That Dog Won't Eat Bread

By DAVID MOON, Moon Capital Management
October 23, 2005

The great thing about a dog is that it is incapable of telling a lie. Fido may keep you up all night barking or chew up your church shoes, but he will not wake up one morning and decide to mislead you by unnaturally manipulating his behavior. Ivan Pavlov discovered this 100 years ago when his dogs learned to salivate at the sound of a bell ' a bell that signified dinner was about to arrive. Dogs are simple, predictable and honest.

On farms, dogs are often given leftover bread to eat; the better table scraps are reserved for fattening the hogs. The canines become accustom to eating a fairly bland diet, and usually augment it with what they can scavenge on their own. But if you constantly feed a dog higher quality foods ' fish, meats, spicy vegetables, fats ' he doesn't want the bread any more. He will refuse almost to the point of starvation. In country vernacular, it is said, 'that dog won't eat bread.'

Too many people in our country won't eat bread. I thought about that as I watched people rush to file bankruptcy last week before the new bankruptcy laws took effect. Many of those people are middle and upper middle class wage earners who became accustom to a diet of fish, fine cars and fancy houses. And when the circumstances removed the fine food, they refused to eat bread.

Too many of us can't see beyond the next monthly bank or brokerage statement. We live in a world that encourages and validates short-term thinking. Long-term effects are too-often ignored for the sake of immediate expediency. The United States was probably the first place in the world to put sugar in food to get our kids to eat it. One morning on the Hallerin Hilton Hill show, a pediatric office worker told the story of a mother who fed her two-year-old child candy corn and Dr. Pepper for breakfast each morning. The mother explained, 'she just cries and won't eat anything else.' I am willing to bet that if this mother works, she either doesn't participate in her 401(k) plan, or she picks whatever fund performed best last quarter. She probably doesn't participate in the plan, because she is so focused on immediacy (making the baby stop crying; paying the bills) that she's unwilling or unable to focus on more important longer-term issues (the health of her child; financial security.)

I've seen children of wealthy parents pay for their monthly country club dues or luxury automobile lease payments with money drawn from home equity lines of credit or loans from trust funds. Those dogs won't eat bread. This is the same type of faulty thinking that causes a person to buy a stock simply because it has increased in price or to sell it because it has declined in price.

Warren Buffett, arguably one of the most successful investors of the last hundred years or so, is 75 years old. His investment decisions are influenced by his 50 and 100-year demographic expectations. That's long-term thinking by a guy who probably won't be around to see he was right. (Buffet may, of course, have plans to still be around in 2105.)

You may argue that Warren Buffett is a billionaire grandfather and has the luxury of being able to ignore short-term nuisances, like annual fluctuations in the S&P 500 or crying babies. You say you live in the real world where your investment returns have a real impact on your standard of living? How do you think really rich investors get that way? Slowly. Deliberately. Methodically. And by choosing not to starve to death when fed a bowl of bread for dinner.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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