When I was 22 years old, or thereabouts, I bought a Swiss made Montblanc Star Chronograph Automatic stainless steel watch from Borsheim’s during the Berkshire Hathaway shareholder meeting. I wanted something that would last, God willing, for the rest of my life and would remind me of when I was young, just starting out, and successfully building my first businesses and got to hear Warren Buffett and Charlie Munger speak to me as an owner of one of the greatest companies in history. It was an emotional, keepsake purchase. I’ve never regretted it, despite the fact I could have bought more stock with the money.
Sadly, the alligator strap on the watch is now broken so I have to replace it. Turns out, they cost roughly $400, which is higher than I expected. (The watch itself retails for $2,740 so it is proportionate, especially given it is authentic alligator skin.)
Still, I hate paying that much for a strap. I’d gladly buy another watch but it kind of feels like when you have a tire blow out and you need to purchase a new one. It’s not nearly as pleasant as buying a new car. It also doesn’t help I don’t know if I want to go with a burgundy or black watch band … or maybe a dark green for money.
So, you consider that Buffett is 79. The average American business earns 12% on book value (we earn much more but I’m going to go with average here). If I were to put the $400 back into the business instead of replacing the watch strap, at 12% compounded, by the time I am Buffett’s age, I’ll have an extra $145,009. That is the power of compound interest. So, do I want to spend $500 to buy another watch strap today or do I want an extra $145,009 half a century from now by reinvesting the money? That is what I need to decide.
