“What are you planning on doing back here?” asked Marsbury.
“Nothing right away, but in another year or two, maybe a swimming pool,” I told him.
“A swimming pool!?” gasped Marilyn.
“Well, I was just thinking, anyway. If you don’t want one, we don’t have to.” I thought she would have been excited by a swimming pool.
“No, I mean, yes, that’d be great! We can do a swimming pool?”
“Sure, unless you just want the little inflatable one for you and Charlie to sit in. I want to watch you huffing and puffing on that.”
Marilyn began carrying Charlie around, him in his little jacket and sun cap, telling him how ‘Daddy was going to dig a swimming pool!’ while Marsbury and I just shook our heads at each other. I simply commented lowly, ‘“Daddy’s not digging anything. Daddy will pay somebody to dig. Daddy’s way too lazy!” That got Marsbury and me to laughing. After a few more minutes, Marsbury took the preliminary drawing and headed back to his office.
Another day I spent in a long meeting with the brain trust. I wanted to start making plan for the future, and needed their input, not so much on what to do, but on how to do it. We made plans to meet over at John Steiner’s office. We met after lunch on Wednesday, him, me, Missy Talmadge, and the two Jakes.
When the meeting started, John commented, “I’m not really sure why I’m here, Carl. I know I handle a lot of your legal work, but it’s not that involved, and I don’t do anything with your investments. It’s not that I’m not happy to have you over, but I’m curious.”
“Fair enough. Two reasons. First, I trust you. We’ve known each other a long time, and I trust your judgment. We might disagree on something, but I know you won’t knowingly get me in trouble.” John nodded his head in agreement with that. “The second reason is about the future. The last week or so, I’ve been helping a friend of mine expand his business, and spending some time doing it, too. Marilyn commented to me that it wasn’t like they were my employees or my business. Another time we were talking and it came up that maybe I could do some investing other than the stock market, like in local businesses. Private equity or venture capital, that sort of thing.” I looked over at Missy. “You’ve heard of that sort of thing, right?”
“Sure. You’re on the small side for that, but everybody has to start somewhere.”
I turned back to John. “So it doesn’t hurt to get your thoughts on things. Same with Missy. As for Jake and Jake, I can just about guarantee that there is a right way to do things as well as a wrong way, and I’d bet I’ll pick the wrong way.”
That got a chuckle for everyone. “So, what’s on your mind? Which topic first, the market or your local business?”
“Market first.” This I was fairly sure on, just not the timing. The late Seventies and early Eighties had been a time of economic stagnation for the country. I can remember working for a lab where we were getting cost of living increases simply to keep us ahead of the inflation adjusted salaries of the kids being hired right behind us. It’s one of the things that killed both the Ford and Carter presidencies. Now, in the late spring of 1982, we were in the depths of a recession. My string of market successes despite this made sure the others would listen.
Everybody leaned forward, in anticipation, which I though faintly amusing. There used to be a commercial by one of the big investment companies, where a broker would say something like, “What we think…” and immediately the entire room, restaurant, theater, or whatever, would go silent and lean in his direction. “I know it’s hard to believe, but we are on the verge of the biggest market bull run in history. I know it sucks now, and it will probably get worse, but in a few months, the market is going to take off like a rocket! We need to be prepared. Missy, you’re going to be handling the stock transactions, as well as anything else related to Wall Street, and you two guys are going to have to make sure I don’t lose my shirt on taxes and costs.”
The others stared at me. “You’re kidding me, right? The market sucks right now,” said Missy, with the others nodding in agreement. “I mean, I know my job is to sit around and blow smoke up your butt, but that’s the truth, and you’re smart enough to know it.”
I grinned at that. I was probably the only guy at the table who knew where that particular expression came from. “Regardless, it is about to happen. I know this like I heard it on the news. We are about to enter a prolonged period of time when the market is going to go straight up. Oh, I’m sure there will be a few burps and bumps along the way, but the long term forecast is for significant growth.”
“What could possibly be the cause of this?” asked Jake Number One, the older Jake, my accountant.
“Computers,” I replied.
“What about them? We’ve had computers for years?”
“No, not like this. I’m not talking about the mainframe computers I did all my programming on back in college. I mean the little ones you can buy from IBM.”
“I’ve seen them,”, countered Jake, “but they’re practically toys. They break constantly, and you need to have a degree in computers just to run one.”
“Carl, I bought one myself, from IBM. They work, but you need to program them yourself. I’m a smart guy, but it’s a real pain. Most people won’t even bother,” added Jake Junior.
“Yeah, I know, and they don’t have much memory and they are expensive and cantankerous. I know all this. Let me ask you this question — what use is a baby? They are expensive and cantankerous and break constantly and so forth and so on. Sooner or later they grow up, though, and get real useful!”
“So, you’re saying they get more useful in the future?” said John.
“Precisely! It’s all about Moore’s Law.”
“Moore’s Law? Who’s Moore?” asked Missy.
“He’s the head of Intel, one of the companies I own stock in. Anyway, he discovered, a number of years ago, that the number of circuits on a chip doubles every two years.”
“I’m not following you,” said John.
I pulled out my calculator. “Okay, here’s a typical calculator. Actually it’s more than that, it’s a scientific calculator. It cost me about $50. It has a chip inside with transistors and circuits. In two years, according to Moore’s Law, that chip will have twice as many components.” The others were still looking blank, so I pressed on. “In two years, this calculator will be twice as powerful. Or maybe half the price. Or maybe half the size! Two years after that, one quarter. It’s an exponential relationship. In ten years time, the size of the components will be a fraction of their current size, the price will be lower than now, even after inflation, and the power will be immensely larger.”
“So, you want to invest in computer companies?” asked Jake Junior.
“No, absolutely not! That’s the totally wrong conclusion. In ten years time, computers and components will be as cheap as dirt. It will be a commodity business. No, I want to invest in the companies that write the programming for the computers, the software!”
That stunned them. They just looked at me like I was crazy. I pushed forward. “Let me tell you a story. You know how IBM introduced the Personal Computer a year ago. What you may not know is that IBM only made the magic box. The program that runs the whole thing is called DOS, and it was written by an outside company called Microsoft. They bought the program, called an operating system, from this Microsoft. Without it, nothing can happen with their computer, it just is an expensive paperweight.” The others were nodding, they knew about the IBM PC, even if they didn’t own one.