Warren Buffett's investing approach has always ignored this key insight from an Austrian economist... but you can take advantage of it. [Liberty Through Wealth](
SPONSORED
[Back in 2009... the Stocks Everyone Talks About Today Were Dirt-Cheap After the Crash](
- Netflix (Nasdaq: NFLX) was $5.67 a share.
- Apple (Nasdaq: AAPL) was just $14.51.
- Amazon (Nasdaq: AMZN) was only $69.
- Google's parent company, Alphabet (Nasdaq: GOOG), was only $164.
The same thing is [setting up today](...
Discover the three stocks coming out of the Corona Crash that investors are going to pile into, [including a free ticker symbol in this tell-all video](.
THE SHORTEST WAY TO A RICH LIFE
What "Creative Destruction" Can Teach You About Buy-and-Hold Investing
Nicholas Vardy | Quantitative Strategist | The Oxford Club
[Nicholas Vardy]
IBM Corp. (NYSE: IBM) is celebrating its 109th year.
That's an astonishing achievement for any company, let alone one in the dynamic technology sector.
"Big Blue" is a remarkable exception in a world where yesterday's heroes become today's zeros.
But even IBM eventually lost its identity as a "one decision" stock.
[Set Stop At](
[Click here]( to watch Nicholas' latest video update.
Portfolio managers used to say that "no one ever got fired for buying IBM."
Today, IBM has long ceded that role to today's tech giants.
The Essence of "Creative Destruction"
Austrian economist Joseph Schumpeter popularized the phrase "creative destruction" in the 1950s.
According to Schumpeter, the "gale of creative destruction" describes the "process of industrial mutation... that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."
Capitalism always creates [new ideas and new products](. The new always pushes out the old.
The U.S. stock market offers many examples of creative destruction.
In the 1920s, the Radio Corporation of America, or RCA, was the Google of its day.
RCA was a fast-growing company with new technology - the radio - that transformed the world of mass communication.
RCA lived a remarkably long life for a technology company, born in 1919 and passing on in 1986.
SPONSORED
[[EXCLUSIVE] Like Turning a 60-Year-Old Back Into a 20-Year-Old?!](
[Senior Mobile Phone](
When Time magazine declared scientists [could reverse the aging process]( in mice, doctors were shocked.
Well, wait until they see [THIS guy](.
He could be living proof of [a powerful "anti-aging switch"]( that may command every cell in your body to act younger.
[Go HERE now to see for yourself.](
Creative Destruction Modified
Schumpeter's insight has stood the test of time. But today, I would add to it the idea of "exponential change."
The pace of creative destruction is accelerating as the average life span of companies is shrinking.
In 2005, consumers' phones were either Motorola (in the United States) or Nokia (everywhere else). Businesspeople carried BlackBerrys manufactured by Canada's BlackBerry Limited (NYSE: BB), originally known as Research In Motion.
All three of these names have all but disappeared.
Motorola's cellphone business, Motorola Mobility Holdings, is part of Chinese-owned Lenovo (OTC: LNVGY), even as its market share has shrunk to 4% in the United States. Microsoft (Nasdaq: MSFT) acquired Nokia (NYSE: NOK).
At its peak, BlackBerry owned more than 50% of the U.S. smartphone market and 20% of the global smartphone market. It boasted a stock price of more than $230. Today, BlackBerry has a 0% share of the smartphone market and is trading at around $4.75.
BlackBerry's fate echoes that of Palm.
Palm - a pioneering company in the world of "personal digital assistants" - was once a high-flying company. Its share price hit a high of $95.06 in 2000 and a market capitalization of $53.3 billion.
HP (NYSE: HPQ)Â acquired Palm for $5.70 a decade later. It eventually ended up in the hands of the Chinese electronics firm TCL.
And no one has heard of Palm since.
Even technology survivors turn into a shadow of themselves.
Cisco Systems (Nasdaq: CSCO) was once expected to be the first $1 trillion company. Two decades later, it's worth just 18% of that lofty amount.
These are all interesting stories, for sure.
It's hard to believe that the same fate likely awaits today's tech darlings Alphabet (Nasdaq: GOOGL) and Apple (Nasdaq: AAPL).
The Challenge of Creative Destruction for Warren Buffett
The fate of these former tech giants highlights the challenges of Warren Buffett's "one decision" investing.
