The success of the Company demands a shared understanding of the Company’s goals and an appreciation of the values that will guide the Board’s decision-making. While the investment work will speak for itself, we (your Board) believe it necessary to set out a statement of principles that will guide our investment decisions.
Our purpose is to protect the savings of our Shareholders. It is not to try to make Shareholders rich or to impress anyone. We do not promise returns of any kind, either relative or absolute. Instead we promise two things: to be faithful to the principles outlined here, and to participate alongside those we serve as fellow Shareholders. The Company’s financial results will be lumpy and, if considered over only a few years, will sometimes be disappointing. We are not concerned with tomorrow, but with preserving savings for the next generation.
We believe savings are scarce. It takes time, effort and sacrifice to acquire them, and holding on to them is difficult. We have the utmost respect for their irreplaceability. For this reason, our understanding of “risk” is fundamentally different from much of the financial industry. We are unconcerned with the “risk” (singular) of the volatility of returns as compared to an index. We are, however, profoundly concerned with understanding and managing the myriad “risks” (plural) that may result in a permanent loss of capital. In doing so, we believe that hubris, unaccountability, and financialisation are every bit as threatening as weak financial accounts and poor competitive standing.
We have no predetermined investment horizon or exit strategies and are keen to participate in the long- term compounding of earnings. We see ourselves as owners rather than investors, and we seek to deploy our capital alongside other owners whose life’s work is committed to the long-term survival of their company. The attributes we prize most — scarcity, permanence and independence — are rare. When we do come across them, we are not looking to sell.
We pay no attention to the views of others in the financial industry, what they expect or what they consider valuable. We are neither bearish nor bullish, but keen to distinguish what is real and true from what is not. We believe that our success will not come from a strict set of rules regarding asset allocation, position sizes, the blind pursuit of diversification, or the mimicking of any index. We do not rely on diversification to compensate us for risks we don’t understand.
We do nothing complicated or formulaic. We invest in businesses and people we understand and avoid those we do not, no matter how compelling they may appear to be. We avoid the idea of growth for its own sake, short-term thinking, and financial engineering. We like natural monopolies and economic niches having scale, barriers to entry and pricing power. We prefer what is firm, durable, earned, and designed for continuity, rather than what is fragile, fleeting, and unsure. We think that endurance is valuable and that it is the result of focusing on the customer rather than financial rewards that ensue. Our emphasis on the qualitative may not be fashionable, but we believe it to be correct.
We believe our ability to hold adequate and suitable reserves is important to achieving our purpose, and that the quality of our reserves matters just as much as the quality of our investments. We want reserves that are timeless — true assets that are neither someone else’s liability nor the plaything of central banks and political parties. For this reason gold bullion is well suited to be an important component of our reserves.
We value responsibility and accountability in corporate governance, as well as the avoidance of conflicts of interest consistent with the duty of loyalty and the duty of care. We will strive to keep our costs low, but will not sacrifice our intellectual or operational freedom for the sake of lower costs.