Since going public in August 2004, EXR has risen about 675%, obliterating the returns of the market over the same time frame (around 175%). This despite an over 70% drop in the crash of 2008. In fact, if you look at the performance of EXR from around its low point, in March 2009, it’s gone up nearly 1800%! A $1,000 investment then would have turned into nearly $19,000 today. And the market over the same time frame? Your $1,000 would be a measly $3,700. So what kind of innovative company is EXR? What kind of unbelievable new tech have they produced, that has changed the world as we know it??
None. EXR is ExtraSpace Storage, a self-storage company people rent units from to lock up all their extra junk. That’s it. There isn’t any more to this than meets the eye.
On the one hand, the ridiculous prosperity of this pretty basic company might come as a surprise. On the other, the fact that EXR and several other self-storage companies have grown and flourished over the past decade or more is a sad but obvious reality. People accumulate junk. Then, to add insult to injury, they don’t get rid of it when they no longer need it (cause maybe one day just in case!!!). Instead, they literally pay other people to hold their junk for them when they no longer have room for it. And this phenomenon is so common that the companies storing the stuff grow faster than most of the other companies that exist.
Money and Stuff
Let’s introduce a new term to the blog: the stuff-to-money ratio. In general, these things are mutually exclusive. You can either have money, or you can exchange that money for stuff. Thus, the more stuff you have the higher your stuff-to-money ratio, i.e. the less money you have relative to your theoretical maximum with a stuff-to-money ratio of zero.
The problem with having a piece of stuff is just that: you only have that piece. With money, you can exchange the money for a number of different pieces of stuff. The other problem with accumulating stuff is that stuff doesn’t really work for you. Your stuff will not compound into more stuff. Your money, however, will. Money can easily be invested at baseline and then called upon to be exchanged for stuff only when the need arises.
Consider John and Joe. John has a very high stuff-to-money ratio. Thus, John has less money than he could have with a lower ratio. He misses out on opportunities to invest. In fact, he misses out twice. He has so much stuff, that he pays a company to store it. This further increases his ratio1Since now he has even less money after paying for storage. In contrast, Joe has a low stuff-to-money ratio. In fact, Joe can fit all the stuff he owns in his own home. Instead of using his money to buy stuff and/or buy storage space for stuff, he invests in a total stock market index fund. Joe owns a portion of all of the companies in the US, including the one John pays to store his stuff. Can you see what’s happening here? John is paying Joe. The decrease in Joe’s stuff-to-money ratio is a direct result of the increase in John’s stuff-to-money ratio. John is transferring his money to Joe.
Who is Joe? I am Joe. And you should be Joe too! This story illustrates both the negative consequences of owning too much stuff, and the positive consequences of being an investor. For more on the later, check out this classic ERE blog post.
The most obvious first step is not to buy stuff when you don’t need it. That’s something most people can get behind. But what if you already have the stuff? For example, there’s a bike rack that had been sitting in my car for at least a year. I am not exaggerating about this. In fact, it would often get in the way of loading stuff into the trunk. And yet I kept it there. I did not use this bike rack because it didn’t fit well on my trunk2because of the shape of my trunk, which is where it’s supposed to be mounted. I finally took it out this week and began the process of getting rid of it.
I can think of a few more examples of this in my own life. Some people, who might be a little more intelligent than me with my bike rack but silly nonetheless, argue that they need to keep their stuff in case they want to use it in the future. Luckily, there’s a place you can store your stuff, for free, and get it again whenever you need it.
That place is called Craigslist. You might think of Craigslist as a place where you can buy stuff from other people for cheap, and that is certainly is. But it’s also a place where you can sell your unused belongings, and then re-buy similar items if you happen to need them in the future.
Or, you can do the reverse, like GoCurryCracker. He buys nice, higher end furniture at deeply discounted prices on Craigslist. He takes good care of the furniture when he owns it, then ends up selling it at around the same price when he moves to a new place. Or you can take my approach and buy furniture that’s functional but not high end, in which case you won’t care at all when it gets banged up during a move or if the new cat decides that the couch is a scratching post.
So, take an inventory of your stuff. Assess your stuff-to-money ratio. And post a few ads on Craigslist. Then, to encourage the rest of us, comment with the results below! And let me know if you need a bike rack for your car :).