21 Jan I’m Going All-In with Live Your Legend! The Difficult Decision to Close My Investment Business
Focusing Your Future
Last night Chelsea and I met a nice man named Horace at a small surfer’s bar in Nosara, Costa Rica (we didn’t exactly blend in…).
He was a 52-year-old investment banker who visited Costa Rica for a few months about two years ago. He’s been living in Nosara ever since. He left the high-priced finance life in exchange for a little “pura vida” as they call it here. He’s now a certified yoga teacher and helping build the Yoga Institute down here. He’s also a pretty good surfer (especially for having started less than two years ago).
I love stories like this. It’s probably the #1 reason I travel – you could never script the stories you’ll hear, the people you’ll meet or the ideas both will help you discover.
Then, this morning, I finished reading The Alchemist for the eighth time.
I try to read it every time I leave the country and once a year at the least. It’s about a boy named Santiago who’s in pursuit of his Personal Legend – his life’s purpose. Or in LYL’s terms, the work he can’t not do. The book inspired the creation of Live Your Legend a few years ago while on a fishing trip with my dad in Chile. It serves as a constant anchor of what matters.
Given Horace and Santiago’s timing in the past 12 hours, I figured now was the right time to share this big news with you.
Making the Difficult Yet Obvious Decisions…
A little over five years ago, I started an investment business with Mike, one of my closest friends from high school and study abroad. It was our first real crack at entrepreneurship, and for years that was my pure focus.
Then, on December 31st, 2013, after five years of blood, sweat, tears, excitement and fun (there were plenty of all), we closed the doors on Cumbre Capital Partners and returned all money to investors.
While the decision was hard at the time, it had become quite clear.
It was time to go all-in with Live Your Legend.
You all deserve it. And to be honest, I believe I deserve it as well. So does the world.
There’s no question about it… there’s no better way I could imagine spending my working hours (and most of my hours, to be honest).
And that’s why it’s so crazy exciting to share this with you – a version of our final letter to investors and friends.
This also happens to be the first part of my annual planning process – Creating Insane Focus.
I’ll share more of my process next week (including my biggest and most painful lessons from 2013).
But for now, enjoy this declaration – and pat yourself on the back because I’m deeply grateful for all of you making this decision so damn obvious.
December 31, 2013
Re: Cumbre Capital’s Final Closing Letter to Investors and Friends – Thank You!
To: Partners, Investors and Friends of Cumbre Capital Partners
Cumbre’s Final Quarter & Our Decision to Return All Capital To Investors
As all of our investors now know, after much discussion between the two of us and our advisors, we decided that Q3 2013 would be the last quarter of operations for Cumbre Capital. As we described in our recent conversations with you, we have already wired the Q3 2013 ending value of your investment to the account you specified. You should receive your final K-1 by April 1st, 2014.
While the decision to close the fund was a difficult one, we could not be more excited about things to come.
We are returning capital because we have other opportunities that require and deserve more of our attention, and we feel that it is in the best interests of our investors and ourselves to focus on one opportunity at a time.
This was not an easy decision, so today we would like to take a few minutes to further explain our decision, recap our experience, and fill you in on what’s ahead.
Management of Your Investment Has Been our Top Priority — Without Any Fixed Fees
About ten years ago, we watched a talk given by Mr. Buffett to the University of Florida MBA Class of 1998 (here’s the video). We have since watched it nearly a dozen times. The investing and life lessons are pure gold.
Mr. Buffett’s most memorable quote from the talk went something like this:
“Taking a job just to build a resume is like saving up sex for old age.”
That one stuck. It made such an impression that we’ve tried to make all our career decisions with these words front of mind.
In 2009, we started Cumbre with the vision of providing investors with access to the investment principles laid out by Warren Buffett and Benjamin Graham in the 1950’s and 60’s. Their approach is the most effective investment strategy that we can understand and the only one we’d be willing to stake our money and our reputation on.
We also felt strongly about structuring the partnership in a way that fully aligned our interests with the interests of our partners. That’s why we refused to charge management fees, and instead opted to be paid only when we delivered exceptional performance. We have also had all of our investable assets invested alongside yours in the fund.
At Cumbre, we have taken the “officers eat last” approach. We continue to feel that this pay-for-performance fee structure should be the rule, not the exception, in the money management industry, and we encourage you to seek out a similar structure when you place your funds with another manager. It astonishes us that fewer than 1% of funds offer this structure. We built Cumbre to offer that fairness, alignment and true partnership to families and business owners who held similar beliefs about long-term business ownership.
For those interested, here is a PDF excerpt from the book Of Permanent Value – The Story of Warren Buffett by Andrew Kilpatrick. The section is titled the “Young and The Brave”, which is a profile on the two of us and our plans to build Cumbre as we launched during the darkest time of our investing careers. Rereading this puts things into perspective and provides a nice reflection. It’s also pretty fun to reminisce. Click here to download it.
