Exactly ten years ago, I left a well-paying job to dedicate myself to investing. My former colleagues wished me well but probably thought I’d lost my mind. With modest means by London standards, my investment committee — a grand total of one member — had plenty of enthusiasm but limited experience.

 

However, what seemed like weaknesses turned out to be hidden strengths. Limited capital allowed me to focus on opportunities beyond the reach of institutional investors. Scarce resources pushed me toward companies that could thrive without my intervention. Instead of sector specialization, I aimed to refine the investment process itself. A one-person investment committee ensured accountability for every mistake which accelerated my learning.

 

Aided by favorable economic conditions, I generated a 15% annual return over this first decade. The lessons learned in those early years will be the wind at our backs for the decade to come.

 

Lesson #1 – The Vicious Cycle

 

During the first few years, I invested in average-quality companies undergoing all sorts of corporate transformations. The high returns I achieved blurred my vision. I was spinning like a hamster on a wheel, endlessly revisiting the same three decisions: what to buy, when to sell, and what to do next.

 

My ongoing effort to understand industries will bear fruit as long as I’m investing. Knowledge compounds just as effectively as capital. The seeds for future returns were planted in the days behind us. 

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Lesson #2 – Allure of Complexity

 

My office walls are lined with annual reports. A gallery of past mistakes. At the time of our investment, these companies seemed promising: unprofitable but with rapid sales growth, led by founders who appeared aligned with our interests. What could go wrong?

 

The charm of investing is that similar ingredients yield different outcomes. Some of today’s biggest companies resembled those on my wall of shame. The trick is knowing how to tell them apart—or, in my case, realizing that investing in such companies isn’t my game. Fortunately, in investing, unlike gymnastics, victory doesn’t come from executing the most complex maneuver.

 

Lesson #3 – Ignoring the Obvious

 

Throughout the history of capitalism, size was the enemy of the returns. Exxon Mobil, the world’s most valuable company twenty years ago, illustrates this principle. Its projects begin with seismic surveys that estimate viable reserves and production costs. Exxon Mobil wouldn’t have come far had it saved the most profitable projects for later.

 

Over the past decade, however, the largest technology companies have defied economic gravity. Year after year, they expanded their competitive advantages and increased returns on capital. My reluctance to study these widely recognized companies stemmed from the belief that other investors had already analyzed them to the point where I cannot bring a valuable insight. This superficial view proved costly.

 

Over the years, I had plenty of opportunities to purchase some of the highest-quality businesses of our time. Contrary to theory, the market is not made up of rational actors. Most market participants, driven by emotion, treat the chance to trade as an obligation, creating opportunities for a patient investor.

 

Even companies outside the global spotlight, like Interactive Brokers, have enough manic-depressive shareholders to rock the boat. Since my first purchase, the stock price has increased sixfold, yet it endured four declines of over 30%.

 

The Next Ten Years

 

The goal of Highway One remains unchanged: achieving the highest possible longterm returns, net of fees and taxes. A deep understanding of a range of companies will help us uncover new opportunities. Clear awareness of our strengths and weaknesses will ensure we pounce on those opportunities in full force.

 

I expect that, through returns and additional investments from existing partners, we might reach the capacity of our investment strategy within the next decade. My response to Highway One reaching capacity will not be a creation of Highway Two. As soon as the influx of new investors begins to harm the goal and returns of those who supported me from the start, the fund will shut its doors to new participants.