Tuesday, June 30, 2009
Monday, June 29, 2009
When it comes to learning," Gladwell said, "what you get is a simple function of what you put in. That is the beautiful and powerful idea behind learning... Sometimes the struggle to learn something is where the actual learning lies."
He also contrasted two learning strategies: capitalization, or leveraging your strengths; and compensation, or focusing your effort on weaknesses. Gladwell contends we spend too much time capitalizing when we'd find much more success by compensating.
Tavakoli should know a thing or two about the value of lunch with Buffett. She dined with the
JT: We covered dozens of topics.
I mention some of the many topics we discussed in my book, but my personal take-aways have to do with
When one invests in value, there is no permanent destruction of value. Stock prices may go up or down, but the underlying companies have value, and they make products that people want and need. These companies keepgenerating earnings and value and when the economy recovers, they are positioned to soar.
While it is true that Berkshire Hathaway may not achieve the high returns of its past due to its enormous size, it will continue to achieve future satisfactory returns. Investors focus more on book value and other metrics rather than the fickle market price. People said value investing was dead in the 1970's when Berkshire Hathaway's share price was down two years in a row (more than 15% for the fiscal year then ending March 1974, and down more than 35% for March 1975). The share price was $51 on March 31, 1975, down from $93 on March 31, 1973. Even if you had "bad timing," and had bought the stock at $93, you would be a happy investor today (BRKA closed yesterday at $86,705). Long-term value investing works if you know the principles of finance and know how to value a company.
Another thing that struck me about
Thursday, June 25, 2009
: I am an observer of the contemporary scene, a journalist, rather than a theorist. I picked up Austrian economics almost everywhere except in school. It came to me, and I to it, in the way that the Austrians say that so many good things happen, that is, by accident, rather than by design.
I chose to feature Röpke because of his book , which appeared in English during the Great Depression. He offers a clear and forceful exposition of the mechanics of the Austrian interest-rate and business-cycle model, and the very difficult but rewarding structure of the theory itself. Vera Smith must have done a great job in translating the work. By the way, I recommend Vera Smiths book as a further elucidation on Röpke's already clear theory. I know there are all sorts of holes in my bibliography; there might be better and more faithful explanations than Röpke offers. But I really do recommend this to people for its simplicity.
: What we do is look for extremes in markets: very undervalued or very overvalued. Austrian theory has certainly given us an edge. When you have a theory to work from, you avoid the problem that comes with stumbling around in the dark over chairs and night stands. At least you can begin to visualize in the dark, which is where we all work.
: The theory is that it will reveal future inflation to policymakers. But they will be severely disappointed. There are a number of different inflations. Whichever one they focus on will be the wrong one. And will not improve the information available to the Fed to run monetary policy. Moreover, it doesn't excite me at all as a speculative or investment vehicle. Any securities innovation coming from the government leaves me cold as a first principle. You can have my share of any and all future indexed bond issuance.
: It is worse. It is a symptom of Greenspan's fundamental failing that will prove to be his undoing. Before this is all over, there will be a big speculative upset, a loss of faith in financial assets, and a loss of faith in the steward of financial markets: Greenspan himself. His tragic flaw is that he thinks--contrary to the teachings of the Austrian masters--that there is some piece of data that will allow him to see the future clearly and head it off at the pass. He really believes that, notwithstanding what he knows about Mises.
: It has been subsidized and encouraged by the central bank, and the rise of debt that has come with it, but it has a life of its own--by and large a successful life, I might add. Wilhelm Röpke criticized all consumer credit as being a product of the inflationary age. He couldn't have anticipated how fully developed the market would end up.
: Correct, and only by degree did bankers come to trust ordinary working men and women. There is nothing incompatible between the gold standard and a democratic regime of credit. Nineteenth-century bankers miscalculated and overlooked a great business opportunity when they overlooked the average American worker. Had World War I not happened, the markets would have discovered, through trial and error, that consumer credit is a legitimate and lucrative business. As it turns out, consumers collectively have presented a much better credit risk than corporations individually. That's not likely to remain true indefinitely.
