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Foundation Investment Advisors and Consultants
 

Insights and Publications

Colonial Consulting provides insights and analysis on current conditions and challenges, market environment, and industry trends.

Quarterly Commentaries

  • It was 2013 and Marc Lore, co-founder of Diapers.com parent Quidsi, was anxious for a new venture. He had recently left Amazon, which had purchased his company for $545 million in 2010 after an escalating price war that Lore ultimately concluded he couldn鈥檛 win. He was in New York, having lunch with an investor from the well-known venture firm Accel Partners, when he pitched his new idea 鈥 an online shopping club where the company would utilize membership fees as its primary source of revenue. A pricing algorithm would squeeze costs from every possible source 鈥 shipping, transaction fees, order size 鈥 and pass along these savings to the consumer. Lore鈥檚 theory was that online companies like Amazon and Walmart.com were catering to the wealthier-than-average middle-class shopper, and that nobody was catering to the just average middle-class shopper, the one that could wait a few extra days for a product in order to save a few extra bucks...

  • Few terms grab the collective attention of citizens in a democracy more than 鈥淢arxism.鈥 Defined loosely as a classless society, it reflects the social, political, and economic theories of its chief architect, Karl Marx, a German philosopher who collaborated with Friedrich Engels to author 鈥淭he Communist Manifesto鈥 in 1848. Marxism is often used interchangeably with the word 鈥渟ocialism,鈥 an economic and political theory advocating collective ownership and administration of the means of production and distribution of goods. In other words, the opposite of capitalism. Despite some bad actors throughout history, capitalism has persisted because it rewards creativity and hard work, key components for the growth, wealth, and productivity of a functioning and thriving society. This is a system that equity investors know well and in which they have the greatest confidence. As far as most equity investors are concerned, socialism is a scourge that impedes progress, not advances it...

  • There are many biases that can come into play when making decisions; where one lives and works, where one grew up, and the company we keep (and have kept in the past) all play a meaningful and often not readily apparent role. These biases are inherent to being human 鈥 everyone has them, and while some are self-aware enough to acknowledge them, others are not. In the work we do as investment advisors, allowing such biases to affect our process could lead to poor decision making 鈥 not only in single instances, but in a systematic and serial manner. In this way, an awareness of the biases and other flaws which affect our decision making becomes quite important. Decision making in the investment world is often governed by what psychologists call "heuristics". Most clearly defined, heuristics refers to the way in which we find adequate, though often imperfect answers to difficult questions. In essence, it is the psychological process we use during complex decisionmaking. As complex decision making encompasses the vast majority of what we do as investment consultants and researchers, understanding the way heuristics impact our processes is of paramount importance. Awareness, in our view, is the first step. Addressing them is the next...

  • In late 2007, Warren Buffett challenged hedge fund-of-funds Protege Partners to a bet. Mr. Buffett wagered $1,000,000 that an investment in the S&P 500 would be worth more after ten years than an equal investment in five fund-of-funds selected by Protege. The market was merciless from the start, delivering a global financial crisis that provided a very strong start for the hedge fund portfolio. Fast forward to today, and Mr. Buffet is in a very solid position; the S&P 500 has delivered 66% over that period, while Protege鈥檚 selection of fund-of-funds (which it has chosen not to disclose) has delivered 22%. With all due respect to the old adage 鈥渋t鈥檚 not over until it鈥檚 over,鈥 the outcome does not look promising for Protege. In 18 months, Mr. Buffet鈥檚 chosen charity 鈥 Girls Incorporated of Omaha 鈥 will likely be receiving a Protege-signed check for $1,000,000, or the equivalent of about five shares of Berkshire Hathaway Class A stock...