How I Think About Debt
Japan has 140 businesses that are at least 500 years old. A few claim to have been operating continuously for more than 1,000 years.
It’s astounding to think what these businesses have endured – dozens of wars, emperors, catastrophic earthquakes, tsunamis, depressions, on and on, endlessly. And yet they keep selling, generation after generation.
These ultra-durable businesses are called “shinise,” and studies of them show they tend to share a common characteristic: they hold tons of cash, and no debt. That’s part of how they endure centuries of constant calamities.
I love the quote from author Kent Nerburn that, “Debt defines your future, and when your future is defined, hope begins to die.”
Let’s say this represents volatility over your life. Not just market volatility, but life world and life volatility: recessions, wars, divorces, illness, moves, floods, changes of heart, etc.
I think this is the most practical way to think about debt: As debt increases, you narrow the range of outcomes you can endure in life.