Moving Forward, We’re Shifting to Personal Career Adventures & Building Private Businesses of Our Own
While the decision to close the fund was a difficult one, we are both eager to pursue emerging business opportunities that now warrant our full-time attention.
At the time we launched Cumbre, panic was widespread and business prices were comfortably below reasonable estimates of intrinsic value. Today, confidence and even greed have returned, eliminating the obvious bargains of 2009. The opportunities today are simply less attractive than when we started. And while we are not trying to make a market call, we believe there is more opportunity in developing businesses right now rather than buying publicly listed equities.
Focusing Our Efforts Where They Can Make the Biggest Impact
One of our investors and advisors has always said, “Focus is the key to the world.”
This point was further brought to our attention by one of our biggest investing mentors, Mohnish Pabrai, when he shared the below quote in one of his recent presentations…
“Take up one idea. Make that one idea your life; dream of it; think of it; live on that idea. Let the brain, the body, muscles, nerves, every part of your body be full of that idea, and just leave every other idea alone. This is the way to success, and this is the way great spiritual giants are produced.” ― Swami Vivekananda
These words have echoed in our minds as we’ve thought about the future of Cumbre. While Cumbre has been far and away our core focus over the past five years, in the last few months, our other business development projects have grown to the point where we believe they deserve our full attention.
Scott is developing a web business, Live Your Legend, dedicated to helping people find and do work that they love by offering online and in-person courses and workshops. He is focusing his work on helping young people identify their talents and passions and assisting them in creating or finding career paths to leverage these interests and strengths. Recent growth in the Live Your Legend community now touches people in every country in the world. And more importantly, it is making significant progress in helping its members find meaningful work and connect with others who inspire them.
Mike and a partner are building a billboard development and advertising company, Mesa Outdoor. They are dedicated to helping small businesses get the visibility they need to grow and succeed by building billboards and offering advertising along the highways in northern and southern California. To date they have built and operated over a dozen signs, and they recently got approval for two more top-flight development projects that have dramatically changed their growth trajectory.
When we began experimenting with these business ideas, we did not imagine the growth potential they now offer. Recently, it’s become clear that our respective skills and strengths will be better applied to the world in building hands-on businesses, as opposed to making passive investments in publicly listed companies.
While running Cumbre over the past five years has taught us a tremendous amount, possibly the biggest lesson has been that we are meant to be business operators rather than investment managers. And the sooner we can make discoveries like that, the better!
As operators of these businesses, we are able to take a more active role and deterministically influence the future as we build our visions.
We Will Continue to Be Value Investors for Life
We fully believe in the Buffett-Graham value investing approach and will continue to think about the world and approach our investments from this perspective. In fact, these same principles apply to our current businesses – finding attractive risk reward opportunities to put capital to work.
To be clear, the decision to close Cumbre has nothing to do with our confidence in the Buffett-Graham long-term strategy. We still believe it to be the most productive and low-risk way to invest in the public stock market.
The companies Cumbre has invested in are still good businesses with sound economics, useful products and loyal customers, and we plan to keep personal investments in some of them going forward. But you have trusted us with your hard-earned savings, which we greatly respect, and that responsibility deserves our full-time attention, which we can no longer provide given our other ventures. We’re simply not willing to compromise our values and reputations – and your capital – in order to keep multiple businesses going.
But you can be sure that while we won’t be running Cumbre in the years to come, we will be diligent value investors for the rest of our lives.
It’s also important to mention that we feel that our respective new businesses are doing more good for society than what we could do in money management. Live Your Legend is inspiring people to spend their time doing work that excites them by making their unique impact in the world, and Mesa is helping small businesses drive the foot traffic they need to survive and provide goods and services for their local communities.
Thank You for Joining Us In the Arena
We started Cumbre for simple reasons. We wanted to build something that helped people in a meaningful way, allowed us to do exciting work, and made some type of bigger impact on the world.
For us, the most important thing is to constantly be creating, building and moving forward so we can take an active approach to our careers and the world. We want to spend our time in the arena instead of the stadium. Cumbre was our first real ticket into the arena.
With that said, we wanted to share a quote with you that seems especially fitting in this time of transition and possibility.
And given that most of you are entrepreneurs, founders, managers, and operators, something tells us you might relate especially well to it.
It’s an excerpt from Theodore Roosevelt’s “Citizenship In A Republic” speech, delivered at the Sorbonne in Paris, France on April 23, 1910.
As we write this, it hangs framed on our office wall…
The Man In The Arena
It is not the critic who counts;
not the man who points out how the strong man stumbles,
or where the doer of deeds could have done them better.
