Works Projects Administration

• The Bottom Line: The Works Projects Administration (WPA) serves as a powerful historical metaphor for value investing: it teaches us to invest in real, long-term, productive assets, especially when fear and pessimism are at their peak.
• Key Takeaways:
• What it is: A landmark American New Deal program from the Great Depression that employed millions to build long-lasting public infrastructure, from roads and bridges to schools and parks.
• Why it matters: It is a perfect real-world case study of counter-cyclical, long-term investment. The WPA invested when no one else would, creating tangible value from the wreckage of a crisis—the very essence of value_investing.
• How to use it: As a mental model, the “WPA mindset” helps investors focus on a company's durable assets, maintain discipline during market downturns, and distinguish between productive investment and pure speculation.

Imagine it's the 1930s. The Roaring Twenties have come to a screeching halt, replaced by the deafening silence of closed factories and breadlines. The stock market crash of 1929 didn't just erase fortunes; it erased hope. The economy was in a freefall, a period we now call the Great Depression. In this environment of maximum despair, private companies were not hiring or investing. They were fighting for survival. Into this void stepped the U.S. government with a radical idea: The New Deal. The crown jewel of its “second phase” was the Works Projects Administration (WPA), launched in 1935. Think of the WPA not as a simple welfare program, but as the nation's board of directors deciding to make a massive, long-term capital investment when its stock was at an all-time low. Instead of just giving out cash, the WPA's motto was to provide a “work-test”—it paid people to build things. And build they did. Over its eight-year existence, the WPA employed roughly 8.5 million people. Its legacy is literally written into the American landscape. That old post office in your town with the beautiful mural? The sturdy stone bridge over the local creek? The high school your grandparents attended? There's a good chance the WPA had a hand in it. They built or improved:

• Over 650,000 miles of roads
• Nearly 8,000 parks
• 125,000 public buildings (including schools, hospitals, and airports)
• 80,000 bridges

Crucially, the WPA's scope wasn't limited to construction. It also funded artists, writers, musicians, and actors through projects like the Federal Art Project and the Federal Theatre Project, creating a cultural infrastructure that preserved skills and enriched the nation's spirit. In short, the WPA was a deliberate, government-led effort to fight economic depression not with financial wizardry, but by investing in the real, tangible, and cultural assets that would serve the country for decades to come. It was an act of faith in the future during a time when the future looked bleak.

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.” - Franklin D. Roosevelt, Second Inaugural Address, 1937. While not about the WPA specifically, this quote captures the spirit of building a solid foundation for all.

The WPA officially ended in 1943, so why should an investor in the 21st century care about a Depression-era government program? Because the WPA's underlying philosophy is a near-perfect mirror of the core tenets of value investing. It provides a powerful, real-world lesson in how to build lasting wealth. 1. Investing in Crisis (The Ultimate Counter-Cyclical Play): The WPA was born from the ashes of the worst economic crisis in modern history. The private sector was paralyzed by fear. Capital was scarce. The future looked hopeless. This is what Benjamin Graham and Warren Buffett call the moment of “maximum pessimism.” While others were selling everything and hiding their cash under the mattress, the WPA was buying—not stocks, but labor and materials—at bargain prices to build assets. This is the value investor's creed: to be greedy when others are fearful. The greatest investment opportunities don't appear in booming markets; they appear in panicked, broken ones, allowing you to buy wonderful assets at a deep discount to their intrinsic_value. 2. Focus on Tangible, Long-Term Assets (Infrastructure over Hype): The 1920s were fueled by speculative excess—people buying stocks on margin not because they understood the business, but because the price kept going up. It was an economy built on paper. The WPA represented the polar opposite. It created tangible things: dams that would generate power for 80 years, schools that would educate generations, roads that would become arteries of commerce. A true value investor does the same. They look past the fleeting stock price and analyze the underlying business. Are they buying a solid, durable enterprise with a strong economic_moat—the business equivalent of a WPA-built dam? Or are they buying a speculative story stock with no real foundation? 3. The Government-Sized “Margin of Safety”: The most important principle in value investing is the Margin of Safety. It means buying an asset for significantly less than your conservative estimate of its intrinsic worth. This discount provides a buffer against errors in judgment, bad luck, or unexpected economic turmoil. The WPA, in a way, was a margin of safety for the entire nation. It put a floor under the economy's collapse by creating jobs and stimulating demand when the private market could not. For the investor, applying the WPA mindset means seeking your own margin of safety—demanding a price so attractive that it provides a cushion, protecting your capital from permanent loss. 4. A Productive, Not a Speculative, Mindset: The WPA's goal was to generate productive capacity and social good, not to turn a quick buck. This is the fundamental difference between investing and speculating. A speculator buys an asset hoping someone else—a “greater fool”—will pay more for it tomorrow, without regard for its underlying value-generating ability. An investor, like the WPA, “buys” a piece of a business with the intention of holding it for the long term, benefiting from the value it creates through its operations, earnings, and growth.

