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🦉 Reputation Over Riches
Discover how Michael Price turned his $10B merger fallout into $25M philanthropy, proving that respect matters more than wealth. Are you prioritizing?
Jeff
November 04, 2024
In partnership with
Hi there… Today, we're diving into a feast of financial wisdom. We'll explore Michael Price's journey from corporate raider to respected philanthropist, unpack how hyperbolic discounting can sabotage your retirement plans, and peek into New Oriental Education's impressive resilience in China's education sector. Buckle up for insights that might just revolutionize your investment thinking!
— Jeff
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Wisdom of the Day
If you get to my age in life and nobody thinks well of you, I don't care how big your bank account is, your life is a disaster.
Michael Price's journey from corporate raider to respected philanthropist offers a compelling lesson. Once known as one of the most feared investors of the 1980s, Price's aggressive tactics made him a billionaire but also earned him a reputation as a corporate bully.
Think of it like being the richest kid on the playground, but nobody wants to play with you. Price found himself in that lonely spot after orchestrating a $10 billion bank merger that led to thousands of job losses. That's when he had his "aha" moment.
Price didn't just have a change of heart; he put his money where his mouth was. He established a foundation, donated $25 million to Yeshiva University, and became a vocal advocate for responsible corporate governance. He learned that true success isn't just about the size of your bank account, but also about the respect you earn along the way.
So, next time you're eyeing an investment, ask yourself: "Will this make me proud?" After all, as Warren Buffett wisely said, "If you get to my age in life and nobody thinks well of you, I don't care how big your bank account is, your life is a disaster." Price's story reminds us that in investing, as in life, reputation is the real currency of success. — Jeff
MULTIDISCIPLINARY WISDOM
In the realm of personal finance, few psychological biases are as insidious as hyperbolic discounting. This tendency to prefer smaller, immediate rewards over larger, future benefits can significantly undermine retirement planning efforts.
At its core, hyperbolic discounting reflects a conflict between our present and future selves. While we intellectually understand the importance of saving for retirement, our innate preference for immediate gratification often wins out. This bias, rooted in our evolutionary past, can lead to procrastination in saving, underestimation of compound interest's power, and ultimately, financial insecurity in retirement.
The consequences extend beyond personal finance, potentially straining social safety nets and broader economic stability. However, understanding this bias is the first step toward mitigation. Strategies to combat hyperbolic discounting include vividly visualizing retirement goals, automating savings, using commitment devices, and breaking long-term objectives into shorter milestones.
Education about compound interest and retirement realities can also counteract impulsive spending. Mindfulness and self-reflection create space for conscious financial choices aligned with long-term aspirations.
Ultimately, overcoming hyperbolic discounting isn't about self-denial, but finding balance between present desires and future well-being. By acknowledging and navigating this psychological hurdle, investors can ensure their retirement years are marked by financial security rather than regret.
THE MOAT
In the dynamic landscape of Chinese education, New Oriental stands out as a paragon of resilience and innovation. The company's Q1 FY2025 results, with net revenues soaring 30.5% to $1.4 billion, underscore its robust operational capabilities and strategic agility. Core educational services surged by 33.5%, while adjusted net income reached $264.7 million, a 39.8% increase year-over-year.
New Oriental's economic moat is both wide and deep, anchored by unparalleled adaptability, an extensive network of 911 learning centers and 81 schools, diversified educational offerings, and technological innovation. The company's swift pivot following the 2021 regulatory crackdown demonstrates exceptional organizational flexibility, transitioning focus to non-academic offerings and new ventures like educational tourism.
Key competitive advantages include market penetration, brand trust, and economies of scale. The company's diversified portfolio reduces reliance on any single revenue stream, while investments in EdTech enhance its competitive positioning.
However, New Oriental faces risks including regulatory uncertainties, intense competition, and macroeconomic factors. Despite these challenges, the company's strategic initiatives and strong financial position, with over $4.7 billion in cash and equivalents, provide confidence in its ability to navigate future headwinds.
Currently trading at a discount to its estimated intrinsic value ($69.50 vs. $84.14), New Oriental's stock may present an opportunity for value investors comfortable with the associated risks. The company's adaptive educational innovation and robust fundamentals offer a compelling narrative for those seeking exposure to the evolving Chinese education sector.
Always Invert
How can New Oriental Education increase its student enrollment and expand its educational offerings successfully?
Ask this:
What could cause students to abandon New Oriental Education and choose its competitors?
Outdated curriculum: Failing to update courses to meet evolving needs.
Unqualified teachers: Hiring instructors who lack expertise or teaching skills.
Poor student support: Providing inadequate academic or administrative support.
Ask Yourself:
Does New Oriental Education regularly review and update its curriculum to align with current educational standards and student demands? Do they have a rigorous teacher selection process and invest in professional development? Do they offer comprehensive student support services, including academic advising and personalized assistance?
REC
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