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Where There's Complexity, There's Opportunity


Often the most difficult problems in life are also the most rewarding to solve. There’s no easy answer because if there was, the problem would cease to exist. Or perhaps the answer is easy, but getting there is the difficult part. Most people give up after realizing this, which is what separates you, the entrepreneur, from the rest. Never a problem too complex, you face it head on knowing your commitment and effort will eventually pay off.


Applying this to investing is no different—where there’s complexity, there’s opportunity. In fact, Warren Buffet often talks about investing being “simple, but not easy.” In other words, the principles are straightforward, but disciplined, consistent execution in the face of challenging problems is difficult.


We’ve been spending a lot of time on Artificial Intelligence and “Dirt” (our shorthand term for real assets such as land, rare earth elements and critical minerals as they relate to the electrification and decarbonization of our economy). Both have massive potential to transform the global economy in the years ahead.


At first, AI and land appear unrelated. But that’s not the case – the AI revolution will require a lot of rare earth elements and other critical minerals (for example, dysprosium and praseodymium). And there’s a crucial geopolitical element to the technology race and critical minerals: On July 3rd, the Wall Street Journal carried this headline: “China Restricts Exports of Two Minerals Used in High-Performance Chips.” The article went on to state that “The minerals—gallium and germanium—and more than three dozen related metals and other materials will be subject to unspecified export controls starting Aug. 1.”1 The article notes that semiconductors (among many other military and energy technologies) rely on these materials.


Simply put—based on current technology, a future of greater digital intensity and decarbonization cannot happen without greater supplies of, and control over, rare earth elements and other materials.


How do we approach these opportunity rich domains? We don’t try to be the experts. Instead, we help clients find the best resources to sift through the complexity – sometimes by working through the client’s network, sometimes by working through ours. We recognize there is a level of knowledge and expertise beyond our understanding. But we can identify industry executives (or former executives) and investors with deep knowledge in their area of expertise.


The goal is to collect data and insight; to break down the complex into the simple; to develop mental models that better explain reality; and most importantly, to identify situations where the odds are stacked in our favor. Only then will we have the conviction to invest.


Simple. But not easy.

 

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