When Buffett buys a stock, his ideal holding period is "forever."
And this worked remarkably well for him. Until it didn't.
Over the last 54 years, Berkshire Hathaway's (NYSE: BRK) book value has grown from $19 to $311,126. That works out to a rate of 19.7% compounded annually.
That figure, however, conceals as much as it reveals.
Berkshire's average rate of return up until about 2000 was right around 30%. But [long-term investment returns have plummeted]( over the past 20-plus years.
The numbers bear this out.
On June 19, 1998, Berkshire's share price was $80,900. On Friday, March 24, 2016, it closed at $210,530.
That works out to a far less impressive annual return of only 5.5% a year over the last 22 years.
And that's far more than just a streak of bad luck.
After all, 22 years account for 40% of Berkshire's lifetime under Buffett's stewardship.
The Investing Lesson of Creative Destruction
Buffett's investment approach ignores creative destruction.
He invests in businesses that remain the same over time.
After all, consumers shave with Gillette razors, drink Coca-Cola and eat Kraft cheese every day. This approach explains Buffett's aversion to technology companies.
On the one hand, this philosophy ensured that Buffett avoided the BlackBerrys and Palms of the world.
On the other, Buffett never invested in the Microsofts, Googles or Amazons either.
The greatest irony is that Buffett's most successful single investment may turn out to be [Apple](.
This technology giant now accounts for more than $100 billion of Berkshire Hathaway's portfolio.
I believe the absence of "creative destruction" - and, by extension, exponential change - from his investments helps explain Berkshire's [flagging returns](.
The greater the creative destruction in a sector, the greater the potential profits.
The biggest challenge?
Make sure you bet on the winners.
Good investing,
Nicholas
[Leave a Comment](
For the latest news from Nicholas, connect on [Facebook]( and [Twitter](.
JOIN THE CONVERSATION
[Facebook](
[Facebook](
[Twitter](
[Twitter](
[Email Share](mailto:?subject=A%20great%20piece%20from%20Liberty%20Through%20Wealth...&body=From%20Liberty%20Through%20Wealth:%0D%0A%0D%0AWarren%20Buffett's%20investing%20approach%20has%20always%20ignored%20this%20key%20insight%20from%20an%20Austrian%20economist...%20but%20you%20can%20take%20advantage%20of%20it.%0A%0D
[Email Share](mailto:?subject=A%20great%20piece%20from%20Liberty%20Through%20Wealth...&body=From%20Liberty%20Through%20Wealth:%0D%0A%0D%0AWarren%20Buffett's%20investing%20approach%20has%20always%20ignored%20this%20key%20insight%20from%20an%20Austrian%20economist...%20but%20you%20can%20take%20advantage%20of%20it.%0A%0D
MORE FROM LIBERTY THROUGH WEALTH
[What Investors Like You Cannot Control... and What You Can](
[Going From Good to Great](
[Should You Bet on Gold Alongside Warren Buffett?](
SPONSORED
[The BIG Deal](
Trump... America's No. 1 tech company... 50,000 American jobs... $10 billion...
And ONE $3 stock trading under a secret name. [Hear the amazing story here.](
[The Oxford Club](
You are receiving this email because you subscribed to Liberty Through Wealth.
Liberty Through Wealth is published by The Oxford Club.
Questions? Check out our [FAQs](. Trying to reach us? [Contact us here.](
Please do not reply to this email as it goes to an unmonitored inbox.
[Privacy Policy]( | [Whitelist Liberty Through Wealth]( | [Unsubscribe](
© 2020 The Oxford Club, LLC All Rights Reserved
The Oxford Club | [105 West Monument Street](#) | [Baltimore, MD 21201](#)
North America: [1.800.589.3430](#) | International: [+1.443.353.4334](#) | Fax: [1.410.329.1923](#)
[Oxfordclub.com](
The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades.
We expressly forbid our writers from having a financial interest in their own securities recommendations to readers. All of our employees and agents must wait 24 hours after online publication or 72 hours after the mailing of printed-only publications prior to following an initial recommendation. Any investments recommended by The Oxford Club should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.
Protected by copyright laws of the United States and international treaties. The information found on this website may only be used pursuant to the membership or subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of The Oxford Club, 105 W. Monument Street, Baltimore MD 21201.