Legacy Capital

There is much ado made about saving one's money wisely. "Invest for the long run;" "get in early on a red-hot market;" and so on and so forth. Despite one's best efforts, investing in a 'good thing' often ends up being a hit-and-miss proposition. Sometimes one buys the right stock, or commodity, or piece of real estate, but sometimes one buys the wrong one.

For the sake of argument, let's say one makes a very good investment. What does it become? Some may say 'my retirement,' or 'a gift for my grandchildren,' or 'a source of income,' or what have you. There are many varied ways people seem to describe their invested money, but the way we would suggest to look at it is as future legacy capital.

Here are some examples of legacy capital: the Panama Canal; the New York State barge canal system; the remnants of the United States railroad system; the Interstate Highway system. These examples were massive investments of time, resources, and capital made long ago, and which continue to pay a 'return' to this day through their continued functional existance. Although not all legacy capital is so dense and recognisable, think about a few other examples: the downtowns of most cities built in the late 19th century; vintage or antique automobiles; the United States geological survey.

All these examples of legacy capital represent good investing from yesteryear; so good, in fact, that today the investment still pays out. Legacy capital, though, can also be irrevocably spent. One only needs to look at the collapse of the Minneapolis interstate bridge to see what happens when legacy capital is not maintained properly. In that case, the legacy capital had been 'spent' down to the point where the entire investment became mere rubble.

In the 2008 Depression, it will be difficult to make future legacy capital. However, it is indeed possible, as much infrastructure extant today is from the 1929 Depression, or even the 1893 Depression. Investment must be made very carefully: one must both preserve the legacy capital of yesterday, and create that of tomorrow. They will be sorely needed.