Thursday, March 22, 2018


"The great personal fortunes in this country weren't built on a portfolio of 50 companies. They were built by someone who identified one wonderful business." -Warren Buffett

Prem Watsa's 2017 letter to shareholders (released a couple of weeks ago) [H/T ValueWalk] (LINK)

What Protects Us From Exploitation? - by Russ Roberts (LINK)

Brian Grazer: "A Career in Curiosity" | Talks at Google (LINK)
Related book: A Curious Mind: The Secret to a Bigger Life
The Blind Fish That Should Have Diabetes, But Somehow Doesn't - by Ed Yong (LINK)


Another 1996 Berkshire Hathaway Annual Meeting excerpt via OID:
Wall Street reports haven't helped. But annual reports.... 
Buffett: It's amazing how well you can do in investing really with what I'd call "outside" information. I'm not sure how useful inside information is. But there's all kinds of "outside" information around as to businesses. And you don't have to understand all of them. You just have to understand the ones you're thinking about investing in. And you can. But no one can do it for you. 
In my view, you can't read Wall Street reports and get anything out of them. You've got to get your arms around it yourself. I don't think we've ever gotten an idea from a Wall Street report. However, we've gotten a lot of ideas from annual reports. Charlie? 
Where it all begins and ends.... 
Munger: It takes a long time to read an annual report - even if the business is a comparatively simple one. If you're really trying to understand it, it's not a bit easy. 
Buffett: Yeah. On average, in a business we're really interested in - where we know what to skip to some extent and what to read - we'll spend 45 minutes or an hour on a single annual report. If there are six or eight companies in the industry, that's going to be six to eight hours. And then there are quarterlies and a lot of other [material].... 
The way you learn about businesses is by absorbing information about 'em, deciding what counts and what doesn't and relating one thing to another. That's the job. 
You can't get that by looking at a bunch of little numbers on a chart bobbing up and down or by reading market commentary, periodicals or anything of the sort. That won't do it. You have to understand the businesses. That's where it all begins and ends. 

Josh Waitzkin on finding your own way...

"[There's] this theme of finding your own way. One of the most common mistakes that I see people make—whether you're talking about kids or adults—in the learning curve is trying to do it like someone else does it; whether it's your dad, or your hero, or Michael Jordan, or Tiger Woods, or whatever the sport is. There are people who are at the top, and you can try to do it like somebody else, but that's very different from trying to figure out the relationship to the art which is completely your own." -Josh Waitzkin (Source)

Wednesday, March 21, 2018

Warren Buffett and Charlie Munger on float and insurance in 1996

Transcribed comments via Outstanding Investor Digest from the 1996 Berkshire Hathaway Annual Meeting: 
Our cheap, plentiful float springs from competitive advantage.

Buffett: You achieve that in this business only by having some kind of competitive advantages. You won't do it just by having an ordinary insurance company - because an ordinary insurance company is not a good business.

We have it in certain respects because of our attitude toward the business. Our financial strength gives us certain advantages. And we have it in the case of GEICO because of a very low cost operation. And it's up to us to try and figure out ways to maximize each one of those competitive advantages over time.  
We've built those advantages. In 1967, we weren't looked at that way in the insurance business. We've built a position of competitive strengths. And GEICO had it without us. But we bought into it over time. 
Would I accept $7 billion for our float? The answer is no.... 
Buffett: So it's a very important asset. And you ought to pay a lot of attention over the years to what's happening with that asset - both as to growth and cost. And that will aid you in calculating intrinsic value.... 
But I will tell you this: We have $7 billion of float presently.... And if I were offered $7 billion for that float and did not have to pay tax on the gain, but would thereafter have to stay out of the insurance business forever - a perpetual non-compete in any kind of insurance - would I accept that?   
The answer is no. 
That's not because I'd rather have $7 billion of float than have $7 billion of free money. 
It's because I expect the $7 billion to grow. 
It would have been a mistake - and one I'd have made. 
Buffett: If I'd been offered that trade 27 years ago of $17 million for the float we had at that time with no tax to be paid - float for which we'd just paid $8.7 million - in return for us to have gotten out of the insurance business, I might have said yes.... 
Munger: You would've.

Buffett: Yeah.

Munger: But he keeps learning. That's one of his strengths.

Buffett: That's probably true in this case. I'm not sure in other cases. But it would've been a terrible mistake. It would have been a mistake to do it 10 or 12 years ago with $300 million of float. And today, a tax-free payment of $7 billion would not compensate us adequately for giving up the opportunity of being in the insurance business forever at Berkshire - even though it'd be a $7 billion pure addition to equity. So we wouldn't take it. In fact, we wouldn't even think about it very long. 
So, as Charlie says, that isn't the answer we'd have given some years back. But it's a very valuable business. 
It's not automatic. But if they're run right and nurtured....

