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Why I Started Junto

Why I Started Junto

My story, motivation, and how I came to the position of starting this peculiar endeavor.
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When I wrote the note The Sit-on-Your-Ass Philosophy to Life, it became more popular than I imagined. To this day, it’s the most read note on Junto. The reason, I believe, is due to its personal story. It showed how a state of vulnerability can turn into an important life lesson.

You spend time reading my notes. Many of you have even trusted me with your email to hear what I have to say consistently. Therefore, I think it’s only fair that I tell you a bit more about myself.

So, this note is again going more personal. It’s about my story, motivation, and how I came to the position of starting this peculiar endeavor. You can treat this as a personal case study for how I made decisions so far through my short lifetime.

The Beginning

I always had an internal motivation to learn fast, work hard, and prove myself to the world.

When I was little, I thought I was destined to become an attorney. Not that I was particularly drawn to law. I was more drawn to the lifestyle, the way of work, and the suits. But I also knew that venturing into law was going to take a lot of work, a long education, and sacrifice. It’s not something that makes you rich overnight.

But I was in a hurry to distance myself. As a child coming from humble means, I knew that to get a big advantage in life, I needed to start making money as soon as possible to at least have a comfortable amount saved up by the time I turned 18 and entered adulthood.

In Denmark, where I grew up, there are strict rules for how much you can work at the age of under 15. And even if I took a regular job as a trolley boy or delivering newspapers, I wanted a different salary than the ones offered to my age peers—one that depended on my skill and effort.

I had all this planned in my head by the time I was 12 years old.

My dad, a floor layer, had found a side gig where he sold imported non-branded jewelry, watches, and other accessories through an internet auction site. Depending on the product and how well it was presented in the listing, some of these items, purchased for a few bucks, could go for either a few cents on the dollar or sometimes over a hundred dollars as the auction for the item ended.

It was a nice little business besides the flooring work. What my dad did was to drive to a big warehouse trade center in Hamburg, Germany, to purchase his jewelry (finding suppliers over the internet wasn’t easy back then), stock the items in our house, shoot some images, write some intriguing descriptions, list them on the auction site, and ship the item to the winner as the auction ended.

I saw the opportunity for me here. I had a chance to do something in which I could excellent my craft and in which that excellence would turn into me making more money. All I needed was to figure out how I could sell my own stuff and make the auction listings so good that I was guaranteed a profit on each item sold.

So that’s what I did. I scrambled together whatever few hundred bucks I had and drove with my dad to Hamburg to purchase my own little inventory of jewelry.

I taught myself to take good product images, write persuading product descriptions, and experiment with the optimal listing and auction ending times. I did a lot of split tests to find what was working well. After a while, my auctions started to go from 5 times to sometimes 20 times the purchase price. Every day after school, I would rush home to list some of my inventory on auction, check my bank account for payments, and head to the post office to ship the products out. My customers had no idea they were dealing with a 12-year old boy. That’s the power of the internet.

Each quarter as my dad and I drove to Hamburg for procurement, I could afford a bigger inventory and my savings account was starting to grow. At one point, I remember calculating exactly how many items I would need to list and sell every day in order to have saved up the equivalent of $150,000 by the time I was 18—which didn’t happen (I also forgot to account for taxes). But after one or two years, I did have quite a pile saved up for my age.

A Greedy Little Squirrel

In 1736, the Danish king Christian VI passed a law that required young people in the age of 13-14 to confirm their baptismal promise through a religious ceremony known as confirmation. Confirmation came to be viewed as an “entrance exam” to religious and social life and the confirmand was usually celebrated with a big party. Of course, I told my parents that after my confirmation I would rather skip the party and get the money instead. I was becoming a greedy little squirrel.

And, of course, it was about that time I discovered the stock market. The first two books I purchased were The Intelligent Investor and Security Analysis because that’s what Warren Buffett recommended. Needless to say, I understood none of the details. But I understood the big concepts.

However, I did not understand the concepts nearly enough to know to be fearful when others are greedy and that we were at the top of a housing bubble with a financial crisis luring. I had piled my entire savings from my hard work into 5 or 6 stocks—whichever I found interesting at the time. There were some banks and some biotechs. Within a year, I ended up losing 70-80 percent of what I had saved up, including the money from my confirmation. My six-figure goal before adulthood suddenly seemed very distant.

But don’t feel sorry for me. I was hooked. Not from the thrill of being in the market but because I had found a potentially lifelong, intellectually stimulating endeavor in which I could excellence my craft by working all by myself.

