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Long-Term Mindset

🧠 Why There'll Never Be Another Costco

Published about 1 month ago • 2 min read

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Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today's Issue Read Time: <3 minutes

  • Lesson: Shining example of capitalism
  • Timeless Content: Hidden struggles
  • Thread: Why new investors lose money
  • Resource: Estate planning 101
  • And more!

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Friends,

Capitalism gets a bad rap. Much of it is deserved.

The biggest problem: short-sighted capitalism is a repeated disaster...for the public at large. Whether it's banks making risky bets or manufacturers tainting our drinking water, the dynamics are the same: the perpetrators get off scot-free; the public at large pays the price.

But that isn't always the case. If you want a shining example of what capitalism can be, it's Costco.

Consider how it plays out for all of the stakeholders:

  • Customers get access to goods they otherwise would pay much more for.
  • Suppliers are given a fair shake when it comes to prices (the company once re-negotiated with a supplier to pay more so that they'd remain sustainably profitable).
  • Employees love the culture. They get paid more than at rivals and have more of their healthcare expenses covered.
  • Shareholders have enjoyed 125,000% returns since the company went public in 1985 -- a rate of 20% per year.

How does Costco pull this off for shareholders? By ensuring membership fees are the bulk of profits.

The popular narrative is that success for any one of these groups is mutually exclusive. Any benefits come at the expense of others.

But it doesn't have to be that way. In fact, the blueprint is very simple.

  1. Mission: Figure out your core mission before taking on outside money. Provide maximum sustainable value for the minimum sustainable price. You give up short-term profits, but you become unassailable.
  2. Ridiculous Discipline: Once that mission is adopted, execute it...every minute, of every day, of every year -- for as long as you exist.

The problem: this is the least sexy blueprint of all time. It requires a management team to eschew greed and keep their eyes squarely on the long-term time horizon.

But as you well know, the long-term horizon is the only one where you can sustainably prosper. That's why we're happy to have you as part of this newsletter community.

Wishing you investing success,

- Brian Feroldi, Brian Stoffel, & Brian Withers


One Simple Graphic:


One Piece of Timeless Content:

Morgan Housel, the author of the bestseller The Psychology of Money, has spoken to hundreds of groups about investing & thinking long-term.

But his blog post, Overcoming Your Demons, takes a different turn. You'll hear about the 14 words that changed Morgan's life.


One Thread:

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Brian Feroldi
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@BrianFeroldi
8:26 AM • Mar 10, 2024
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One Resource:

Need an estate plan but don't know where to start? Check out this guide for the eight steps to building these important life documents.


One Quote:


👋 LAST WORD How are we doing?

We love hearing from readers and are always looking for feedback. How are we doing? Is there anything you'd like to see more of or less of? What aspects of this newsletter do you enjoy the most?

Just hit reply and say hello – we'd love to hear from you!

Cheers,
The Long-Term Mindset Team


More From Us:

📗 If you've read Brian Feroldi's book, he'd love a review.

👨‍🎓 The next cohort of our Valuation Explained Simply course starts in May! Click here for details.

🎬 Want a review of popular company earnings? Check out our YouTube channel! Last week, Brian Stoffel reviewed Crowdstrike's stellar results and covered why Sea Limited is investable again.


Long-Term Mindset

by Brian Feroldi

I teach you how to invest with a long-term mindset. Each Wednesday, I share six pieces of timeless content that can be read in less than 2 minutes. Read by 100,000+ investors from a16z, Amazon, Google, Microsoft, and more.

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