How to be a minimalist both in life and investing.
In this episode you’ll learn:
- How hand-made pottery combines simple material, specific steps and randomness to create beautiful things.
- What are the principles of minimalism.
- How do you know you have pared back too much.
- What are some examples of minimalist portfolios and what have the returns been.
Show Notes
Japanese Wood-Fired Ceramics by Mazakazu Kusakabe and Marc Lancet
Anne McCrossan Note: The episode mentioned has a studio space at The Leach Pottery. Her studio space is actually at Gaolyard Studios.
The Unknown Craftsman by Soetsu Yanagi
Henry David Thoreau quote on simplicity
The Simple Guide to Minimalist Life by Leo Babauta
PortfolioCharts.com portfolios
Become a Better Investor With Our Investing Checklist
Become a Better Investor With Our Investing Checklist
Master successful investing with our Checklist and get expert weekly insights to help you build your wealth with confidence.
Summary Article
Minimalist Investing
I have a clay bowl on my desk. It is irregular in shape and far from perfect if one judges perfection as being perfectly round. The bowl’s color varies from orange to purple to metallic. The piece is rough to the touch and has random spots on it.
The bowl is beautiful. It was hand made by Fumio Ito, a Japanese Buddhist monk and potter who lives and works in the village of Seishido in the Fukushima prefecture. Ito fired the bowl in a wood-fired kiln.
A River of Fire
Mazakazu Kusakabe and Marc Lancet write of pottery made in this fashion in their book “Japanese Wood-Fired Ceramics”:
“A river of fire flows through the kiln; the ceramic pieces are as stones washed over by the flame. The firing adorns each piece with original markings as inevitably as moss grows on rocks or trees. The resulting ceramic surfaces exhibit wide-ranging finishes—splashes or waves of color, sandy deposits of ash or melted pools of liquid color—all manifest according to the intricate dynamics of natural forces.”
Ito only fires his wood kiln once per year. It takes him and his helpers that long to chop and split sufficient wood to burn. My oldest son spent three weeks two years ago splitting and stacking wood for the kiln.
I asked my son to buy a bowl from Ito. Instead Ito gave him one. He said it wasn’t good enough to be sold. I’m not sure what the flaw is if there is one.
One of the ongoing debates with pottery is what to do with “less good” wares that don’t turn out as well as the potter would like.
My friend Anne McCrossan who has a studio space in St. Ives, Cornwall in the UK at the Gaolyard Studios says, “There are many stages in the making process from raw clay to a finished piece that turn a good pot into a less good pot and vice versa.”
Randomness and Respect
The many stages of the making process is one of the things Anne enjoys about working with clay. She also appreciates “the randomness of it, the respect for fire, and that through the journey from beginning to end one is acutely aware of the intimacy in the relationship between oneself and the other elements. There are many, many alchemic moments which shape the end outcome. This makes the experience of interacting far more satisfying than a simple transaction.”
The Leach Pottery, near where Anne has her studio space, was co-founded in the early 1920’s by Bernard Leach and Hamada Shoji.
Someone once asked Hamada why he used such a large kiln. He replied, “If a kiln is small, I may be able to control it completely, that is to say, my own self can become a controller, a master of the kiln. But man's own self is but a small thing after all. When I work at the large kiln, the power of my own self becomes so feeble that it cannot control it adequately. It means that for a large kiln, the power that is beyond me is necessary. Without the mercy of such invisible power, I cannot get good pieces. One of the reasons I want to have a large kiln is because I want to be a potter…who works more in grace than in his own power. You know nearly all the best pots were done in large kilns."
Pottery and Fishing
I have never sat a spinning wheel to make pottery. Yet, the combination of simple materials, specific steps and randomness intrigues me.
McCrossan says, “I love how the material I am working with comes out of ground that I know, as it has done since the Middle Ages. The reconstitutability of clay is near-miraculous, as is how each potter's work is uniquely their own. The process of fully understanding the making process is intimate and takes a lifetime; each stage has its own very involved specific tasks, each enjoyable in their own ways and that being comfortable with each of them is essential for mastery.”
The reasons Anne enjoys pottery are some of the same reasons I enjoy fly fishing. The equipment needed is minimal. There are specific steps to follow in terms of choosing and presenting the fly. Yet, the outcome is not completely under my control. There is a high degree of randomness, which is why when fishing the Henry’s Fork I frequently don’t catch a fish.
Simplicity In Investing
I have found the same pattern of simplicity and randomness in investing. I focus on asset classes and invest primarily with low cost exchange traded funds. I don’t try to identify hot stock picks, currency movements, or the market’s reaction to the latest statement by the Federal Reserve.
Instead, I make sure I have a diversified asset allocation with multiple return drivers from stocks to bonds to real estate to gold. I then respect the degree of randomness that will influence the outcome.
Recently, I came across a website at portfoliocharts.com that provides an overview of 15 minimalist portfolios. This site is an anonymous labor of love by Tyler, a mechanical engineer with some wicked excel skills. He doesn’t give his last name.
Portfolio Charts provides the historical return and risk characteristics for some basic portfolios whose returns are driven by asset allocation. The statistics are attractively presented in a series of charts, tables and graphs.
The site is a great place to start for those looking for some simple investment portfolios. Please recognize, though, the historical returns shown on the site are not likely to be repeated going forward.
While there is a large degree of randomness when it comes to investing in the short-term, in the long-term returns are significantly influenced by the starting conditions in terms of current interest rates, dividend yields and valuations.
With interest rates and dividend yields near historical lows while stock market valuations are average to above average, investment returns in the next decade will be lower than what they have historically been.
