Regular readers recall this theory: recipes trump manufacturing. They’re more valuable. (And one of Lux’s recent, still unannounced investments underscores this long espoused theory). But about 300 years ago, a valuable recipe disappeared.
You see, around 1700, a recipe for making steel—a special kind of steel—was lost. The process was invented 1,000 years before being lost and it was for the famously sharp and lethal Damascus sword.
Researchers who recently studied a sample of the sword’s molecular structure claim they discovered carbon nanotubes—the first ever to be found in steel. And this might explain the legendary properties. The process might’ve inadvertently created nanotubes (not formally discovered for another millennium) of iron-carbon mineral cementite and when Blacksmiths etched the finished swords with acid—the nanowires which are resistant to acid might have been protected and strengthened.
A good thing for Gillette (and CVS, Walgreens and RiteAid) that that recipe for ultra-sharp blade of Damascus was lost. Of course they’d rather sell you a one, two, three or heck, seventeen-blade disposable razor—just as long as it doesn’t last too long.
Whatever the process, this was clear: the only contact you’d want with it—was in your hand—and not at your neck.
Too often we forget: life is fragile.
And too often still we forget: dominance in life isn’t a birthright. Nor an entitlement (whether you’re a company, an industry, a country or its leader). It must be earned—and can be easily and unexpectedly lost. The more stable and predictable the system seems—the less likely it is.
Consider this image from one of my columns in 2004:
Pretend you're a turkey born on January 1st, 2006. For the next 11 months, up through Thanksgiving, life is good. Actually, life is great. You (the turkey) wake up, get fed and walk around all day. Just in time to go to sleep and do it all over again the next day. And with each new day you become conditioned to assume that the next day will be just like the one before it. And this logic works all the way up till Thanksgiving. When suddenly—boom! Off with your head! The irony is that the closer the turkey is to death, the more confident it becomes. And so it is with many investors. The turkey gets fatter and feels safer. But at the very time he should be trying to evade the blade.
Complacency is a vice. Thriving on ambiguity, uncertainty and volatility is a virtue. And against our human nature. Robert Rubin, Warren Buffett, Eddie Lampert, Bill Miller—all exemplar thrivers.
Back to swords or as Saturday Night Live once parodied Sean Connery in a Jeopardy skit, “I’ll take S words for 1000, Alex”.
There’s another sword that underscores the point that life and dominance don’t come with money-back guarantees and the delicate balance that (as you’ll see quite literally) hangs in the thread. Thirty five years ago, President Kennedy invoked words of the sword of Damocles—ever more appropriate today—when he said this:
"Today, every inhabitant of this planet must contemplate the day when this planet may no longer be habitable. Every man, woman and child lives under a nuclear sword of Damocles, hanging by the slenderest of threads, capable of being cut at any moment by accident, or miscalculation, or by madness. The weapons of war must be abolished before they abolish us."
The story of Damocles went like this: Damocles was a suck-up to 4th Century tyrant Dionsyius, telling him how lucky and great his life was with all his power and riches. So, Dionysius offered him a day in the life—a little taste. The next night, Damocles lived like a king: endless food and drink and women. What he didn’t notice was a sharp sword dangling by a single thread of horsehair above his head. When he did, he wanted out and immediately. Finite tragedy—within seconds and inches—suspended by chance and nearly infinite triggers (a breeze, a bump, the pull of gravity, and so on). Dionysius was trying to show the (yeah, forgive me) dual-edged sword and balancing act of power and peril.
Speaking of swords, a good friend of mine is waiting to swing his. He doesn’t know it yet—or maybe he does and plays it cool—but he’s going to be one of the great ones. Investors, that is. He reads voraciously—and not the latest Malcolm Gladwell business buzz book best-seller, but the investment classics that have stood the test of time. I can’t reveal his list, because he’s carefully cultivated it over many years. And even if I did, like Joel Greenblatt’s magic formula, and most men’s subscriptions to Men’s Health magazine, it wouldn’t do much good. People confuse owning the book with reading it, and reading it with retaining it, and retaining it with using it. This friend is a like a warrior waiting to wield his sword when the right investment opportunity comes along.
Another famous swordsman took this approach. But his wasn’t from Damascus or Damocles. It was from Kentucky. Both Michael Mauboussin and Warren Buffett have invoked baseball legend Ted Williams in how he approached swinging his Louisville Slugger, “waiting for the fat pitch would mean a trip to the Hall of Fame; swinging indiscriminately would mean a ticket to the minors."
Wait for your pitch. Swing your sword.
DEC.08.2006 by Josh Wolfe (email: nanotech@forbes.com)
