Kennon-Green & Co. Global Asset Management, Wealth Management, Investment Advisory, and Value Investing

The Test of Greatness Comes in the Heart of Winter

It’s Easy to Succeed During Good Times

One of my favorite pieces of wisdom comes from a Chinese proverb written by Confucius in the Spring and Autumn period.  The philosopher points out that all trees are green when times are easy, saying, “Only in winter do the pine and cypress show they are evergreen.”

When you are managing your business, your life, or money, the true test of your ability and talent will come during the bad times. Have you managed your liquidity well enough so that even the worst depression won’t wipe you out? Have you conducted yourself with restraint so you don’t find yourself buried under interest expense on credit cards and store accounts?

Most people can look like geniuses and make money when times are good. But in order to tap the power of compounding, you have to protect your wealth so that there is something left to compound. There is a reason a lot of the family fortunes you see in the $50 to $100+ million range come from businesses that were started 50 or 100 years ago. Through depressions, recessions, wars, inflation, deflation, scandals, and changes in the law, families that continued to put capital to work at good rates of return were able to enjoy the fruit of their labor.

That is one of the reasons I love businesses that are the result of families working together over multiple generations to build something that provided a service to society. The byproduct of that service was wealth. Their true accomplishment was creating something that people wanted.

Whenever things are difficult and obstacles appear, realize that your conduct and reaction to them will determine whether you are an evergreen or a common tree, able to prosper only under favorable conditions that are out of your control.