Serengeti, located in Tanzania, Africa, bordering Kenya, is a place of unparalleled beauty. Abundant wildlife lives in one of the most productive ecosystems on earth and it is one of only two locations where hominid fossils, estimated to be more than 2 million years old, have been found, pointing to our very early beginnings as human sapiens. Some roving descendants of those early hominids made it through Asia, over the (frozen) Bering Straight into Silicon Valley, North America and onwards: an unbelievable feat for us to comprehend in our current technology-filled world. What determined-minds, powered by two legs can do, is truly astonishing. But, I am getting way ahead of myself…. Let’s get back to Serengeti, where it all began for us.
Serengeti stretches over 1.5 million hectares/ 3.7 million acres of super productive volcanic grasslands, which sustain approximately 2,000,000 wildebeests, 900,000 Thomson’s gazelles, 300,000 zebras, 7,000 elands, 27,000 topis, 18,000 hartebeests, 70,000 buffalos, 4,000 giraffes, 15,000 warthogs, 3,000 waterbucks, 2,700 elephants, 500 hippopotamuses, 200 black rhinoceroses, 10 species of antelope and 10 species of primate. Major predators, competing for preys (see list above) include 4,000 lions, 1,000 leopards, 225 cheetahs, 3,500 spotted hyenas, and 300 wild dogs. Serengeti shelters at least four globally endangered animal species: black rhinoceroses, elephants, wild dogs, and cheetahs. The animal population tracks in a seemingly perpetual cycle between the dry and wet seasons, repeating the same pattern over and over again. Only large outside environmental forces seem to have impacted this cycle of life in Serengeti, like the severe drought in 1830.
Serengeti is incredibly unique, so unique it is a unicorn amongst unicorns and I wonder why it has not been formed into a company or a fund and sold its shares to the public at large. Everybody on earth with a vested interest in sustaining this UNESCO world heritage site would surely want to own a share of this unicorn, right? Serengeti Co. must be at the very least worth something along the lines of a division of Walt Disney Co. Just for your information Walt Disney has a market capitalization of USD 250 billion.
Serengeti has about 200,000 visitors per year, a lot of fertile lands and many special animals you don’t need to feed. I would expect its visitors and its expected value per visit to rise in the future. We anticipate earth to be inhabited by 10 billion humans by 2050 and thus the wildlife uniqueness of Serengeti will only increase over time. To generate extra cash, Serengeti could surely extract big royalties from Walt Disney’s Lion King, which uses Serengeti as a blueprint and all related commercial products and endorsements. I tried to get some financial numbers, but unfortunately, it is very hard to unearth any meaningful figures. Google found and scanned a 10-year Serengeti Management Plan. Sadly, out of the 144 pages, the word finance was only mentioned 18 times and only in the most general terms.
You see, without knowing all the details of its operations I would guesstimate with the value of its land, the potential up-selling of its accommodations, an increase of ticket prices and aggressive pursuit of royalties, a unicorn valuation of USD 5 billion would not too much to ask for an Initial Public Offering. We likely could find one billion people to spend $5 per share to collectively own and sustain this Unicorn, right? Serengeti’s General Management, if you read this, please call us at i-Cthru, and we will gladly offer our help for free. In my humble opinion, you are in clear need of “animal spirits” to survive.
SILICON VALLEY, NORTH AMERICA
Survival, innovation, adaptability, a high tolerance for risk-taking, a never-ending cycle of losers and winners entangled in fierce competition for resources are all present in Silicon Valley today. Silicon Valley became the center of new Internet Technology firms during the dot-com bubble and now has the highest concentration of big technology firms in the world combined with the highest number of filed patents globally. Silicon Valley is a unique place, a super fertile ground for unicorns with the right set of “genes”.
Apparently, survival, innovation, adaptability, and tolerance for significant risk-taking were already present in Silicon Valley 15,000 years ago. According to Jared Diamond, in his book “Guns, Germs, and Steel: The Fates of Human Societies” most of the West-Coast looked a lot like Serengeti today, with herds of elephants and horses pursued by lions and cheetahs. Even camels and giant ground sloths were in abundance on these fertile lands. No wonder that these grounds attracted the Clovis people. Clovis people were very successful hunters, constantly innovating and adapting to their environment, improving their productivity and surviving. There is a plausible theory they are far descendants from the hominids in Serengeti who migrated from Africa to Asia and crossed the Bering Straight into the North American West-Coast.
Some theories hypothesize that the Clovis hunters were too successful and over-hunted Silicon Valley and beyond, to the point that their favorite food sources became extinct. The Clovis people eventually fanned out into separate smaller tribes and went into a general decline. Silicon Valley and all its Unicorns should take notice: being too successful might not be sustainable; too much “animal spirits” might eventually work against you.
THE VALLEY OF REGRET
The Valley of Regret is a vast virtual space in your mind and a fertile ground for emotions like doubt and regret to grow into dominant negative forces. The Valley of Regret is where short-term details always seem to overwhelm the long-term focus, resulting in a bad case of myopia. Robert Frey from FQS Capital/ Renaissance Capital did some interesting backtesting over 180 years of stock market drawdowns and found that most of the time our investments will be underwater (every month the teller resets), resulting in a long trek through the Valley of Regret wishing we would/ could have done something differently. Robert Frey also concluded that market behavior, its character so to speak, has not changed over 200 years. In other words, the composition of the market might have changed (ETF’s, Index trackers, etc.), but the fundamental behavior of the market is the same as it used to be. He concludes that big market moves are driven by herd behavior and not by any change of fundamentals.
John Maynard Keynes was the first person to use the term “Animal spirits” in relation to the Economy and to explain it. He used it to point out people’s spontaneous urge to action rather than inaction, and not as the outcome of a rational thinking process; something hardwired in our genes from thousands of years of evolution that dictates our behavior whether we like it or not. New theories around herd behavior try to explain why sudden moves in the market are rather unexpected and seem to evolve into a move with a velocity of a herd of 2,000,000 wildebeest culminating into a mass migration. This seemingly uncontrollable process also seems repetitive without any change or indication that something was learned and applied from a previous cycle.
So maybe there is one more reason to keep a close eye on Serengeti and its inhabitants in its current state. Maybe this is The place where we should look for answers regarding major market moves. We should at least study it in much more detail relative to ourselves. Animal spirits have been part of Serengeti, Silicon Valley and in the Valley of Regrets for at least thousands of years and seemed to be hardwired inside us. Maybe one day our hardwired herd behavior gene will come in handy, but for long-term investors’ success, it remains very unhelpful.