Sunday, January 20, 2019

Survival first...

"Nature and history do not agree with our conceptions of good and bad; they define good as that which survives, and bad as that which goes under." --Will and Ariel Durant (The Lessons of History)

"The only definition of rationality that I’ve found that is practically, empirically, and mathematically rigorous is the following: what is rational is that which allows for survival. Unlike modern theories by psychosophasters, it maps to the classical way of thinking. Anything that hinders one’s survival at an individual, collective, tribal, or general level is, to me, irrational." --Nassim Taleb (Skin in the Game)

"Never forget about the man who was six-foot-tall, who drowned crossing the stream that was five feet deep on average. To be a successful investor, at minimum, you have to survive. Surviving on the good days is not the issue. You have to be able to survive on the bad days. The idea of surviving on average is not sufficient. You have to be able to survive on the worst days." --Howard Marks (interview on The James Altucher Show)

"My belief is: If you have not figured out the risk, then you shouldn't even think about the upside." --Weijian Shan (Real Vision interview)

"The first stop in Warren [Buffett]’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." --Alice Schroeder  [In a talk discussing Warren Buffett's investing process.]

"The fundamental principle of auto racing is that to finish first, you must first finish. That dictum is equally applicable to business and guides our every action at Berkshire." --Warren Buffett (2010 Shareholder Letter)

Saturday, January 19, 2019


"The unthinkable can always happen, and you have to run your affairs accordingly." --Peter Bernstein

On Jack Bogle (1929-2019) - by Jason Zweig (LINK)

A Lifetime of Systems Thinking - by Russell Ackoff (1999) [H/T @pcordway] (LINK)

Clayton Christensen: After 40 years studying innovation, here is what I have learned (LINK)

Exponent Podcast: Inverted Pyramids (LINK)

The Insulin Wars [H/T @Atul_Gawande] (LINK)

GMO White Paper: Is the U.S. Stock Market Bubble Bursting? A New Model Suggests 'Yes' (LINK)
  • A new model suggests that from early 2017 through much of 2018, the U.S. stock market was a bubble.
  • Driven by negative changes in sentiment, the bubble started to deflate in the fourth quarter of 2018, in spite of strong fundamentals.
  • Our advice, consistent with our portfolio positions established in Q1 2018 – as usual, we were early – is to own as little U.S. equity as your career risk allows.
Questions we hear a lot - by John Hussman (LINK) [And if you're not one to read the economic analysis, the talk by Martin Luther King Jr., "Loving Your Enemies," attached to the end is always a worthwhile read.]

Friday, January 18, 2019


"I do think that there’s a lot to be said for developing a temperament that can own securities without fretting. I think that the fretful disposition is an enemy of long-term performance." --Charlie Munger (2003)

"I think it’s almost do well in equities over a period of time if you go to bed every night thinking about the price of them. I mean, Charlie and I, we think about the value of them... Focusing on the price of a stock is dynamite, because it really means that you think that the stock market knows more than you do.... The stock market is there to serve you and not to instruct you." --Warren Buffett (2003)

Bill Gates: The Best Investment I’ve Ever Made (LINK)

In the Company of Greatness - by Frank K. Martin (LINK)

Billionaire Sam Zell Buys Gold for First Time in Bet on Tight Supply (LINK)

‘Bear Market’ Is an Arbitrary Label, but Using It Can Hurt - by Robert Shiller (LINK)

a16z Podcast: Pulse Check on Consumer Tech Trends 2019, CES and Beyond (LINK)

a16z Podcast: The Business of Cybercrime (LINK)

Five Good Questions: S4:E1 James Clear – Atomic Habits (LINK)

American Innovations Podcast: Bill Nye Wants to Save the World (LINK)

The Massive Mystery of Saturn’s Rings (LINK)

The Overlooked Organisms That Keep Challenging Our Assumptions About Life - by Ed Yong (LINK)

Thursday, January 17, 2019

RIP Jack Bogle

"If a statue is ever erected to honor the person who has done the most for American investors, the handsdown choice should be Jack Bogle.... In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me. --Warren Buffett (2016 Annual Letter)

John Bogle, who founded Vanguard and revolutionized retirement savings, dies at 89 (LINK)

Jason Zweig recounts Mr. Bogle's long and influential career (video) (LINK)


