On Wealth and Happiness

A most interesting opinion piece in today’s New York Times entitled,  The Rich Are Not Who We Think They Are. And Happiness Is Not What We Think It Is, Either,” written by Seth Stephens-Davidowitz .

The author suggests:

  1. Of the top 0.1 percent of wage earners in America – those earning $1.48 million per year, most of them draw income from owning a regional supply business like an auto dealership or a beverage distribution company. Yes, there are celebrities, actors and athletes who make piles of money given their talent and notoriety, but three times as many affluent taxpayers make the majority of their income from business ownership. Salaries don’t make people rich nearly as often as equity does.
  2. The nature of those businesses tends to be dull and boring including: auto repair shops, gas stations, business equipment contractors, etc. Their businesses tend to endure because they  provide goods and services that meet long term needs and demands.  This tends contrasts “sexy” businesses like salons, cosmetic stores, record stores, and clothing stores. These “sexy”  businesses have a limited life expectancy. On average, they typically fold after 2½ – 4 years.
  3. Another important feature of their businesses is their ability to avoid ruthless price competition – either through a monopoly or a regional advantage, etc. For instance, more than 20 percent of auto dealerships in America have an owner making more than $1.58 million per year. Those dealerships have legal protections; state franchising laws that give auto dealers exclusive rights to sell cars in a territory. Same for many beverage distributors, which act as middlemen between alcohol companies and stores and supermarkets.

His findings are not unlike the conclusions drawn by Thomas Stanley, author of the 1990s classic, “The Millionaire Next Door.”

The advantages of business equity isn’t lost on the owners. Most of them are happy to maintain the status quo. Turnover is minimal (i.e. don’t be looking to purchase one of these businesses at a discount anytime soon).

The author then asks, “If pop culture is right in suggesting getting rich is a path to happiness?” I’ll examine that in a subsequent blog. For now, I’m going to see if I can find a cheap distribution business.

About the Author:

Seth Stephens-Davidowitz graduated from Harvard in 2013 with a PhD in Economics. His work has focused on using big data sources to research behaviours and attitudes. Using “big data” sources, his essay explores who are the rich in America and what relationship wealth plays in happiness (not for the faint of heart).


Markel’s Hip Capitalism…

Tomorrow, Markel Corp. will be hosting their 2022 Annual General Meeting at:

The Richmond Raceway Complex
900 E Laburnum Ave (Gate 4)
Richmond, VA 23222, USA

As with the Berkshire Hathaway AGM, Markel management places a premium on relationships and personal attendance. I haven’t found anything that suggests the meeting and/or panel discussions will be webcast. I will post links if I do.

I’ve been a Markel shareholder and a Tom Gayner for years, but have yet to make the trek to Richmond, VA. My planned trip in Spring 2020 was cancelled due to COVID.

In the meantime, readers might benefit from reading Tom’s 2022 Letter to Shareholders.

Wishing all hosts and attendees a festive and productive meeting and safe travels from to and from your places of origin. Hope to join you next year!

Markel – Selected News Releases

Further Reference…

The Evolution of a Value InvestorTalks at Google – June 22, 2015. Tom Gayner is the CIO of Markel Corp, where he manages the company’s investment portfolio. He talks about his journey as an individual and value investor. A recent Wall Street Journal feature on Mr Gayner’s investing style mentions: ‘He has an outstanding investing record. He works only for Markel and doesn’t take outside clients, but every investor can learn from him.’ You never woul’ know any of this [extraordinary success] from listening to Mr. Gayner. After a good year, most portfolio managers beat their chests even harder than they beat the market; Mr. Gayner’s 2014 report merely said, “our overall equity portfolio earned 18.6%,” without even mentioning that the S&P 500 was up 13.7%. Instead of trying to mimic the inimitable brilliance of Mr. Buffett, maybe more investors should emulate the common sense and patience of Mr. Gayner.

Ritholtz, BarryBarry Ritholtz Interviews Tom Gayner.” – Masters in Business podcast transcript – from November 21, 2021.

Brodersen, Stig Long Term Investing with Tom Gayner”The Investor’s Podcast Network – posted on You-Tube about a year ago.

Morgenson, Gretchen, “Managers and Investors, Well Met New York Times, May 13, 2007.

McGough, Robert Markel Insures the Unusual and Makes Money in the Process” Wall Street Journal, July 16, 1999.

Markel Corporation: Everything You Need to Know Insurance Business Magazine https://www.insurancebusinessmag.com/ca/

Books Recommended by Tom GaynerMcKinsey & Co.Business Leaders Reading