Rearview vs. Frontview

Unless you invest in start-up companies without rearview results, you are always using the rearview to forecast the frontview to some extent.  For most companies that interest me, the immediate road behind looks like a great, smooth ride. However, the frontview is foggy with a winding and bumpy road.

Companies with long driving records can inform you how they have dealt with past roads and how they will deal with difficulties in the future.

To take the metaphor one step further, I like companies where the road behind is of the same kind as the road ahead–no amphibious vehicles required.  Blackberry changing from a handset maker to a software company is like trying to drive a BMW over the ocean.  It may have been a great ride through the countryside, but I am not sure how it is going to handle on the Atlantic.

The rearview mirror can tell you a lot about the frontview as long as you are still on dry ground.




More to Explore

Returns for Great vs. Bad Businesses

Munger and The Cattle Rancher

Munger’s ability to find great businesses is directly related to his ability to consistently discard bad businesses. He is excellent at inverting, and discarding the bad businesses as quickly as possible.

The Abominable No-Man and Bad Management

Some investors think a business is good, but know that management is bad.  These investors justify the investment based on the idea that the great price of the business is worth the bad management. This is akin to marrying a supermodel who is going to yell at you all day.  Whatever pleasure your eyes may derive from the marriage, your ears will endure a greater amount of pain in the long run. The pocketbooks of those partnering with bad management are likely to see a similar 50%+ decline in their net worth.

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