Friday, July 13, 2018


"The history that Charlie and I have had of persuading decent, intelligent people, who we thought were doing unintelligent things, to change their course of action has been poor.... So I would say that if you really think you’re in with people that have got a good business, but they’re going to keep doing dumb things with your money, you’ll probably do better to get out and get in with people who’ve got a good business and you think they’re going to do sensible things with it. I mean, you’ve got that option. Now, you also have the option of trying to persuade them to change their mind. But it’s just very, very difficult." --Warren Buffett

The Lifecycle of Greed and Fear - by Morgan Housel (LINK)

Of China and Oil - by Peter Zeihan (LINK)
Related book: The Absent Superpower: The Shale Revolution and a World Without America
Walt Disney had a vision for tomorrow—and the means to sell it (LINK)

Anne Wojcicki: "Co-Founder and CEO of 23andMe" | Talks at Google (LINK)

Failing Upwards: Science Learns by Making Mistakes. | Phil Plait | TEDxBoulder (video) (LINK) [He also wrote a follow-up blog post on his talk, with a transcript, HERE.]

"You have to let go of ideas that don’t pan out or else you’ll never see the bigger picture. And if you let it go you’ve learned from it, and won’t make that same mistake again." --Phil Plait

Thursday, July 12, 2018

Intelligent Fanatics

I'm  pleased to announce that, if you have been planning to become a member of the Intelligent Fanatics website and haven't yet done so, you can now support this blog by signing up for Intelligent Fanatics using THIS LINK. I signed up shortly after the site started and have been a happy customer. If you do sign up now, you'll get locked in at the current price ($59.99) for life. For more information on the site, click on the link and check it out. The referral link will also be posted on the right side of this blog's home page, under the Support section.


"The game in our kind of life is being able to recognize a good idea rarely is presented to you. And I think that’s something you have to prepare for over a long period. What is the old saying? That opportunity comes to the prepared mind? And I don’t think you can teach people in two minutes how to have a prepared mind. But that’s the game." --Charlie Munger

How 20-Year-Old Kylie Jenner Built A $900 Million Fortune In Less Than 3 Years (LINK) [I think the mental model for understanding the business success revolves around understanding the way the internet has changed the competitive advantages around supply and demand relationships. As Ben Thompson has written: "The most successful companies no longer control supply but rather demand; moreover, that shift is not due to the actions of any one company but rather to the fundamentally changed structure of the market.... This is the critical insight: it has always been obvious that owning all customers is preferable to owning all suppliers; before the Internet, though, that was impossible. There was too much friction. In other words, the implication of the Internet is the enablement of new models that actually make much more sense, yet were previously unviable because of said friction."]

Ruane, Cunniff & Goldfarb Investor Day Transcript (May 2018) [H/T Eli] (LINK)

Journalist Elon Musk questioned over Tesla reporting speaks (video) (LINK)
Scott Wapner is joined by Linette Lopez, the Business Insider senior finance reporter whom Elon Musk criticized over Twitter on her Tesla reporting. With Yale's Jeffrey Sonnenfeld and Bethany McLean, Vanity Fair.
The Knowledge Project Podcast: The Science of Doing Good, with William MacAskill (LINK)

Revisionist History Podcast: Strong Verbs, Short Sentences (LINK)

American Innovations Podcast: Nuclear Energy | Backlash | 5 (LINK)

An interview with George Church: Reversed Aging, Pig Organs, and the Future of Humankind (LINK)

A Hallmark of Alzheimer's May Actually Begin as a Defense Against Viruses - by Ed Yong (LINK)

Wednesday, July 11, 2018


"Study the past record of the stock market, study your own capabilities, and find out whether you can identify an approach to investment you feel would be satisfactory in your own case. And if you have done that, pursue that without any reference to what other people do or think or say." --Benjamin Graham [Source]

Ben Graham's 1955 Senate Testimony (LINK)

