Late Stage Mature Pre IPO Unicorns -

Sustainable Investing as a Strategy – 9/19/2019 — The world is becoming unstable, volatile, and scary.

Being sustainable isn’t a do-gooder philosophy.  The reason Ponzi schemes blow up is because they aren’t sustainable.  Sustainable means solid, consistent, over the long term.  So when someone uses the phrase, be aware of the connotations and varied interpretations on what sustainability really is.  Environmental sustainability is a term which could be called a sub-term of the overall concept of what is ‘sustainable.’

Why does this matter?  If you are investing, nothing else could be more important.  Being a fund manager and investor for 25 years, this is the one important question to ask a manager when evaluating their track record: Can it continue?  (And subsequently, what are the risks?  What are you doing to prevent them?)

A great example of a system that was not sustainable was the Soviet Union.  A great idea, an egalitarian utopia where all classes are one (but your life is decided by the personality of the Dictator…) – but it was unfortunately unsustainable and collapsed in 1991.

Another thought on sustainability is looking at what’s NOT sustainable, such as the New York City taxi system.  And so we have the Pre IPO Unicorn and now the public company Uber.

Same thing with a trading strategy.  If you are looking at investing in a CTA program, they can provide excellent above Alpha returns, a couple examples are Alpha Z Advisors and Aleph Strategies two options trading strategies we work with.  The question any investor should ask themselves, is can this continue?  Is this model ‘sustainable’ – meaning can it continue to perform after a long time period?  That’s what Venture Capital (VC) firms look for, sustainability.

This concept is probably the most important concept in investing, and it has nothing to do with the environment.  However, the issue with the environment has the same theme – if we abuse the environment we cannot take resources from it anymore.  Uses like pit mining, oil as an energy source, are not sustainable because once it’s gone it’s gone.  Solar energy is sustainable because the sun replenishes the energy every day.

How many sustainable companies are there in the world?  We can say any company that has been in business for more than several hundred years, we can say is sustainable.  Like it or not, the US Government is sustainable.  Other countries have risen and fallen in the short history of the United States.

The Château de Goulaine is the 3rd oldest commercial enterprise in the world, and the oldest winery in the world:

While it is not clear exactly when the estate vineyard started producing wine for commercial use, rather than just family consumption, the millennium during which the estate of Château de Goulaine has been producing wine makes it the oldest known wine business still in existence;[6] It is believed to be the third oldest commercial enterprise in the world.[6][7] It is considered the oldest European family owned business.[8] The castle estate is one of the last Châteaux de la Loire to still be producing wine.[2]  In addition to producing a Muscadet, Château de Goulaine also produces a Sancerre and Vouvray as well as what is believed to be the first commercial Chardonnay in the western Loire Valley. The estate also grows some Folle blanche.[2]


Source: TripAdvisor

1,000 years isn’t a lot, if you consider the cosmos, and the age of the Earth itself, or the Sun.  If you get into Quantum Physics and the multi-verse, our life is but the blink of an eye.  “Sustainable” doesn’t necessarily mean to last for 1,000 years or 1,000,000 years, the concept is inert.

For business, we aren’t necessarily looking for something that will last 1,000 years, times change and so do wants and needs.  What we are looking for is something that isn’t going to be phased out with a new fad, something that isn’t going to be knocked down by wind and water, something that is going to continue to perform year in and year out regardless of the circumstances that test the model.

A great example of something that is not sustainable is Kodak.  They popularized the phrase “Kodak Moment” Which was that moment when you needed a camera to capture special memories and save them; a child’s first birthday party, a friend’s new puppy.  But the “Kodak Moment” has morphed into a new meaning – it’s the moment that your product is no longer needed.  Digital cameras in smartphones led to the demise of Kodak.  Kodak’s real “Kodak Moment” was the moment when no one wanted Kodak anymore – they all had a camera on their phone.

So these examples contrast what Sustainable really is and to understand the Gestalt of the word.