The Unconventional Investment: LEGO's Surprising Venture Fund Rivalry

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Based on a Twitter thread by Will Manidis

Recall those hours spent building LEGO masterpieces? Who would've thought those vibrant bricks could rival venture funds in returns? An intriguing dive into two decades of secondhand LEGO pricing data reveals some eye-opening insights. Even with a random purchase strategy, LEGO sets could potentially match the returns of many venture capital firms. But with a dash of strategy? You could potentially eclipse even the crème de la crème of VC firms.

A Deep Dive into LEGO Data

Mining through data of 16,000 LEGO releases since 2000, anomalies like promotional or duplicate items were discarded. This refining process yielded a more focused dataset of around 10,000 sets.

To determine current market values, resale data was sourced from Bricklink, a popular LEGO marketplace. Interestingly, these figures were observed to be lower than eBay prices.

Calculating the Net IRR

Assuming a purchase at each set's release and holding it until 2023 allowed for the calculation of a net Internal Rate of Return (IRR). For context, the venture capital benchmark data was sourced from the reputable Cambridge Associates.

While recent years present skewed results due to inflated paper markups, data up to 2010 or 2015 appears more reliable.

Strategy Makes a Difference

Year by year, random LEGO purchases often rivaled or even surpassed the returns of median venture funds. Certain themes, when purchased blindly, consistently churned out impressive IRRs. For many of these sets, the high resale value was evident as early as the end of the first year.

Surprisingly, factors like dollar value or piece count seemed less influential on the current resale value. However, applying even basic statistical methods on a couple of years' data revealed strategies capable of producing a whopping 20%+ IRR over a decade.

The World of Super Alternative Assets

Venturing beyond traditional investments unveils a vast and often unexplored realm of super alternative assets. From LEGO to vintage vehicles, there are diverse paths to substantial returns. As Manidis aptly points out, sometimes the journey to prosperity might just bypass B2B software and lead to a picturesque Hamptons compound, complemented by a classic 1974 Land Rover Series III.

For a deeper dive into the data and insights, visit the original Twitter thread by Will Manidis.