Buffett: It has to be run right - as does GEICO, the reinsurance business, National Indemnity and the homestate companies.... And it's not automatic. 
But they have the people, the distribution, the reputation, the capital strength and other competitive advantages in place. And, if nurtured, I think they become more valuable as time goes by. 

[H/T Linc]

[And if anyone happens to, by any chance, have a copy of the August 27, 1992 Outstanding Investor Digest issue that they could pass along, I'd be much appreciative. Thanks.]


"The odds are very good that there'll be opportunities from time to time. You cannot study financial history and observe the way markets and people behave and not believe that. Will we do something in the next five years? I can't say. In ten years, yes, we will." -Warren Buffett, 1988 Berkshire Hathaway Annual Meeting [via OID] [H/T Linc]

Why Edward Thorp Owns Only Berkshire Hathaway ($) (LINK)
Q: What’s in your portfolio now? 
A: One good stroke of good fortune was meeting Warren Buffett in 1968. It led me to realize that I needed to invest in Berkshire Hathaway (ticker: BRK.A), although I didn’t do it until 1982. It’s my single investment in the stock market. It’s like a broad value-stocks equity index. I hold it in lieu of VTSAX [the Vanguard Total Stock Market fund]. It does about as well with no current taxes to pay. VTSAX has dividends that are taxed annually. I also have some hedge funds, but I consider them not as good as Berkshire, so I use them to spend and finance other things I do. 
Q: Why not go out and find better investments, as you did in the past? 
A: When I was 35, I had lots of time and less money, so doing 10% or so better than the index, with little risk, was attractive and fun. At 85, the marginal value of time is higher and the marginal value of money is lower. These are strong disincentives when I can make a long-run 10% or so by doing nothing.
Warren Buffett’s vision for NetJets is now the company mantra, new Europe CEO says [H/T @pcordway] (LINK)

Whitney Tilson reflects on the end of his hedge fund (LINK)

The Cambridge Analytica Scandal, in 3 Quick Paragraphs (LINK)

WorkLife with Adam Grant Podcast: Is Your Personality More Flexible Than You Think? (LINK)

Peter G. Peterson, a Power From Wall St. to Washington, Dies at 91 (LINK)

Bertrand Russell’s Advice to People Living 1,000 Years in the Future: “Love is Wise, Hatred is Foolish” (LINK)

There are a couple of great deals on Kindle books today ($2.99):

Never Split the Difference: Negotiating As If Your Life Depended On It

WTF?: What's the Future and Why It's Up to Us

Tuesday, March 20, 2018


"Our outlook for inflation is always the same. We feel there's a big bias toward inflation - both in the U.S. and around the world. But our objective is not to profit from it as much as it is to avoid disaster. Our outlook leads to our buying businesses with the same characteristics that are good in low inflation - namely pricing flexibility, high returns on capital, profits received in cash and so forth." - Warren Buffett, 1988 Berkshire Hathaway Annual Meeting [via OID] [Related link: Warren Buffett’s Comments on Inflation]

Investing is Hard - by Ian Cassel (LINK)

On Social Media and Its Discontents - by Cal Newport (LINK)

Ryan Holiday speaks with James Altucher about his latest book, Peter Thiel, Hulk Hogan, Gawker, and the Anatomy of Intrigue (podcast) (LINK)

What’s Next for Humanity: Automation, New Morality and a ‘Global Useless Class’ (LINK)

The Death of the Last Male Northern White Rhino Won’t Change the Species' Fate - by Ed Yong (LINK)

Monday, March 19, 2018


What I read during 2017 and a few book recommendations - by Tamás Vincze (LINK)

Understanding Speed and Velocity: Saying “NO” to the Non-Essential (LINK)

To Control Your Life, Control What You Pay Attention To (LINK)

Good news is gradual, bad news sudden - by Matt Ridley (LINK)

Buffett and Munger on Discount Rates and How They Read Annual Reports [H/T @HurriCap] (LINK)

How the Bear Stearns Meltdown Wrecked Something More Valuable than Money - by Jason Zweig ($) (LINK)

The Facebook Brand - by Ben Thompson (LINK)

Stream On: An IPO Valuation of Spotify! - by Aswath Damodaran (LINK) [Though maybe he's a little too optimistic on content costs continuing to drop.]