I began working less and started reading more. I wasn’t eager to quickly earn the money back that I had lost, partly because I didn’t need them. A 14-year old boy didn’t need the kind of money I had. Instead, I was now hungry for knowledge. I realized that simply working wouldn’t give me the foundation to be set for life. It could only make me better at the specific work I was doing. Rather, I wanted a skill set that allowed me to make the right decisions when I entered adulthood and did need the money. I didn’t know the right word for it at the time, but what I wanted was to become a generalist rather than a specialist because it would provide me with the best options later in life.

And so, I forgot all about wanting to become an attorney and started to imagine what it would be like to work at a big Wall Street firm. Investing was the right game for me. It was a game in which I could never stop learning—about anything. Every door of knowledge opened another door.

This wasn’t how I thought about school. I got good grades but I didn’t like the school system. Because I spent so much time working and learning outside of it, I quickly learned that the school system isn’t designed to make kids independent and self-sufficient; It’s designed to churn out workers who can bang facts in the back of the head, rewarded by Pavlovian conditioning in the form of grades. And the result is that students end up caring more about grades than they do about learning.

When I got into high school, my disliking of the system turned to the worse and my grades deteriorated to mediocre. I didn’t care enough because I read and developed plenty outside of school. In retrospect, I was too anarchistic in this regard. Because to be fair, there is one great utility of schooling which is that it teaches you structure and philosophy of science. And some classes are very important to pay attention to, such as math, which was my favorite subject. The math they teach you in school gives you mental models that very much correspond to the real world.

Betting on Different Horses

My love of learning kicked into high gear at the age of 18 once I went to university because I had more time to work and think for myself. It was also a time of experimentation (business experimentation, mind you).

While studying economics, one of these experiments was taking a sales job in cold calling to better my sales and communication skills in the most uncomfortable way you can imagine. Of course, I only lasted few days and concluded, as I did at the age of 12, that manual labor wasn’t for me.

Then I divided my effort outside of my studies into three bets to gain more experience.

Bet #1: I worked two years in creating a financial education website that ended up being the largest financial encyclopedia in Denmark. While the traffic was large and growing, I never found a way to monetize it correctly and ended up selling it.

Bet #2: I figured that I needed to better understand the nature of financial markets by trying out different approaches to it. (No, I wasn’t a sectarian value investor blinding myself to other opportunities to make money in the market.) I dabbled in options trading, I swing-traded illiquid small-caps, I shorted scammy penny stocks, and I experimented with algorithms. After a couple of years, none of these activities gained any traction and turned out a net loss. But each brought with them valuable lessons, externally in terms of market mechanisms and internally in terms of psychology and circle of competence. If you are a serious investor, I advise you to try different things out and venture out of your bubble. You have to try other things to figure out what true investing is. It gives you a major advantage in the long run.

Bet #3: The third bet turned out the successful one. It was when I co-founded Abelstedt, a jewelry company (yes, I relied on my initial circle of competence), with my better half, Julie, who is now my fiancée. Now, this is where our story merges with the story about Abelstedt told in the note, The Sit-on-Your-Ass Philosophy to Life. If you haven’t read it, you can do so, and then come back and finish this note.

I can’t stress enough how important it is to learn investing from the perspective of a business owner. Investors who owned their own business possess a big advantage. Founding Abelstedt has been invaluable in terms of sharpening my thinking around investing problems.

The success we had with the company also made me realize another important thing: that I didn’t take my university education for any job nor did I do it for anyone else. I did it as a challenge to myself just like everything else I’ve done up to this point. Before, I used to think that the purpose of a long education was to give me the best head start before going out into the real world.

The Epiphany

But running a company was the real world. I realized I couldn’t have it better. While doing my Master’s degree, Abelstedt was gushing enough free cash flow to make a comfortable living for both of us. We could work whenever we wanted, wherever we wanted, and we had no debt. Living frugally as we always had, our savings started to pile up. I surpassed my childhood goal of $150K by a wide margin faster than I would have imagined had I gone on the career-building treadmill.

My prior dream of going to work at a big Wall Street firm suddenly seemed ironic. I had fallen too much in love with independence.

So I decided then and there that after finishing my Master’s degree, I would continue the entrepreneurial route and build my own engine of wealth rather than oiling somebody else’s. Abelstedt would be the flywheel of that engine, and whatever cash the business would throw off would be allocated to our equity portfolio which would become an ever-growing part of the business empire. My vision now expanded far and beyond a long career in finance and I started to imagine our holding company turning into our very own mini-Berkshire.

But just as I thought I was out, they pull me back in.

Through my financial education website (my first bet during my time at university), I had gotten to know a wealthy Danish man who liked some of the stuff I’d written. One day, this man calls me up and offers me a position as a portfolio manager at his single-family office. In addition to assisting in setting the direction for the family’s overall portfolio and asset allocation, I would manage a discretionary portfolio with a pool of capital that was significantly bigger than what I was currently managing with our own money. I would mostly be working alone in an office of only three employees, and by being part of a big client at various investment banks, I would have plenty of access to a wide network of people and a variety of expensive tools like the Bloomberg Terminal. If I had to try out finance as a profession just once, this would be the ideal environment. So I accepted the position.

