Hey folks, last week I laid out the three ways I think of compounding capital: cigar butts, quality compounders, and structural investing.
This week, I wanted to spend a little more time on the last one, because I had a good example I wanted to share.
Main Street Investing
As a quick reminder, structural investing is betting on what's most likely to happen over the long run, before it's obvious.
The example below comes from Alex Hormozi, in an interview with Dave Ramsey. Alex is sharing how he'd interviewed some guy to learn about his investing strategy, and this was his answer:
I find a city, and I find the main street, because usually there's a main street. And then I take a ruler, and I go out 30 miles. And then I buy all that land. And then I wait 20 years.
Full interview here, timestamped to the exact story.
What the strategy does right
The story is short and simple, but worth stripping down to the mechanism underneath.
First, the strategy buys the whole ring around the city, not one parcel. It doesn't need to guess which specific block develops first, which road gets widened, or which corner gets a gas station. It's diversified across parcels within the ring, which means being wrong about the specific spot doesn't sink the bet — you just need the ring, on average, to develop.
Second, it’s also using time arbitrage. It's buying an asset that's almost certainly worth less today than it will be eventually. It doesn't predict what the return will be, and it doesn't predict exactly when the return shows up — twenty years is a rough marker, not a hard rule. It's just betting the growth arrives, eventually.
Third, the strategy uses fiat currency to buy hard assets. This creates inflation resistance.
That's a well-constructed bet on paper. But it only works if the growth it's betting on actually shows up — and growth by itself isn't guaranteed to continue. Growth can decay. If you're betting on growth continuing for the 20 years this strategy needs, you need a reason it won't fade — the same way a quality compounder needs a moat protecting its returns.
The moat behind it
The guy in the story doesn't specify a country, but I'm assuming he's referring to cities within the United States. And that specification matters, because whether this bet is closer to a sure thing or closer to a coin flip depends entirely on whether that growth has a moat behind it.
Does a US city have one? Unlike most superpowers, the US came out of WW2 with its infrastructure intact. The rest of the industrialized world was stuck rebuilding from scratch, and that gap is what let the US enjoy outsized economic dominance for the better part of the last century. That's also why the US produced an outsized share of the world's richest people (Buffett, Gates, the Waltons) — not because Americans were smarter, but because the underlying growth had staying power.
Economic growth and population growth are synergistically intertwined. So with this economic dominance came a population boom.
Now while you can't predict which specific US city will grow the fastest, you can expect that many will flourish and spread outward. This is because population growth flows toward existing infrastructure, because that's where the jobs, family, and connections already are.
So the 30-mile ring around a growing town's main street is the low-resistance path for that growth to land on. Buy the ring before the growth arrives, and the growth does the repricing for you.
The real strategy is: find cities with structurally-protected population growth, buy the underdeveloped land around them, and wait for development to catch up.
That's the tell for structural investing generally: you're not betting on an event, you're betting on a vector that's already in motion, protected by something durable, and unlikely to reverse on any timeframe you care about.
The generalizable framework
Pull the pattern out of the real estate wrapper and it's four conditions:
The direction is already established, not predicted. This isn't calling a demographic shift into existence — the growth is already happening. You're positioning ahead of where it lands, not betting it starts.
The direction is protected by something durable, not circumstantial. A moat, same as a quality compounder needs — a structural reason the trend won't decay before your horizon is up.
The bet doesn't require precision. Buy the whole ring, not a parcel. You can be wrong about the specific spot and still right about the direction. Precision would actually be a liability here — it would mean you think you can time something you don't need to time.
The horizon is long enough that the direction has time to win. Twenty years isn't a hard rule, but the requirement behind it is not arbitrary — the horizon needs to be long enough for a multi-decade trend to fully play out, so that short-term noise (a recession, a bad year, a local scare) gets absorbed rather than deciding the outcome.
Put together: find a protected trend that's already underway, position broadly enough that you don't need to call the specifics, and hold long enough that the trend has time to do the work instead of you.
Got a structural bet of your own — something you're positioned in because the direction feels inevitable, not because the price is cheap today? Reply and tell me what it is. I'll feature the best ones next issue.
