"DuckTales," the cartoon series that filled many of our childhoods with joy, told the story of a duck who was obsessed with money and making money. He would swim in the pile of coins and count them over and over. Though you might think he was only a cartoon duck, old Uncle Scrooge had a lot of investing wisdom. The following are a few investing tales from the world of Scrooge McDuck to help you remember the principles of investing. (For more, see: The 3 Most Timeless Investment Principles.)
Pricing Power and Helicopter Drops
In an early comic book featuring Uncle Scrooge ("A Financial Fable" from 1951), the plutocratic duck runs a farm with the help of his great-nephews Huey, Dewey and Louie and keeps all his hard earned cash in a corn silo.
When a tornado hits the silo, it sucks up Uncle Scrooge's money, then drops it all over the county. Scrooge is not upset, however, knowing that if he and his young nephews keep working, they will get the money back soon enough.
Meanwhile, Gladstone Goose, the luckiest goose in the county holds out his hat and ask for money from heaven. A giant pile of Uncle Scrooge's dollars fall right in it. When Gladstone and his traveling companion Donald want to spend the money, however, they discover the tornado has distributed extra riches equally to everyone in the county. Everyone is now a millionaire!
When the newly rich villagers come to Uncle Scrooge for farm fresh food, he informs them that all the prices have gone up: eggs, bacon and milk all costs millions of dollars. Eventually, Uncle Scrooge gets his money back and everything goes back to normal.
This story demonstrates economist Milton Friedman's monetarist theory of inflation. (Did Friedman read Donald Duck comics? "A Financial Fable" is almost exactly the premise of Friedman's "helicopter drop" hypothesis.) In the end, tangible assets and value enhancing labor will make money, and profits from get-rick-quick schemes will be illusory. (See here for FAQs about Milton Friedman.)
Much Ado About Mind Share
In "Much Ado About Scrooge" (1987) Uncle Scrooge discovers a treasure map leading to a lost play by the famous poet William Drakespeare and sets off on a quest to find it. When he is asked why he has undertaken this crazy journey, Uncle Scrooge effectively says the Drakespeare brand will make anything by the playwright a valuable commodity. In the end, Uncle Scrooge opens a Drakespeare theme park to capitalize on his find.
Uncle Scrooge and Warren Buffett are of the same mind with respect to a solid brand. Just like Buffett's rationale for a stake in Coca-Cola, Scrooge McDuck reasons the public will pay a premium for a taste of the authentic Drakespeare, well above the low cost of creating the product. (For more, see The Power Of Branding.)
Understand Your Customer:
In the same episode, a door-to-door salesman, Filler Brushbill makes nearly half a million dollars in sales to the usually stingy Uncle Scrooge and his great nephews. His sales pitch is so well tailored to the needs, wants and aspirations of his customers that you get the feeling he could sell ads to Google.
That other great investor, Warren Buffett, appreciates companies like Filler Brushbill that understands their customer’s needs so well that they almost never leave the story without making a purchase. A fine example would be Wallmart, which provides its customers the best deals on almost everything. (For more, see: Using Social Media To Reach Customer Service Departments.)
Be a Big Fish in a Small Pond:
In "Bermuda Triangle Tangle" (1987) Uncle Scrooge and his nephews travel to the aforementioned triangle to untangle its mystery. Once there, the intrepid adventurers meet Captain Bounty, an old sea salt who not only runs the place, but also keeps it safe from a seaweed monster that lurks in the depths. Scrooge frees the sailors who have been captive to the sea monster for ages brings Captain Bounty back to Duckburg to live.
Little does Uncle Scrooge know that the seaweed monster followed his ship home! Just before the monster scares away the entire population of Duckburg, Captain Bounty pacifies the monster with his virtuoso harpsichord performance. Though the residents of Duckburg are eternally grateful, Captain Bounty decides he will return to the Bermuda Triangle with the sea monster in tow. "I would rather be a big fish in a little pond than a little fish in a big pond," Bounty tells Uncle Scrooge. The same is true for any business: it's better to be a leader in a small market than a small player with no competitive advantage in a huge market. (For more, see: Understanding Market Share.)
The Cost-Cutting Habit:
In "The Curse of Castle McDuck" Uncle Scrooge and his nephews make a trip to Scotland to visit his birthplace. Along the way Uncle Scrooge finds his first piggy bank, and says "my life of thrift began with this very bank." When our adventurers get to Castle McDuck, they discover the old pile is haunted by a glowing hound that terrorizes the locals, and at night druids perform secret rites within the castle walls.
Uncle Scrooge and the nephews trap the druids and their magical hound (which is, in fact, just a dog), and ask them why they drove the McDucks from Castle McDuck after it was built. It turns out that Silas McDuck, who first built Castle McDuck, did it on top of the druids' stone circle "to cut costs." Uncle Scrooge blushingly acknowledges that cost-cutting runs in the family.
Realizing that the McDuck clan has been in error for centuries, Scrooge McDuck offers to share the site with the druids. During the day it will be a tourist site to make money, and at night the druids can perform their ceremonies. In the end, everybody wins.
Warren Buffett famously said, “Whenever I read about some company undertaking a cost-cutting program, I know it's not a company that really knows what costs are about. ... The really good manager does not wake up in the morning and say 'This is the day I'm going to cut costs,' any more than he wakes up and decides to practice breathing.” Though this sounds like the kind of attitude that got Silas McDuck into trouble with the druids, it is actually the opposite. Silas's thrift and Scrooge's ingenuity combined to create more money for both the McDucks and the druids and more happiness for the townspeople who are not only free from the ghostly hound but have extra happiness from the renovated castle. (For more, see: Capital Investment Decisions - Cost Cutting And Asset Replacement.)
The Bottom Line
Is Uncle Scrooge a secret avatar for Warren Buffett? No one knows (though, probably not). But both profess the same investing philosophy: work hard, don't sweat the small stuff and save, save, save. If you take a page from Scrooge McDuck's playbook, who knows? You may be swimming in a vault of gold coins too.