The WPA is a historical analogy, not a mathematical formula. You can't calculate a company's “WPA score.” Instead, you use it as a mental framework to guide your investment analysis and decision-making.

When analyzing a potential investment, especially during a market downturn, ask yourself these “WPA-inspired” questions:

1. 1. What is this company building?

Look beyond the quarterly earnings report. Is the company investing its capital in things that will create durable, long-term value? This could be physical infrastructure (like a railroad upgrading its tracks), technological infrastructure (like a software company building a powerful ecosystem), or brand infrastructure (like a consumer goods company investing in its reputation and customer loyalty). A company that consistently reinvests its profits wisely to strengthen its business is building its own “WPA projects.” Be wary of companies that primarily use capital for share buybacks at inflated prices or for “diworsification”—acquisitions far outside their circle of competence.

1. 2. Is this company's “stock” on a Depression-era sale?

The WPA could hire workers and buy materials cheaply because of the economic collapse. As an investor, your opportunity comes when the market acts irrationally. Is a fantastic, well-run company—a true “infrastructure builder”—being sold off because of a general market panic or a temporary, solvable problem? This is the moment Mr. Market is offering you a bargain. Your job is to have the courage and the cash ready to act, just as the WPA did, when assets are on sale.

1. 3. Does my portfolio have its own “public works”?

Think of the most resilient, stable, cash-generating businesses in your portfolio as your “public works projects.” These are the companies that will likely keep producing value through economic thick and thin, just as a WPA-built bridge continues to serve traffic regardless of the economic climate. These are your bulwarks against volatility. Ensure your portfolio isn't built entirely on speculative, high-growth “story stocks” but is anchored by these durable, value-producing assets.

Let's compare two companies in the wake of a sharp market correction.

The WPA mindset guides you toward Steady Infras—the productive, boring, and now-cheap asset—and away from the speculative allure of Mo-Tech, whose foundation is uncertain.

The WPA mindset is a powerful tool, but it's essential to understand its strengths and weaknesses as a mental model.

• Encourages Long-Term Thinking: It forces you to look past short-term market noise and focus on what creates value over decades.
• Reinforces Counter-Cyclical Behavior: It provides a strong, intuitive reason to be brave when others are fearful, which is often the most profitable time to invest.
• Focuses on Real Value: It serves as a constant reminder to invest in the underlying business (the “bridge”) rather than the fluctuating stock price (the “market sentiment”).
• Promotes Resilience: Building a portfolio of “WPA-like” companies creates a more robust and defensive collection of assets that can better withstand economic downturns.

• Governments vs. Individuals: This is the biggest limitation. The WPA was funded by a government that can levy taxes and print money. It didn't need to turn a profit. You, as an investor, must demand profitability and a return on your capital. The analogy is about the type of investment, not the source of funding.
• Inefficiency Risk: The historical WPA was criticized for inefficiency and “make-work” projects at times. Similarly, a company can pour money into “infrastructure” (R&D, capital expenditures) that is poorly managed and destroys shareholder value. The analogy must be paired with rigorous financial analysis to ensure the “projects” are actually value-accretive.
• Mistaking “Old” for “Durable”: Not every old-economy, “boring” company is a good investment. Some are simply melting ice cubes, their infrastructure becoming obsolete. You must distinguish between a durable WPA-style bridge and a horse-and-buggy factory.

• value_investing: The core philosophy that the WPA analogy so vividly illustrates.
• margin_of_safety: The central principle of buying assets at a discount to their real worth, mirroring the opportunity created by a crisis.
• mr_market: The personification of the market's manic-depressive mood swings, who offers you “Depression-era” prices.
• counter_cyclical_investing: The formal strategy of investing against prevailing market trends.
• economic_moat: A company's durable competitive advantage; the modern business equivalent of a WPA-built fortress.
• intrinsic_value: The “true” underlying worth of a business that you are trying to estimate and buy below.
• great_depression: The historical context that made the WPA necessary and provides the backdrop for understanding “maximum pessimism.”