Patience is a strategy, not just a personality trait
Good morning. Three things on my mind this week — one on a business, one on a framework, one on behaviour.
Costco's pricing power has a ceiling, and that's the point. The membership model deliberately caps how much margin the business will extract from any single customer relationship. Most retailers maximise the wallet. Costco maximises the relationship. Over thirty years, the second strategy compounds harder than the first — but only if you're patient enough to find out.
The "fair price" in WCAFP does real work. Munger's framework is sometimes read as "buy great businesses at any price." That isn't what he said. The fair price clause is what separates WCAFP from passive ownership of an index. Without it, you're buying quality at any multiple — and quality at the wrong multiple has produced some of the worst long-term returns in modern market history.
Patience is a strategy, not just a personality trait. The most useful thing I learned from re-reading Howard Marks this month: if you wait for the obvious moment to act, you have already missed it. Patience isn't sitting on your hands. It's having the work done before the moment arrives — so that when it does, the decision feels boring.
That's the three. Read patiently, think slowly, own quality.
— EO