Devil Take The Hindmost

By Eric Chunn in CAPITAL THINKING — Jul 27, 2018

All you need to know about the problems of being in the wrong place, at the wrong time, in the wrong business - or being too lazy to do your own research.

Capital Thinking | Devil Take The Hindmost

Capital Thinking • Issue #120 • View online

“It’s a nickel and dime business. You make dollars by accumulating nickels. If you make dollars by grabbing dollars, you’ll never survive.” - Joe Bastianich

… by Edward Chancellor, is the title - or at least the first part of it anyway, of one of my favorite business books. And one of the topics covered is the Japanese Investment Bubble of the 1980’s.

Ben Carson shares my fondness for Chancellor’s work and he offers up some of the high points:

By 1990 the total Japanese property market was valued at over 2,000 trillion Yen (around $18 trillion) or 4x the real estate value of the entire U.S.
Grounds on the Imperial Palace were estimated to be worth more than the entire real estate sectors in California or Canada.
From 1956-86, land prices increased 5,000% even though consumer prices merely doubled.
During the 1980s, share prices in the stock market increased 3x faster than corporate profits.
Over 20 golf clubs cost more than $1 million to join. It cost $2.7 million to join the best golf club in Tokyo.
At the peak, there was a 32 square foot space in a Tokyo shopping district that sold for $600,000 even though it was far too small to build on.
The stock market traded at 90x corporate profits by the 1989 peak.
Prices in Tokyo’s best neighborhoods were 350 times more expensive than comparable spots in Manhatten.
In Japan’s 6 largest cities, residential real estate prices fell almost 65% from 1991 to 2005.

Carson goes on to say, “None of this made any sense. It was ludicrous. But these things happen because we humans almost always take these things too far.”

Indeed we do. And if you look, you see evidence of that craziness all around you.

Take restaurants, for example. Just how many fast food joints does one town need anyway? Is there really that much money in the biz?

I seriously doubt it.

Backing up my theory and putting some real numbers to paper, Tren Griffin makes you wonder why anyone would ever willingly go into the restaurant industry.

Best Line: “Opportunity cost is a huge filter in life.” - Charlie Munger

So here it is: All you need to know about the problems of being in the wrong place, at the wrong time, in the wrong business - or being too lazy to do your own research.

For the "Too Long, Didn't Read" Crowd