Related link: The Mises Online Store
Wednesday, June 24, 2009
Tuesday, June 23, 2009
Monday, June 22, 2009
Ben Franklin was a gregarious person, who loved sitting down and having long conversations with friends and acquaintances. In 1727,
The members of the Junto were drawn from diverse occupations and backgrounds, but they all shared a spirit of inquiry and a desire to improve themselves, their community, and to help others. Among the original members were printers, surveyors, a cabinetmaker, a cobbler, a clerk, and a merchant. Although most of the members were older than
I should have mentioned before, that, in the autumn of the preceding year,  I had form'd most of my ingenious acquaintance into a club of mutual improvement, which we called the Junto; we met on Friday evenings. The rules that I drew up required that every member, in his turn, should produce one or more queries on any point of Morals, Politics, or Natural Philosophy, to be discuss'd by the company; and once in three months produce and read an essay of his own writing, on any subject he pleased. Our debates were to be under the direction of a president, and to be conducted in the sincere spirit of inquiry after truth, without fondness for dispute or desire of victory; and to prevent warmth, all expressions of positiveness in opinions, or direct contradiction, were after some time made contraband, and prohibited under small pecuniary penalties.
The Junto's Friday evening meetings were organized around a series of questions that Ben devised, covering a range of intellectual, personal, business, and community topics. These questions were used as a springboard for discussion and community action. In fact, through the Junto,
American Philosophical Society
One outgrowth of the Junto was the American Philosophical Society, created in 1743 to "promote useful knowledge in the colonies."
A respected intellectual institution, the American Philosophical Society still exists more than 200 years later.
This is the list of questions
1. Have you met with any thing in the author you last read, remarkable, or suitable to be communicated to the Junto? particularly in history, morality, poetry, physics, travels, mechanic arts, or other parts of knowledge?
2. What new story have you lately heard agreeable for telling in conversation?
3. Hath any citizen in your knowledge failed in his business lately, and what have you heard of the cause?
4. Have you lately heard of any citizen’s thriving well, and by what means?
5. Have you lately heard how any present rich man, here or elsewhere, got his estate?
6. Do you know of any fellow citizen, who has lately done a worthy action, deserving praise and imitation? or who has committed an error proper for us to be warned against and avoid?
7. What unhappy effects of intemperance have you lately observed or heard? of imprudence? of passion? or of any other vice or folly?
8. What happy effects of temperance? of prudence? of moderation? or of any other virtue?
9. Have you or any of your acquaintance been lately sick or wounded? If so, what remedies were used, and what were their effects?
10. Who do you know that are shortly going [on] voyages or journies, if one should have occasion to send by them?
11. Do you think of any thing at present, in which the Junto may be serviceable to mankind? to their country, to their friends, or to themselves?
12. Hath any deserving stranger arrived in town since last meeting, that you heard of? and what have you heard or observed of his character or merits? and whether think you, it lies in the power of the Junto to oblige him, or encourage him as he deserves?
13. Do you know of any deserving young beginner lately set up, whom it lies in the power of the Junto any way to encourage?
14. Have you lately observed any defect in the laws of your country, of which it would be proper to move the legislature an amendment? Or do you know of any beneficial law that is wanting?
15. Have you lately observed any encroachment on the just liberties of the people?
16. Hath any body attacked your reputation lately? and what can the Junto do towards securing it?
17. Is there any man whose friendship you want, and which the Junto, or any of them, can procure for you?
18. Have you lately heard any member’s character attacked, and how have you defended it?
19. Hath any man injured you, from whom it is in the power of the Junto to procure redress?
20. In what manner can the Junto, or any of them, assist you in any of your honourable designs?
21. Have you any weighty affair in hand, in which you think the advice of the Junto may be of service?
22. What benefits have you lately received from any man not present?
23. Is there any difficulty in matters of opinion, of justice, and injustice, which you would gladly have discussed at this time?
24. Do you see any thing amiss in the present customs or proceedings of the Junto, which might be amended?