I was reminded of the above after reading this comment from Warren Buffett at the 1997 Berkshire Hathaway Annual Meeting:
What two years in this century has the Dow had the greatest overall gain? The two years in the 1900s are 1933, which most of you don’t think of as a banner year, and 1954. And in both of those years, the Dow was up over 50 percent, counting dividends. 
In March of 1955, because of that, the fact that the Dow had gone up — bear in the mind that the high on the Dow was 381 in 1929 and it took 25 years before that was surpassed. And in 1954, the Dow went from, say, 280 up to 404, or something like that, just a little over 50 percent.  
So what did they decide to do? They decided to have congressional hearings about it. And they did.  
In March of 1955, they had hearings in the Senate Banking and Currency Committee, Chairman Fulbright. And my boss, Ben Graham, was called down to testify. And it’s fascinating reading. Bernard Baruch was there, all kinds of people. 
Where’s the value in value investing? [H/T @williamgreen72] (LINK)

Worthless Just Two Years Ago, West Texas Sand Now Brings in Billions (LINK)

Required reading for marketplace startups: The 20 best essays (LINK)

TED Talk: How to build synthetic DNA and send it across the internet | Dan Gibson (LINK)

How Rats Remake Coral Reefs - by Ed Yong (LINK)

The New Story of Humanity's Origins in Africa - by Ed Yong (LINK)
Several new discoveries suggest that our species didn’t arise from a single point in space. Instead, the entire continent was our cradle.
The Long Now Foundation event -- Chris D. Thomas: Are We Initiating The Great Anthropocene Speciation Event? (video) (LINK) [also available as a podcast]
Related book: Inheritors of the Earth: How Nature Is Thriving in an Age of Extinction [This book earned quite the praise from Stewart Brand: "...the best book on evolution since Darwin."]

Tuesday, July 10, 2018


"There are no secrets in [the investing] business that only the priesthood knows.... It’s all out there in black and white. It’s a simple business.... It requires qualities of temperament way more than it requires qualities of intellect...You do need a certain temperament that enables you to think for yourself. And then you have to develop a framework — and I developed it from reading Ben Graham, I didn’t come up with it myself — very simple framework. And then you have to look for opportunities that fit within that framework as you go through life, and you can’t do something every day...You can learn every day, but you can’t act every day." --Warren Buffett

Buffett Starts to Say Goodbye to a Pile of Equity-Index Options [H/T Linc] (LINK)

I Can’t Hear You: How the New Information Landscape Fuels Tribalism - by Russ Roberts (LINK)

Nassim Nicholas Taleb on the Likeville Podcast (LINK)
Related book: Skin in the Game
Grant's Podcast: Mix and match (LINK)

Jordan Peterson talks with Lewis Howes (podcast) (LINK)

David Graeber in conversation with Rory Sutherland (podcast) (LINK)
Related book: Bullshit Jobs
TED Talk: The rapid growth of the Chinese internet -- and where it's headed | Gary Liu (LINK)

The evolution of ancient Stoicism, and why it matters today (LINK)

Book(s) of the day: Penguin Little Black Classics Box Set


For qualified candidates, is looking to fill a role that might just be "the best CFO job in Private Equity" (LINK)

Sunday, July 8, 2018


a16z Podcast: Beyond Zero-Sum Thinking in the Game of Tech… and Life (with Marc Andreessen, Ben Horowitz, and Steven Johnson ) (LINK) [Marc Andreessen also Tweeted a bunch of book recommendations, HERE.]

Lessons from Josh Wolfe (Lux Capital) - by Tren Griffin (LINK)

Something I Changed My Mind About Recently - by Ben Carlson (LINK)

Masters in Business Podcast: Paul Vigna on Blockchain & Cryptocurrency (LINK)

Recode Decode Podcast: Box CEO Aaron Levie talks tech regulation and the future of jobs (LINK)

Open Offices Make You Less Open - by Cal Newport (LINK)

Why Are We So Certain About Our Mistakes? - by Ryan Holiday (LINK)

