Since 1776, American GDP per capita has risen 38-fold, net of inflation.

A 38x increase sounds impressive until you do the math. A 38-fold gain in 244 years only requires a 1.5% growth rate.

Yet that 1.5% growth rate turned out to be world-class. Compounded for 244 years, it has made Americans among the wealthiest in the world. Only four small countries (Luxembourg, Switzerland, Ireland, and Norway) have a higher GDP per capita. Today, Americans make up 8% of the world’s population but own 30% of the world’s wealth.

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Diamond Hill Investment Group is a simple, predictable, and profitable business that trades at a reasonable price. Better yet, they’re value investors — “intrinsic value” appears on the first page of their 10-K. The cherry on top? They’re in a “take rate” business — asset management — that we understand well.

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Someone recently asked Charlie Munger what he thought about today’s combination of quantitative easing and large fiscal deficit. He responded:

Well, there I’ve got a very simple answer and that is it’s one of the most interesting questions anybody could ask. We’re in very uncharted waters. Nobody has gotten by with the kind of money printing we’re doing now for a very extended period without some trouble. I think we’re very near the edge of playing with fire.

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John Kenneth Galbraith studied every speculative mania between the Tulip Bulb bubble of 1636-7 and the 1987 crash. While each episode had unique external circumstances, he found that their underlying psychology was remarkably similar.

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Semiconductors are mission-critical to modern life. They power everything from smartphones and laptops to cars, AI, industrial automation, and the internet of things. There are few areas of life semiconductors that have been left untouched. And yet, per capita consumption of semiconductors looks virtually certain to increase.

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The best businesses tend to either be low-cost producers or possess untapped pricing power. The more extreme they lean in one of these directions, the better. Costco and HEICO, which we've recently covered, are vanguards of the low-cost model. TransDigm, which I will cover today, is an example of a business with pricing power.

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Pattern matching one of the most useful tools in an investor's toolbox. The idea is to figure out what's worked in the past and identify similar set-ups in the present. History may not repeat, but it does rhyme. One of the most profitable patterns is what Warren Buffett and Charlie Munger call the Cancer Surgery Strategy. I’ve also referred to it as “shrink to grow.”

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There are, generally speaking, two business models that work. The first is to provide customers with the lowest prices. The second is to convince customers to pay higher prices. Companies like Costco, Amazon, and GEICO use the first model while companies like Apple, Starbucks, and Nike use the second. Virtually every business lies somewhere on a spectrum between these two extremes.

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Lots of budding investors ask Dan and I for book recommendations and advice about where to start learning. Usually, they get whatever's at the tip of our tongue that day (a good example of the availability bias at work!). So, I thought I'd take some time to link to my favorite investing resources. Rather than provide a comprehensive -- and overwhelming list -- I'll just share the best. Quality over quantity.

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Every six months we write our clients a letter to explain what they own and why they own it. We aim to delineate the key factors driving the fundamentals of our business so that we anchor to value rather than price.

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