Business Lessons from Jack Ma - Alibaba and the 40 SaaS - by Tren Griffin (LINK)

Leithner Letter No. 222-225 (a sample chapter from The Bourgeois Manifesto) (LINK)

Wing's IoT Startup State Of The Union [H/T @AlexRubalcava] (LINK)

Patrick Collison (CEO of Stripe) Reddit AMA [H/T @sarthakgh] (LINK)

Scott Galloway on breaking up tech's big Four (podcast) (LINK)
Related book: The Four
How I Built This Podcast -- LARABAR: Lara Merriken (LINK)

a16z Podcast: How to Live Longer and Better (LINK)

Book of the day: Tectonic Shifts in Financial Markets: People, Policies, and Institutions - by Henry Kaufman

Friday, March 16, 2018


"When everything seems to be going against you, remember that the airplane takes off against the wind, not with it." -Henry Ford [H/T @vitaliyk]

Amazon Strategy Teardown [H/T Market Folly] (LINK)

Why America needs to invest in its future: Lessons from the U.S. steel industry’s demise (LINK)

Jeremy Grantham on the [i3] Podcast [H/T Abnormal Returns] (LINK)

Adventures in Finance Podcast -- Commercial Break: What the Ad industry’s struggles say about the economy (LINK)

Exponent Podcast: Episode 145 — Qualcomm, Patents, and Innovation (LINK)

The Predictable March of Corpse-Eating Microbes - by Ed Yong (LINK)

Book of the day [H/T @vitaliyk]: The Virgin Banker: My Life in Finance - by Jayne-Anne Gadhia

Thursday, March 15, 2018


U.S. Airline Industry: A Rorschach Test for Investors (LINK)

Ironies of Luck - by Morgan Housel (LINK)

The Man Behind the DC Rainmaker Gear-Review Empire [H/T @pkedrosky] (LINK)

Contract Interpretation 2.0: Not Winner-Take-All But Best-Tool-For-The-Job - by Lawrence Cunningham (LINK)
To illuminate its importance and value — call it contract interpretation 2.0 — this Essay turns to Warren Buffett’s contracting philosophy and practices. The famous investor and businessman is also a polyglot teacher, and his approach to contracts, especially acquisition agreements and employment arrangements, illustrates the imperative of using the right tool for the job.
Audit transparency disclosures give investors new tools [H/T @jciesielski] (LINK)

What a psychiatrist learned from 87,000 brain scans (video) (LINK)

Daniel Amen: "The Brain's Warrior Way" | Talks at Google (LINK)

An Older Origin for Complex Human Cultures - by Ed Yong (LINK)

A Twist in Our Sexual Encounters With Other Ancient Humans - by Ed Yong (LINK)

Why Earth's History Appears So Miraculous - by Peter Brannen (LINK)

No, space did not permanently alter 7 percent of Scott Kelly’s DNA (LINK)
Scientists studying Scott found that much of his gene expression changed while in space, and about 93 percent of his expression levels went back to normal when he got home. However, 7 percent of his genes related to the immune system, DNA repair, bone formation, and more were still a little out of whack when he returned. These genes are referred to as the “space genes,” according to NASA. 
That’s still a cool result, but it doesn’t mean his genetic code is significantly different. “To have 7 percent of his gene expression changed after the spaceflight does not mean that 7 percent of the DNA changed, or that those changes were necessarily due to mutations,” Nichole Holm, a geneticist at UC Davis who did not work on the Twins Study, wrote to The Verge in an email.

Wednesday, March 14, 2018


"One, remember to look up at the stars and not down at your feet. Two, never give up work. Work gives you meaning and purpose and life is empty without it. Three, if you are lucky enough to find love, remember it is there and don't throw it away." -Stephen Hawking

The Power of Detachment (LINK)
Piramal Enterprises has the rare distinction of generating annualized shareholder return of 30% over 29 years till 2017. And the architect behind this stunning performance is Ajay Piramal.
Theranos and Silicon Valley's 'Fake It Till You Make It' Culture (LINK)

Billionaire Raises His Bet on Containerships (LINK)

Not a Single Japanese 10-Year Bond Traded Tuesday (LINK)

WorkLife with Adam Grant (podcast): The Team of Humble Narcissists (LINK)

Jordan Peterson on taking responsibility for your life (video) (LINK)
Related book: 12 Rules for Life: An Antidote to Chaos
What a Giant Soda Stream Reveals About the Fate of Corals - by Ed Yong (LINK)

Stephen Hawking (1942–2018) (LINK)

The Universe and Beyond, with Stephen Hawking [aired 10 days ago] (video) (LINK)
This year’s season finale of StarTalk on National Geographic TV was Neil deGrasse Tyson's interview with Stephen Hawking. In memory of his passing, and in celebration of his life, we offer that episode for you here, now, commercial free.

Tuesday, March 13, 2018


Elon Musk's interview at SXSW 2018 (video) (LINK)

Qualcomm, National Security, and Patents - by Ben Thompson (LINK)

Bill Gates chats with Jorge Aguilar, the superintendent of the Sacramento City United School District (LINK)

The Knowledge Project Podcast -- Company Culture, Collaboration and Competition: A Discussion With Margaret Heffernan (LINK)

Invest Like the Best Podcast: World After Capital, with Albert Wenger (LINK)

How Psychopaths See the World - by Ed Yong (LINK)