BACK TO THE CHALKBOARD
I had a professor in business school, Mr. Dixon, who always asked one question at the beginning of class: “What is the purpose of a business?”. As nascent entrepreneurs we would answer with ignorance:
To make a profit
To sell goods and services
To beat the competition
Professor Dixon replied, “No! The purpose of a business is to increase the value of the lives of others. And if you focus on that, you will be successful.” At the time I did not understand what adding value meant. His words would arrive as an epiphany a decade later.
Let’s dial back the clock 228 years and head to New York City where a group of investors met under a sycamore tree on Wall Street to sign the founding document for the New York Stock Exchange, The Buttonwood Agreement. The beauty of this agreement isn’t solely how it organized the stock market and fostered trust in securities trading, its power lies in how it allowed for capital to flow more freely from investors to businesses; businesses with aspirations to truly increase the value of others.
SMALL COMPANIES, BIG MISSIONS
How do we benefit from free-flowing capital? Let’s look at the anecdote of Apple to find out.
On April 1, 1976 Apple Computer Company was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne. Their first product, Apple I, was a motherboard computer system designed and built almost entirely by Steve Wozniak. It sold for $666.66 simply because Mr. Wozniak “liked repeating digits”. On December 12, 1980 Apple went public for $22/share and raised $100 million in capital which allowed them to expand, innovate, and deliver new and better life-changing products. The rest of the story is history and today Apple boasts a market capitalization of 1.36 TRILLION dollars. Yes, Trillion. You don’t get that big purely seeking profit, selling simple goods, or crushing the competition. Those may be byproducts of hard work, but companies become this successful when they find ways to add value for their customers.
How does Apple add value? You wouldn’t be wrong to say computers, phones or watches. But if you dig deeper you find that their true value add is innovation. Releasing a phone that looks identical to its predecessor with incremental changes to functionality might seem minor, but this is rarely the case. Innovation is a slow and evolving process that yields great results to those willing to endure the many interactions of failure along the way. Apple isn’t simply skating by. It invests billions every year and employs thousands of people to make it easier for you and me to communicate, learn, and connect.
One day when Steve Jobs was a kid helping his father put up a fence, he asked his father, “why does the back of the fence have to look as good as the front?...Nobody will ever know.” His father replied, “But you will know.” Jobs quoted this as a life lesson he learned as a kid that catalyzed his unwavering focus on organizing his teams to craft technological masterpieces. The level of emphasis on creating products of value and not simply objects of adequacy is what separated Apple from its competitors.
BACK TO WALL STREET
Today we see how free-flowing capital and structured securities markets make it easier for us to take part in the success and profits of value-based companies like Apple and it wouldn’t have been possible without the bold founders who got together to sign the Buttonwood Agreement in 1792. It is worthy to note that 5% of your core equity position (DFQTX) is allocated to AAPL stock. So, you are already a partial owner of this wonderful company, along with many others innovating around the world.
Sunday, May 17th marks the 228th anniversary of this historic moment and reminds us that the world is full of great companies working every day to innovate and improve the lives of others. All made possible by a group of investors who came together to sign the Buttonwood Agreement.
2: Reference Top Holdings https://us.dimensional.com/funds/us-core-equity-2
The views and opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.