Dorothy Parker, Warren Buffett And The Wisdom Of Index Funds

(MENAFN- ValueWalk) Dorothy Parker, 1924. Source: New York Public Library, via the Public Domain Image Archive and Wikimedia Commons. Public domain in the United States (published before 1931).

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The Top Twenty Corporations After Thirty Years From Two Thousand Car Companies To Three: Two In Bankruptcy “Death Be Not Proud” – John Donne “Change Is The Only Constant” – Attributed To Heraclitus Darwinian Evolution And The Index Fund Parker, Goldwyn And“Singin' In The Rain”

Dorothy Parker, uncrowned queen of the famed Algonquin Round Table, poet, novelist, humorist, screen and short story writer, once had a fabled run-in with studio boss, Samuel Goldwyn, who insisted she write screenplays delivering audiences just what they wanted: happy endings.

Her retort is deathless prose, literally addressing death itself and, inevitably, lost upon the business-minded Goldwyn:

Truth be told, it was a collision of two rights.

Moviegoers love happy endings.

And reality demands all living things arrive at an unhappy end.

People, like corporations, live and die. It is a rare person or corporation that survives a hundred years. And of those who do endure, many devolve into obscure, truncated existences, like faded movie stars in Mr. Goldwyn's employ.

The Top Twenty Corporations After Thirty Years

At the 2021 Berkshire Hathaway Annual Meeting, Warren Buffett compared the then-current twenty largest corporations by market capitalization with their forerunners of 1989.

Spoiler alert!

Only 32 years later, none from 1989 remained in the top twenty.

From Two Thousand Car Companies To Three: Two In Bankruptcy

Were that not sufficiently shocking, Warren then recounted the two thousand US automobile companies christened at the dawn of the twentieth century, all competing to participate in a new mode of transportation soon to revolutionize life throughout the nation.

Investors dove in.

A century later three companies survived; two of them bankrupt.

Interestingly, of the original two thousand casualties, three hundred were electric car companies.

And in another reversal of fortune, the largest car company in the world by capitalization today is... all electric.

“Death Be Not Proud” – John Donne

So, if death is the only certainty, when corporations and people inevitably rise, fall and die, where might investors look for safety and prosperity?

If, as the hilarious albeit depressive Dorothy Parker insisted, no one ever has a happy ending, what's an aspiring investor to do?

“Change Is The Only Constant” – Attributed To Heraclitus

Greek philosopher Heraclitus is remembered for the concept that“a man never walks in the same river twice.”

The man has changed and the river has changed.

And“change is the only constant.”

Moreover, stubborn resistance to change brings frustration and stress.

Acceptance of change, including inevitable death, brings peace and wisdom.

Wisdom is appreciating Nature: birth, death, genetics and Darwinian evolution.

Darwinian Evolution And The Index Fund

What Charles Darwin saw and what Dorothy Parker's observation misses is, though every individual life ends, life itself persists, generates and evolves.

Darwin perceived the almost infinitely long, counterintuitive game life plays, which all before him had missed.

So amidst the ever-changing, evolving investment landscape portrayed in Warren Buffett's remarks, the wise man drew a gentle and understated conclusion:

And lest you complain that Warren Buffett is not putting his money where his mouth is – Berkshire Hathaway holds no index funds directly at the present writing – Warren's will instructs that his wife's trust be invested 90% in index funds and 10% in US treasuries.

Warren's late partner, Charlie Munger, long a critic of diversification, for dashing any hope of exceeding market returns, finally came to the same conclusion.

At his last Daily Journal meeting, Charlie proudly announced that all Daily Journal employees' retirement investment choices were delimited to index funds.

Here is Charlie, reversing course without apology or regret, in answer to Becky Quick's question about his longstanding position on diversification:

Taking his cue from evolution, Charlie exploded one of his favorite ideas, focused and concentrated investment, at least for the ordinary investor:

Parker, Goldwyn And“Singin' In The Rain”

Long after Sam Goldwyn left Goldwyn Pictures Corporation in 1922 and shortly after Dorothy Parker was blacklisted in 1950s Hollywood, the conglomerate Metro-Goldwyn-Mayer, which bore Goldwyn's name but never his signature, produced the single, greatest movie musical in history,“Singin' in the Rain” (1952), an eye-popping, ear-thrilling, fantasy of the evolution of motion pictures from silent to sound.

A story of evolution and adaptation, of how industries and technologies grow and change, how careers begin, rise, fall and die.

And both the title and the featured song and dance provide an instruction on how to face a cruel and ever-changing world with a smile, accepting the inevitability of loss and death, remaining what Charlie Munger deemed himself:

Here's the same message, in song and dance, despite a fever of 103 degrees: Gene Kelly's immortal performance of“Singin' in the Rain”:

Full disclosure: grateful and faithful student-shareholder of Berkshire-Hathaway and VOO

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