Beyond Standard Strategic Plans: J.D. Rockefeller's Formula for Success
Apply his Principles of Decision-Making: Lessons for Business and Life
A warm hello to all new readers! I’m glad you are on board.
New here? I’m Michael and on a mission to make beating the stock market as easy for you as choosing your favorite ice cream. I write an algorithm that does exactly that.
How it all started. The journey so far.
Oil changed Texas - and Texas changed the world.
While I was in Austin last week, I took some time to visit its history museum, and it proved to be a nice surprise.
(hey, Sundays the entry is free!)
There I read the above quote, and it hit me even harder because, at the same time, I was reading the book below.
This book comes with my highest recommendation, not for its stock knowledge, but for the insights it offers into the mind and strategies of a very successful businessman. There, J.D. stands out for his self-awareness, which played a significant role in his life. What struck me the most is how many techniques he used, long before they became common in today's self-help books. It was surprising in many ways. Rockefeller's ability to think differently from the masses enabled him to make unconventional decisions, that led to his success.
Here is just one of his golden nuggets.
Letter 34
It goes something like this.
While he is swinging his racket at the gold course, a gentleman named Dr. Hamilton tells a story about a fisherman and an angler.
He finally asks J.D.: “Mr. Rockefeller, do you want to be a fisherman or an angler?”
Rockefeller answers with wit. He explained that if he were an angler, he wouldn't be qualified to play golf with Dr. Hamilton because he relies on effective strategies in business, which the angler's approach lacks.
He said; “… no angler is so stupid that he just throws down the bait without thinking, planning, and deciding in advance…” but even top-of-the-line equipment, techniques, best bait, and locations do not guarantee success. Even if they catch fish, there's no guarantee it will be the desired one.
Rockefeller then went on to explain the superiority of the fisherman's strategy. By utilizing a net that almost matches the pulling power of the boat, fishermen aren't tied to a specific range. As a result, they catch many different fishes including the desired one.
I quote: “I told Mr. Hamilton and my golf friends that I am not a stubborn, step-by-step angler who solves problems in a simple way. I am a fisherman who can create a variety of choices until the fish that can create the most commercial benefits. They all laughed and said that I had leaked the secret of making money.”
Now he goes on and gives his son the secret sauce.
“Many people insist that the key to success lies in a solid strategic plan, and this plan must be backed by concrete, measurable, achievable, and practical action goals. I admit that this is very important, but it has fatal flaws. The plan emphasizes the standard of judgment and the pre-determined results, and what people adopt is also a fixed method that believes that the goal can be achieved. Since these programs are based on known methods that are expected to achieve the goal, we have in fact limited the scope before we start.”
He tells his son.
“… consider variety of possibilities, and actively try various options, and then focus on the best option.”
The takeaway for me was this line.
“The essence is flexibility, long-term, multi-faced, and large-scale.“
I love this kind of high-level thinking because everybody can pull his lessons.
In essence, it tells me that we should never settle to test and improve our winning strategies in all areas of life.
So, how have I adopted this lesson into my life?
Behind the Scenes
Well, I improved my back-testing algorithm. Or better, I’ve found a way to improve it. As I evaluated the last results, I’ve found two years with a “too good to be true” performance. I’ve put on my professor's glasses and found the reason.
The good thing is, that the math of my algorithm is sound.
But.
Data is dumb - you make it “smart”
The reason lies in the raw data. Although it is correct - today, it stumbles over the cords of the past.
Here is why.
When a company transitions from an over-the-counter (OTC) market to a major exchange like the New York Stock Exchange (NYSE).
This move typically results in a significant change in trading volume, shifting from low liquidity in the OTC to high liquidity on the NYSE. If your stock backtesting algorithm fails to account for this, it might inaccurately assume the stock has always traded with high liquidity and is skewing the test results. And in most cases, it does fail, because raw stock data is not tracking these transitions.
So the math is sound and in reality, the picking algorithm would have never picked this ticker.
But the backtesting algorithm did, and so he picked a ticker that was an OTC stock – back then – and today it’s not. And back then the price was very attractive compared to its fundamentals, but it never “happened” since my picking algorithm is ignoring OTC stocks.
And I want a realistic backtesting algorithm.
How to solve it?
First, I will check the liquidity of all stocks before feeding them into my backtesting algorithm.
As a second step, I will gather SEC data to make it bulletproof. This little snippet will also enter the „Backtesting might seem straightforward, but it has its pitfalls“ group.
So, I will have to do this first, before I share the latest results. On the one hand, it sucks, but I’m happy I found it since it will improve the quality of the backtesting results even further.
What else?
Since I was in Austin and I’m a big Joe Rogan fan, I’ve visited his comedy club – twice. One show was with Erik Griffin and the second was Joe the legend itself - with a lot of his comedy friends.
If you like Joe as I do, it’s a MUST and worth every penny.
Most shows are sold out very fast, but you can do what I did on my second show. Be there 1.5 hours before the show starts and make yourself comfortable in the “backup waiting line”. Usually, 10-20 people who bought tickets don’t show up, and this is where you get happy. You can then get a last-minute ticket right at the door.
(No, I’m not an affiliate, just a fan.)
What else?
I hit a personal milestone. I finished my first half-marathon on Maui, and it became even better.
At the beginning of this year, my wife had a herniated disc, and it shuttered her plans to run the half-marathon. But she is very stubborn and focused hard on her rehab and did it anyway – and finished even before me! Now that is a badass! Give her some applause.
The Plan
There is a lot to do, so let’s do it. I will implement the addition into my backtesting algorithm. My goal is to be done by the end of the coming week since I have to run the training again. I will share the results ASAP.
What’s on my head
This vacation was necessary. The past months have been very intense and I’m so happy that I decided against “taking work with me”. I shared a lot of quality time with my wife and we had great conversations. The energy tank is full and fresh again, and I’m looking forward to what’s coming next.
Nuggets I’ve enjoyed
Get the book: The 38 Letters From J.D Rockefeller To His Son (no affiliate link)
If you love Joe Rogan do yourself a favor. —> Find his comedy club here.
So, there you have it - my last three weeks in a nutshell - relaxed, refreshed, and refueled.
Have a great day StockStar!
Hit that heart if you love being in a good mood!
Michael
If you like it, share it, and make somebody happy.
Recommend The Economy Rocket to your readers and friends
I share my stock investment story without sugarcoating – you get the good, the bad, and those tricky ego trips. I'm developing a service with a mix of smart code and proven investment strategies, making stock analysis a thing of the past if you wish. Why? Because life offers so much more beyond the confines of stock analysis.
Disclaimer:
The information in this article is my personal opinion. I’m not a certified investment professional. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. There are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk and do your own research as well. Investing in the stock market can lead to a total loss of the capital invested.
Great post Michael. I shall get my hands on this book. Congrats to you and your wife for the marathon.
I have to read Rockefeller’s letters asap! From what you shared, it feels like he had come up with the lean startup strategy very long before it was streamlined.