How to Undertake the Artist’s Journey - by Steven Pressfield (LINK)
Related book: The Artist's Journey
Spiders Can Fly Hundreds of Miles Using Electricity - by Ed Yong (LINK)

The Original American Dogs Are Gone - by Ed Yong (LINK)

Thursday, July 5, 2018


 "I don’t look at the primary message...of [Ben] Graham, really, as being...anything to do with formulas. In other words, there’s three important aspects to it.... One is your attitude toward the stock market. That’s covered in chapter eight of The Intelligent Investor. If you’ve got that attitude toward the market, you start ahead of 99 percent of all people who are operating in the market. So, you have an enormous advantage. Second principle is the margin of safety, which again, gives you an enormous edge, and actually has applicability far beyond just the investment world. And then the third is just looking at stocks as businesses, which gives you an entirely different view than most people that are in the market. And with those three sort of philosophical benchmarks, the exact — the evaluation technique you use is not really that important. Because you’re not going to go way off the track, whether you use Walter’s approach — Walter Schloss’s — or mine, or whatever." --Warren Buffett

1991 Barron's interview with Seth Klarman [H/T @NeckarValue] (LINK)

If You Say Something Is “Likely,” How Likely Do People Think It Is? - by Andrew Mauboussin and Michael J. Mauboussin (LINK)

Investing and the Art of Catching Falling Knives - by Vishal Khandelwal (LINK)

The Absolute Return Letter, July 2018: The Italian Job (LINK)

29 Life-Changing Lessons That Will Make You Successful And More Strategic - by Ryan Holiday (LINK)

Your company’s culture is not unique, psychologist Adam Grant says (LINK)

Invest Like the Best Podcast: The Future of Media, with Niel Roberson (LINK)

Grant's Podcast: Nobody knows notin' (LINK)

American Innovations Podcast: Nuclear Energy | Meltdown | 4 (LINK)

Revisionist History Podcast: The Imaginary Crimes of Margit Hamosh (LINK)

TED Talk: How we're saving one of Earth's last wild places | Steve Boyes (LINK)

A Game-Changing AI Tool for Tracking Animal Movements - by Ed Yong (LINK)

How to Grow Old: Bertrand Russell on What Makes a Fulfilling Life (LINK)

"The best Armour of Old Age is a well spent life preceding it; a Life employed in the Pursuit of useful Knowledge, in honourable Actions and the Practice of Virtue; in which he who labours to improve himself from his Youth, will in Age reap the happiest Fruits of them; not only because these never leave a Man, not even in the extremest Old Age; but because a Conscience bearing Witness that our Life was well-spent, together with the Remembrance of past good Actions, yields an unspeakable Comfort to the Soul." --Cicero (via "Praising Old Age" in Poor Charlie's Almanack)

Monday, July 2, 2018


How I Evaluate an Investment - by Brent Beshore (LINK)

Lessons from Cliff Asness - by Tren Griffin (LINK)

Sustaining Wealth is Harder Than Getting Rich - by Ben Carlson (LINK)

On Passion and Its Discontents - by Cal Newport (LINK)

Peter H. Diamandis interviews Joshua Dahn, the principal and co-founder (with Elon Musk) of the Ad Astra School [H/T @maxolson] (video) (LINK)

J.P. Morgan Reading List Collection 2018 (LINK)

For Audible members, the new $5.95 sale that runs until July 8th has a few titles that stood out to me:

Den of Thieves - by James B. Stewart

Stuff Matters - by Mark Miodownik

Debt: The First 5,000 Years - by David Graeber

The Goal - by Eliyahu M. Goldratt, Jeff Cox

Red Notice - by Bill Browder

Warren Buffett on looking at the downside first...

