A: The most important lesson is that bubbles spawn anti-bubbles. These are places to hide and plant seeds for the next bull market. Let’s take the Japan bubble in the late 1980s. It was fueled by the idea of the visionary bureaucrat: a partnership between business and government. This was called "industrial policy" and perceived as an improvement over the free market system. The anti-bubble was the more laissez faire American model, essentially Silicon Valley. The conventional wisdom was that America lacked competitiveness and its technology sector could not compete without government help. At that time, we actually invested in Dell, then named Dell Computer, trading for 10-12 times earnings. Michael Dell started the company in his dorm room and dropped out of college as business took off. It was one of our largest holdings and turned out quite well.
Q: So Dell was an investment in the anti-bubble?
A: Exactly. If you can identify this pattern, you will constantly be avoiding risk (the bubble) and chasing opportunity (the anti-bubble). You may not experience all the excitement of the speculative blow-offs, but you’ll certainly achieve above-average returns over time.
~ Kevin Duffy, interview with Christoph Gisiger: "We're Dealing With a Very Different Animal," The Market NZZ, July 18, 2022
