Business & Money

I continue to look for opportunities in retail. I’m convinced there must be a few diamonds in the rough that might offer considerable investment returns.

One thing in retail that is apparent and difficult to refute is the shift from brick-and-mortar to e-commerce. Assuming you accept that at face value, I’ll offer up a few observations.

There’s a new service imperative in e-commerce. Consumers want faster delivery, free shipping, and speedy no-hassle returns. This means e-commerce retailers need to make significant investments in supply chain logistics that are close to consumers. This is in stark contrast to centralized distribution models of yesteryear that pooled inventories and managed distribution across wide geographies.

This change not only affects e-commerce retailers. Traditional brick-and-mortar retailers that want to remain relevant are forced to invest in their online operations, forcing similar investments in consumption-end supply chains.

Also, consumers are increasingly located in dense urban environments. Thus, potential sites for logistics centers close to consumers are a finite resource. So, for companies that invest in logistics real estate assets in these locations should enjoy rising rents and high occupancies.

All this to say that I believe there might be a great investment opportunity in REITs that focus on consumption-end supply chain logistics assets. The best example of this that I’ve been able to find is Prologis (PLD). And I love the fact that Amazon is its largest tenant.

You can rest assured that this one has been added to the watch list!

Human Progress

In settings where innovation is important, it’s often said that it’s best to approach things from first principles. That is to say that people should approach questions or challenges from a fresh perspective, without preconceived notions or ideas about the right solution.

In thinking about what types of people are best at this sort of thinking, it would appear that children might have an obvious advantage. Due to a simple lack of experience, they have no other option but to approach most things they encounter from first principles. So they ask ‘why this’ and ‘why that’ in an attempt to gain an understanding of the world.

But as we age, this sort of questioning falls off a cliff. The more we learn, the more we’re supposed to know and the less we tend to ask.

This leads to a sort of paradox wherein expertise is inversely correlated with one’s ability to ask good questions. Experts have gone so far down the knowing path, that there’s no longer a perceived need to ask questions. Of course, that opens one up to vulnerability as you might be operating with information that is out of date or simply wrong. It’s the proverbial situation where everything looks like a nail to the hammer-wielding individual.

So it seems that outsiders to a specific problem or industry might often be those best positioned to ask good questions and approach things from first principles.

Philosophy

This past Thursday I woke up to pouring rain. When I went outside to walk the dog, the cold drops felt refreshing on my skin.

After the walk, I jumped on the treadmill at the gym for a quick 1-mile run to warm up before my workout. In our gym, many of the treadmills are lined up against floor to ceiling windows, overlooking the 7th-floor terrace and the east river in the distance. As I ran, I noticed something interesting. If I focused my forward gaze, I could see a small green shrub on a hill outside the window. However, if I didn’t focus my gaze, I would instead see my reflection staring back at me while running on the treadmill.

It was a great reminder of a simple idea. You have a choice of what you see. Or rather, you have a choice of what you perceive or where you decide to focus your attention.

The rain outside during the walk that morning reflected the same. When I looked out the window when I woke up, I thought “damn, walking Dutch in the rain sucks.” But when I got outside, I was pleasantly surprised by the feeling of cold water making contact with my skin.

There’s so much wrapped up in everyday sensory experience!

My Latest Discovery

A friend sent me this Anjunabeats set earlier this week. It’s unbelievable!