"I always start from a position of fear. And then when I see something that looks attractive, I start getting greedy.... But I'm always looking at the downside on something first. I mean, if you can't lose money, you're going to make money. One reason we've done reasonably well, and this really goes back to when I was age 20 and learned from Graham, because my first 10 years were the best, is we've never lost a lot of money as a percentage of our net terms of permanent loss. Now, things may go down 50 percent. Berkshire's stock has gone down 50 percent four times in the time that I've owned it. But in terms of permanent loss....we've had plenty of losses, but they've never been the kind that really are destructive. And I always look at the downside first in anything." --Warren Buffett (March 1, 2010)


Related quote:

"If a catastrophic outcome is possible or you can’t judge the downside, stay away." --Peter Bevelin 

[via the Librarian character in All I Want To Know Is Where I'm Going To Die So I'll Never Go There, and a complementary quote to the story about Buffett and Mid-Continent Tab from Friday]

Friday, June 29, 2018

Links... and What can go wrong?

"The best way to get what you want is to deserve what you want." --Charlie Munger

Daniel Kahneman on Expertise, Bias, and the Investment Industry [H/T Phil] (video) (LINK)

Ray Dalio at the Aspen Ideas Festival -- Success in Leadership and Life: A Function of Principles (video) (LINK)

Aspen Ideas Festival -- Deep Dive: Leading Transformational Change (video) (LINK)

Little Money Rules - by Morgan Housel (LINK)

Twists and Turns in the Tesla Story: A Boring, Boneheaded Update! - by Aswath Damodaran (LINK)

Rocket Men Precision - by Ben Carlson (LINK)
Related book: Rocket Men: The Daring Odyssey of Apollo 8 and the Astronauts Who Made Man's First Journey to the Moon
The Knock-On Effect Podcast: Rising dollar to unleash unusual ice cream flavors? (LINK) [Interesting topic of vanilla beans, which have risen in price from $20/kilo to about $600/kilo since 2016. It looks like there is also a recent article in the The Globe and Mail (Canada) on the topic.]

How One Number Could Change the Lives of People With a Rare Disorder - by Ed Yong (LINK)

Book of the day: Social Value Investing - by Howard W. Buffett and William B. Eimicke

Also, for Audible members, Pre-Suasion by Robert Cialdini is the Daily Deal today ($3.95).