Fast forward 8 months, I quit the job.

As it turned out, this wasn’t my ideal environment. I didn’t need a Terminal—no serious investor does. And surrounding myself with all these industry people only muddled my thinking. I found that the finance profession contains a lot more salesmanship than it does investment capabilities. And it’s amazing how influenced you get from the environment you find yourself in.

Another thing about working at a family office is that you take on lots of different tasks other than simply reading, thinking, and investing. I wasn’t wired to handle hundreds of emails, tons of phone calls, and attend bunches of meetings. (Unfortunately, this is the game of the job market.) And I didn’t care enough about my salary and level of AUM as compared to my opportunity of venturing out and thinking on my own. So I decided to take a 100 percent pay cut and concluded for the third time that no job was going to cut it for me.

Meanwhile, at home, our equity portfolio had grown to a size that was of equal importance to our core jewelry business. If I was to manage this portfolio, beat the market over the long haul, and fulfill my vision of turning the holding company into a mini-Berkshire, it would require my full attention. So, Julie took full responsibility for the jewelry business while I took full responsibility for the cash it would throw off.

After some time, that’s when it appeared to me: If I wasn’t going to manage other people’s money (for now), I could combine my main activities of reading, writing, and investing into a haven that other value investors (or other designations) could turn to and benefit from.

I imagined a modern-day investment partnership where members would manage their investments at their own discretion but have the opportunity to follow our journey with full transparency and honesty. Contrary to secretive hedge funds or mutual funds that lock up investor capital, members would pay a tiny membership cost in comparison to thousands (or in some cases, millions) in management fees to get full transparency of our thought process and decision making. Members would know what to expect (which was a patient, low-activity, sit-on-your-ass value investing approach aiming to beat the market over the long haul), and they would get valuable insight into how we think about companies, investing, and the art of multidisciplinary thinking.

This vision became Junto.

What Works

One of my biggest life lessons has been to sit on my ass when I found what worked.

And what worked for me was working for myself and by myself. I started my story by working for myself and ended up working for myself. But working for oneself may not be for everyone. Of course, there are downsides, it can be a constant struggle, and the imposter syndrome (that creeping feeling of asking yourself, “Who am I to claim I know anything about this stuff?”) is very real. That said, for people working in the investment business, a lot of the characteristics of working for oneself are, in my opinion, actual necessities to achieve extraordinary success.

The antidote to the imposter syndrome, of course, is to set examples of what you preach. Preaching isn’t worth a damn without clear action. Unfortunately, lots of people working in finance preach without setting examples. There really is something serious behind the phrase, “eating your own cooking”.

Other than setting examples, here are some other important takeaways from my story, whether it’s in your work or other aspects of your life:

  1. Be able to think for yourself. Resist blinding yourself to the influence of your environment in terms of opinion and mindset.
  2. Read more than you think you need. Learn more than you think you need.
  3. Focus on things that scale and compound. Equity scales and compounds; Renting out your time doesn’t.
  4. Focus only on the few things that work to get big returns. You don’t have to be everywhere and do everything.
  5. Keep control of your time, which you can’t unless you say no the majority of times. Stuff doesn’t produce happiness; Time control does.
  6. Stop playing status games and ignore the people who do.
  7. Play long-term games and seek the people who do.

What’s Next

As I tap dance to work, my vision for Junto is growing bigger by the day. Initially, it was all about chronicling my investment journey. Now, I imagine the future of Junto to be so much more.

I imagine Junto to become the preferred stop for people wanting to learn the art of value investing the right way. I imagine Junto to become a haven for seasoned investors. I imagine Junto to become the greatest value investing community on the planet.

They say you get the customers you deserve. Seeing the quality of the members we have so far, this vision looks brighter than ever.

As for Abelstedt, we’re expanding from Europe to the U.S. market, and Julie and I are moving with it. The next big chapter of my life is just getting started. Granted that our pending investor visa gets issued sometime within the next six months, we will be moving in the first quarter of 2022. Knowing that the majority of Junto’s members are based in the U.S., I can’t wait to meet and get to know many of you.

I will be in Florida from September 28 and drive around the country until the end of November. I will document the trip on Twitter. If we’re in the same area for a while and you want to meet up for a coffee or a quick bite, feel free to reach out.

Cordially,
Oliver Sung

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6 Responses

  1. Thanks for the great writeup! Been really appreciating your notes and learning a lot from being hooked in. If you ever make it up to Western Canada, my father and I would love to meet you.

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