To See Meaning in the Small - Application to Investment
The Hagakure is a book written in Japan in 18th century Japan, encapsulating Bushido, the Japanese Way of the Warrior. In the Hagakure is a great story:
Among the maxims on Lord Naoshige’s wall there was this one: ”Matters of’ great concern should be treated lightly.” Master lttei commented, “Matters of small concern should be treated seriously.” [1] (You might recall this story from the great film Ghost Dog, featuring Forest Whitaker - pictured above.)
Often, like a small ripple that over time builds to a tidal wave, seemingly small events or trends can give us indications of large future events - future events which we can utilize to strategic advantage.
In early July of this year, U.S. authorities fingered North Korea as the origin of a large-scale cyber attack on the U.S. that overwhelmed U.S. government and private websites [MSNBC:http://www.msnbc.msn.com/id/31789294/ns/technology_and_science-security/]. This was covered by mainstream media, but only for a brief period. About a year prior to this, last September, Israel attacked targets in Syria, rumored to be involved in Nuclear weapons acquisition. What was very little reported was that prior to their airstrike, and specifically for the period of time of the airstrike, the entire Syrian radar system went off the air [Aviation Week: http://www.aviationweek.com/aw/generic/story_generic.jsp?channel=awst&id=news/aw112607p2.xml&headline=Israel%20Shows%20Electronic%20Prowess].
These attacks, and others like it have appeared in the media, but have not received significant media or public attention. I see these as the ’small’ matters of Master Ittei that should be given great attention. It would appear conceivable that the increasing use of network technology and the effectiveness of such attacks would mean a potentially significant rise in the significance of this form of warfare and criminal activity down the road. Therefore, I would see this area of investment, both on the attack side and the defense side as a sector of significant interest for long term upside investment potential.
Spotting potential future trends when they are still small allows an investor to obtain investments at price levels that are highly advantageous, because others have not yet seen these trends and so have not driven up prices. It is this way that Master Ittei’s principle is of broad application to investment strategy, both in the markets and in other areas. For example, if we observe small but significant activity in a geographic location within a city, for example an area that is slowly becoming hip or cool, but is not yet mainstream or gentrified, this could be an interesting indication for real estate investment in that area, where property prices are now far below what they would be after the area develops further.
I believe that we will explore this principle and its application many times in the future.
By the way, a follow up to my previous article on the Action Gap and its application to critique Porter’s business philosophy is coming up soon!
Lorne
© Copyright Lorne Gross, 2009
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Note: Mr. Gross is not a certified investment advisor, examples of stock analysis herein is for discussion purposes only.
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1. From Hagakure, Yamamoto Tsunetomo, Chapter 1.
