You know what can be an incredible competitive advantage? Not engaging in a particular expenditure that your peers do. Given how cheap and incredibly easy it is to make your own coffee, I do not understand those who go to Starbucks before work every morning, especially when they hit the drive-thru so they cannot even claim the ambience and lodging of going inside. For those who camp out at Starbucks with a book or laptop for three hours, I can at least understand it, as you’re really using the beverage as a proxy for $1.67 per hour rent for usage of a facility to tend to your business.
The part of passive investing that has long intrigued is that only a slight behavioral modification can result in outsized rewards. Picture a couple, each of which picks up a Starbucks coffee on the way to work each morning, for a daily cost of around $10 over the course of their working careers for the past twenty years.
With about twenty or so business days per month, this is a roughly $200 per month expense.
Compare it to another household, where the couple buys their own coffee for $10 per month, which is preferable anyway, because when you make it at home, you can brush your teeth after having the coffee before heading to work rather than having the residue of coffee sludge cementing against your teeth for 8-10 hours.
Aside from the fact that the latter would save $47,800 over a generation from this slight behavioral change, imagine if these couples used their savings and invested into Starbucks stock in a sort of direct capitalism–instead of joining the masses, profit from them, with the expectation that the dividends and capital appreciation from the stock will replace the satisfaction of the overpriced coffee indulgence on the morning commute.
What happens if you took that extra $190 per month and invested it into Starbucks over the past 20 years and captured the 19% annual returns? The result would be $508,000 in Starbucks stock, which would be paying out about a $1,000 per month in dividends.
In Poor Richard’s Almanack, Benjamin Franklin said, “A small leak sink a great ship.” Perhaps the corollary should also be kept in mind, “Bits of kevlar, steel, and aluminum, over time will build a great ship.”
What is fascinating is that all of this information is perfectly accessible. The math is what it is. The only potential logistical barrier is brokerage fees, but heck, there are apps like Robinhood that would let someone actually accumulate Starbucks stock in real time in lieu of consuming Starbucks coffee, and if you wanted to use a traditional brokerage house, you could pool the funds intermittently and just pay the $4.95 fee here and there. I figure the brokerage fees are offset by the higher gas costs and depreciation if someone has to drive even a little bit out of their way to access Starbucks, plus the value of their time.
Otherwise, the information that well-branded beverages are highly profitable and reward their shareholders quite well over time isn’t exactly the best kept secret among those who study the history of America’s capital markets. It is worth stopping to contemplate small changes, often from consumption to investing, or from sloth to skill-development, or sedentariness to movement, that can manifest the adage, “From small things, big things will one day come.”
Originally posted 2018-12-09 12:52:30.