Posting may be light over the next 7-10 days, so before the weekend, I'll leave you with a little more wisdom from Warren Buffett (via Alice Schroeder) and Tony Deden. I enjoy learning something from one great investor that reminds me of a lesson from another, as it gives one a new perspective on which to build the mental model in one's mind. Deden's discussion in regards to the question "What can go wrong?" reminded me of a story Schroeder told about Buffett's investment in Mid-Continent Tab, when she described Buffett's first filter as being "What can go wrong?" First, the excerpt from Deden, where he made the point using his firm's investment in a salmon business (which I believe is Bakkafrost):
So we have a relatively important stake in the business of salmon farming, for argument's sake. Well, not just myself, perhaps, but we have a team that knows, more or less, everything there is to know about salmon farming literally everywhere in the world. We know what can go wrong. We know where the strengths are. We know where the abilities, where the skill is.    
And not just merely from what will happen in the price of...salmon today or tomorrow, the demand or supply of it, but in terms of those ingredients that contribute to the long-term viability of a business. But we also pay to understand what can go wrong. What can go wrong is really more important than what can go right, because over time, even a marginally good business will profit, will do well.    
So you really need to understand, you don't know what anything is worth until you know what can go wrong. Because we value things differently because we weigh components differently. There's no such thing as valuation metrics based on some standardized formula, unless you see it in connection with other issues.
And then Schroeder's story, from a 2008 talk, about Buffett and Mid-Continent Tab (from a file I have compiled on investing wisdom over the years, but I believe the original source for this excerpt is the CS Investing blog):
So when Wayne Ace and Warren Cleary who were two friends of Warren’s saw that IBM was going to have to divest in this business, and they thought, “We are going to buy a Carroll Press which was a press that makes these cards. And we are going to compete with IBM because we are based in the Mid West, we can ship faster. We can provide better service. And they went to Warren and they said, “Should we invest in this company and would you come in with us? And Warren said, “No.” 
Well, why did he say no? He didn’t say no because it was a technology company. He said no because he went through the first step in his investing process. This is where I think what he does is very automatic but it isn’t well understood. He acted like a horse handicapper. The first stop in Warren’s investing process is always to say, “What are the odds that this business could be subject to any type of catastrophe risk—that could make it (the business) fail? And if there is any chance that any significant part of his capital would be subject to catastrophe risk, he just stops thinking. NO. He just won’t go there. 
It is backwards the way most people think because most people find an interesting idea and figure out the math, they look at the financials, they do a projection and then at the end, they ask, “What could go wrong?” 
 Warren starts with what could go wrong and here he thought that a start-up business competing with IBM can fail. Nope, pass, sorry.  And he didn’t think anymore about it. But Wayne and Cleary went ahead anyway and within a year they were printing 35 million tab cards a month. At that point, they knew they had to buy more Carroll Presses so they came back to Warren and said, we need money—would you like to come in? 
So now, Warren is interested because the catastrophe risk is gone.  They are competing successfully against IBM. So he asks them the numbers, and they explain to him that they are turning their capital over 7 times a year. A Carroll Press costs $78,000 dollars and every time they run a set of cards through and turn their capital over, they are making over $11,000.  So basically their gross profit on a press (7 x $11,000 = $77,000) is enough to buy another printing press. At this point Warren is very interested because their net profit margins are 40%. It is one of the most profitable businesses he has ever had the opportunity to invest in. 
Notably people are now bringing Warren special deals to invest in—it is 1959. He has been in business for 2.5 years running the partnership. Why are they doing that? It is not because he is a great stock picker. They don’t know that. He hasn’t yet made that record.   It is because he knows so much about business, and he started so early he has a lot of money. So this is something interesting about Warren Buffett—people were bringing him special deals like they are today with Goldman Sachs and GE
He decided to come in and invest in the Mid-Continent Tab Company but, interestingly, he did not take Wayne and John’s word for it because the numbers they gave him were very enticing. But, again, he went through, and he acted like a horse handicapper. 
Now here is another point of departure. Everyone that I know or knew as an analyst would have created a model for this company and projected out its earnings or looked at its return on investment in the future. Warren didn’t do that. In going through hundreds of his files, I never saw anything that looked like a model. What he did is he did what you would do with a horse….he figured out the one or two factors that determined the success of the investment. In this case, it was the cost advantage that had to continue for the investment to work. And then he took all the historical data, quarter by quarter for every single plant and he obtained similar information as best he could from every competitor they had, and he filled several pages with little hen scratches with all this information and then he studied that information. 
Then he made a yes/no decision. He looked at—they were getting 36% margins, they were growing over 70% a year on a $1 million of sales—so those were the historical numbers. He looked at them in great detail like a horse handicapper would studying the races and then he said to himself, “I want a 15% return on $2 million of sales and said, Yes, I can get that.” Then he came in as an investor. 
OK, what he did was he incorporated his whole earnings model and compounding (discounted cash flow or DCF) into that one sentence.  He wanted 15% on $2 million of sales (a doubling from $1 million current sales). Why does he choose 15%? Warren is not greedy, he always wants 15% day one return on investment, and then it compounds from there. That is all he has ever wanted and he is happy with that.  …You are not laughing, what’s wrong? (Laughs)  
It is a very simple thing, nothing fancy about it. And that is another important lesson because he is a very simple guy. He doesn’t do any DCF models or anything like that. He has said for decades, “I want a 15% day one return on my capital and I want it to grow from there-ta da! The $2 million of sales was pretty simple too. It had a million in sales already and it was growing at 70% so there was a big margin of safety built into those numbers. 
It had a 36% profit margin—he said I would take half that or 18%. And he ended up putting in $60,000 of his personal, non-partnership money which was 20% of his net worth at that time. He got 16% of the company’s stock plus some subordinated notes.   And the way he thought about it was really simple. It was a one step decision. He looked at historical data and he had this generic return that he wants on everything. It was a very easy decision for him. He relied totally on historical figures with no projections.  
I think that is a really interesting way to look at it because I saw him do it over and over again in different investments.