The credit belongs to the man who is actually in the arena,
whose face is marred by dust and sweat and blood;
who strives valiantly; who errs, who comes short again and again,
because there is no effort without error and shortcoming;
but who does actually strive to do the deeds;
who knows great enthusiasms, the great devotions;
who spends himself in a worthy cause;
who at the best knows in the end the triumph of high achievement,
and who at the worst, if he fails, at least fails while daring greatly,
so that his place shall never be with those cold and timid souls who neither know victory nor defeat.
— Theodore Roosevelt
We have always promised this to each other: Stay in the arena. Get dirty. Experiment, learn, grow and build things.
To this end, we see our experience with Cumbre as a runaway success.
But that would have been impossible without you in the arena alongside us.
For that, we owe you all tremendous gratitude. Your presence has made these past five years much more than we could have imagined. Thanks to your support and our experience, our belief of what’s possible has been transformed. We look forward to running with that new belief in our future endeavors. Something tells us we’ll be crossing paths with plenty of you in the years to come. We very much look forward to that.
Connecting the Dots
On June 12th, 2005, Steve Jobs, founder of Apple Inc., gave a commencement speech to the graduating class at Stanford University. We have watched it well over a dozen times and believe it’s one of the best career and life talks of all time. If you haven’t watched it lately, we highly recommend it (here’s a link to the video).
During his talk, there was one message that never seemed to leave our mind…
“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.”
These last five years have been nothing short of amazing. We could have never predicted they’d lead us to today – not even close. But looking back, we wouldn’t change a thing.
And as it turns out, we appear to have ended up exactly where it feels like we’re supposed to be. We couldn’t be more excited about what’s next.
It Never Ends — We Will Always Be In Your Corner
We’ve loved building this business over the past five years, and the interactions we’ve gotten to have with so many savvy and accomplished people (all of you!) have been priceless. We are proud of what we have all built together and the people we’ve been able to surround yourselves with – as well as the 48% net return we produced for our investors since our January 1, 2009 inception.
If you would like help in deciding what to do with your funds after you receive them from Cumbre, we’d be happy to have those conversations on a person-by-person basis so we can hear your goals and perhaps point you toward other money managers we respect and plan to invest with ourselves. While less than 1% of managers operate in the same investor-aligned structure as Cumbre, we are thankful to know a few of them closely.
One of them is Farnam Street Investments, run by Jake Taylor and Lonnie Rush, who also founded the value investing course for UC Davis’ MBA program. They manage investments with the same strategy and values as we did with Cumbre, and we have traded ideas and shared trips to Omaha with them for years.[From Scott: Since closing Cumbre, I’ve entrusted them to manage a sizable portion of my investments. I’d be happy to make a personal introduction – just say the word.]
We will always be in your corner, ready to help however we can.
We wish each of you the best of luck in your investing and personal futures. And as always, if there is any way we might be able to help, or if you would like to trade ideas on something, please do not hesitate to reach out.
Just because our official Cumbre relationship has come to a close does not at all mean our friendships need to do the same. We look forward staying connected as we all continue to build out projects, trade ideas and support each other in the center of the arena.
Thanks again for being a part of Cumbre. It has meant more than you realize. We are forever grateful for your support, friendship and enthusiasm. You have allowed us to go further than we could have imagined, and we are much better investors, entrepreneurs and citizens of the world as a result.
We’re excited for the new ideas and discussions to come. They’ve been our favorite memories of the past few years. As far as we’re concerned, we’re just getting started.
See you in the arena – and in Omaha this year!
Scott Dinsmore & Mike McCoy
Ahhh… now that feels good. Talk about a weight off the shoulders!
I can only imagine what we can all do together now that we have pure focus on our side.
Now it’s your turn…
What do you know needs your deepest focus this year? What other projects need to be cut in order to make it possible?
Share in the comments below. I know it’s not easy, but it’s incredibly important and unbelievably freeing. This is your permission to say no to one thing so you can say hell yes to what you know really matters.
I’m all in. You?
P.S. To kick off our new year of focus, on February 10th, we’ll be opening our private How to Connect With Anyone course and community to our next crop of students. Enrollment will be open for four days.
To keep it intimate, we only let in a small group of people and so far it has sold out every time. If you’re interested in surrounding yourself with the people who refuse to let you fail, I suggest you get on our Insider’s waiting list. In addition to early priority access, you’ll get some fun free connection tools to go along with it.
Oh, and do you need help nailing your focus? This free workbook should help…
I learned the below process from one of Warren Buffett’s pilots of 10+ years. It’s a wild approach and crazy how simple and powerful it is. It’s free to members of our community (which is also totally free). And if you’re already a subscriber, just enter your email below to be taken straight to the download page. Don’t worry, you won’t be double subscribed. Enjoy!
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