Investing Lessons from an Old Bathtub

Written By Adam Philipp

An old bathtub shouldn't inspire many investing insights. But my house—a brick colonial built in 1929—in which this clawfoot tub sits, has been a source of surprising realizations recently. My house is no mansion, but it’s built well. Its original inanimate inhabitants like my bathtub have witnessed a lot in their nearly 100 years.

Given the Trump Administration’s back-to-the-future dalliance with aggressive tariffs and recent days’ consequent market plunge, the wheels of this former history major’s mind started spinning. I began thinking about all the important world events that my old house has experienced and outlasted. They include:     

  • The Great Depression

  • The rise and fall of Nazi Germany

  • World War II

  • The Holocaust and numerous lesser-studied genocides

  • The development of countless vaccines that have saved and prolonged so many lives

  • Presidencies ranging from Herbert Hoover’s to Donald Trump’s.

  • Nearly the Soviet Union’s entire existence

  • The invention and use of nuclear weapons (…and treaties banning or limiting them)

  • The invention of television (…and cord cutting)

  • The invention of the internet

  • The Civil Rights Act of 1964

  • The Vietnam War

  • The Moon landing

  • Rampant inflation in the 1970s and early 1980s (…and historically low inflation rates and negative inflation rates in Europe and Japan in recent memory)

  • Both the Soviet and American invasions of and withdrawals from Afghanistan

  • The building and the fall of the Berlin Wall

  • 9/11

  • The Great Recession

  • The COVID-19 pandemic

  • The Russian invasion of Ukraine

  • The rise of AI

Examining this list of calamities, breakthroughs, and other significant events (which is of course not exhaustive, I just grew exhausted listing them), I developed an even greater appreciation for studying history in college. It is one of the most useful fields of study for future investors.

History taught me to think critically about a range of different eras, cultures, movements, technological innovations, and ideas, and weave together theories about them that I might not dream up otherwise. This prepared me to seek insights about companies that lie beyond the numbers in a quarterly report. History also taught me to rely on primary sources when available, and better recognize bias, illogic, and ulterior motives in what might be presented as “objective scholarship,” “investment research,” or, if you’re still watching cable TV these days, “news.” But studying history's greatest benefit, I’ve found, is that it stretches your mind to think in terms of time horizons that the average person rarely contemplates.

Long-term horizons are critical to successful investing. All else equal, the most long-term investor generally receives the greatest spoils as significant events can become innocuous blips. With a short time horizon, innocuous blips can become significant events. If you’re investing for 100 years, you can shrug off calamities like World War II and the persistent threat of nuclear war. If you’re investing for 100 days, you can ill-afford dumb non-events like a sharp fall in soybean futures or stocks dropping 5% on any given day for no reason at all.

Through studying history, I also appreciate having a much thicker mental rolodex of events that, while not exactly repeating, may rhyme well enough with today’s events to be instructive. This has made me more immune to the constant refrain that, today, we live in a new and vastly more complex world. In some ways, we do. In many ways, we don’t.

The specifics of modern life might feel novel, but when it comes to human nature—and economic activity—there is little new under the sun. As Yale post-doctoral fellow Scott Miller points out, “debt-deflation cycles hit first-century Rome and 20th-century New York in eerily similar ways. Sophisticated short-selling schemes and complex derivative contracts caused the US’s first financial crisis in 1791. Financial contagion spread from the UK to the European continent in 1846–47 as fast as it did in 2008 (and then produced the widespread revolutions in 1848).” Even venture capital, often thought of as the prophetic, visionary, relentlessly forward-looking, ultra-modern midwife of Silicon Valley's brave new technological world, is far older than it appears. Harvard Business School professor Tom Nicholas sees whaling—a quintessentially 19th century way for borderline crazy people to earn a literal and figurative killing—as the first practice of what we now call venture capital. The more things change, the more they stay the same.

“People of the past,” Miller concludes in his point above about similarities between economic eras, “were not ignorant bumpkins.” Indeed, recognizing the need for humility vis-a-vis our forebears is another of history’s valuable lessons for investors. Far too often, convinced of our own superiority, not only do we assume they were bumpkins, but also, as a corollary, that we are brilliant—perhaps even infallibly so. Miller’s otherwise very smart Yale School of Management students make this cognitive mistake in class when they “routinely begin questions with some variation of, ‘We know that these people were less sophisticated than us, so…’” Miller interprets his students as saying, “‘we have better data, more developed analytic theory, and better computational tools, so I know that we would not have made these mistakes.’” Over the course of the semester, Miller disabuses his highly confident students of their misconceptions about the past. 

Carmen Reinhart and Ken Rogoff, in This Time Is Different: Eight Centuries of Financial Folly, cautioned how dangerous this attitude is, and they credit the belief that “this time is different” with leading otherwise smart people into the throes of financial calamity.  Many of our financial disasters, they contend, stem from the “firmly held belief that financial crises are things that happen to other people in other countries at other times; crises do not happen to us, here and now. We are doing things better, we are smarter, we have learned from past mistakes. The old rules of valuation no longer apply.” Presuming that you are the exception and not the rule can be seductive and feel natural. Indeed, it reminds me of the mindset that leads numerous survey participants to believe that everyone else in the world—except themselves—is a bad driver.

Regarding our modern world's ostensible complexity, I’m sure every era of human life felt complex to those living through it at the time. The internet has driven a massive communications revolution in our lifetimes. However, the printing press—a similarly revolutionary technology—helped, in its own way, pave a path to war, revolution, political change, enlightenment, social upheaval, and a religious reformation in Europe. I doubt many “bumpkins” living through the technological and social changes of the 15th and 16th centuries would consider that historical moment idyllic or simple.

All of this brings me back to my little old house. In it, I can literally reach out and touch fixtures and finishes older than harrowing historical events like World War II. This fascinates me. It's also a humbling realization—one that convinces me that, in investing and history, “this time” is never really that different. Thus, I would encourage anyone unduly fazed or panicked by the Trump Administration’s tariffs to think critically about where tariffs fit in the slew of significant events over which markets have triumphed since 1929. I have a feeling that investors who channel their inner history major, ponder it, and elect to stay the course through 2025’s dense economic fog will eventually be rewarded.

Adam Philipp