Back when I was first reading Jack Bogle's book Enough, I emailed him the following quote from Seneca that I thought was a perfect compliment to the things he had written about in his book: 
"What difference does it make how much there is laid away in a man's safe or in his barns, how many head of stock he grazes or how much capital he puts out at interest, if he is always after what is another's and only counts what he has yet to get, never what he has already. You ask what is the proper limit to a person's wealth? First, having what is essential, and second, having what is enough." 
Mr. Bogle was kind enough to both respond to my email as well as pass along some words of encouragement to a young man still early on in his investment career. A short while later, I came across another quote that reminded me of his book, and again passed it along. Though not quite as fitting as the one above, it was a longer quote from Arthur Schopenhauer:
"It is difficult, if not impossible, to define the limits which reason should impose on the desire for wealth; for there is no absolute or definite amount of wealth which will satisfy a man. The amount is always relative, that is to say, just so much as will maintain the proportion between what he wants and what he gets; for to measure a man's happiness only by what he gets, and not also by what he expects to get, is as futile as to try and express a fraction which shall have a numerator but no denominator. A man never feels the loss of things which it never occurs to him to ask for; he is just as happy without them; whilst another, who may have a hundred times as much, feels miserable because he has not got the one thing he wants. In fact, here too, every man has an horizon of his own, and he will expect as much as he thinks it is possible for him to get. If an object within his horizon looks as though he could confidently reckon on getting it, he is happy; but if difficulties come in the way, he is miserable. What lies beyond his horizon has no effect at all upon him. So it is that the vast possessions of the rich do not agitate the poor, and conversely, that a wealthy man is not consoled by all his wealth for the failure of his hopes. Riches, one may say, are like sea-water; the more you drink the thirstier you become; and the same is true of fame."
He once again replied with kindness and, as he put it, delight that those of us who digested his work made interesting connections to other things. And as I look back at the quotes above, they once again seem fitting ways to describe a great man that gave far more than he took from the world, and was always happy with having enough.


And since it's only fitting to let Mr. Bogle have the last word, let's go back to the inaugural issue of CFA Magazine (Jan/Feb 2003). Charley Ellis moderated a panel of investing greats (Bernstein, Bogle, Brinson, Buffett, LeBaron, Neff, and Templeton), and the final question he asked the panel was: "Given the option to say whatever you would like to say that, 30 years from now, bright, young people would be sitting down and reading, saying 'Gee, I'm glad I was able to read this particular thought,' what would that thought be?" Bogle's reply, which was the last among the panel members: 
"First, put the client’s interest ahead of your own, and, one day at a time, help to make this field of investing more of a profession and less of a business. Second, learn every day, but especially learn from the experiences of others. It’s cheaper! And third, never, never lose your idealism, no matter how rough your career might be, and never lose faith in your nation."

Wednesday, January 16, 2019


Case Studies of Companies That Do Capital Allocation Right - by Phil Ordway (LINK)

Cummins: Diesel Engine Maker with Shareholder-Friendly Management - by Chris Bloomstran (LINK)

What Does An Intelligent Fanatic Look Like? - Ian Cassel (video) (LINK)

Brent Beshore's 2018 Year In Review: Serving the Six-Sided Teeter Totter (LINK)

O’Shaughnessy Quarterly Investor Letter Q4 2018 (LINK)

Lawrence Cunningham NACD 2018 Lifetime Achievement Award (video) (LINK)

WeWork’s CEO Makes Millions as Landlord to WeWork (LINK)

How a Behavioral Scientist Optimizes His Monthly Cashflow (LINK)

a16z Podcast: Dark Data in Healthcare (LINK)

Glossier CEO Emily Weiss on the “art and science” of the beauty business (LINK)

Peter Diamandis: "Exploring Exponential Technologies" | Talks at Google (LINK)

Tidying Up: Marie Kondo on her Netflix show, the KonMari method, and why folding "sparks joy." (video) (LINK)

Charlie Munger on diversification

From the 2008 Berkshire Hathaway Annual Meeting:
Students of America go to these elite business schools and law schools and they learn corporate finance the way it’s now taught and investment management the way it’s now taught.
And some of these people write articles in the newspaper and other places and they say, “Well, the whole secret of investment is diversification.” That’s the mantra. 
They’ve got it exactly back-ass-ward. The whole secret of investment is to find places where it’s safe and wise to non-diversify. It’s just that simple. 
Diversification is for the know-nothing investor; it’s not for the professional. 

Related previous posts:

Warren Buffett on Diversification - 1966

Warren Buffett on Diversification (1998)

Phil Fisher on diversification

More from Phil Fisher on diversification

Warren Buffett and Charlie Munger on portfolio concentration, and having the right temperament for it

Seth Klarman on position sizing (bottom paragraph)

Mohnish Pabrai on position sizing

Generalizing the Kelly Criterion

A quick diversification thought...

A few comments on the Berkshire Hathaway letter to shareholders

Tuesday, January 15, 2019


"Patience is bitter, but its fruit is sweet." --Aristotle

Hedge Fund Baupost Has a Complex $1 Billion Bet on PG&E (LINK)

The 30 Best Pieces of Advice for Entrepreneurs in 2018 [H/T @BrentBeshore] (LINK)

Do Stocks Do the Worst Before or During Recessions? (LINK)

Samuel Andrews: The Man With the Billion Dollar Ego (LINK)

Invest Like the Best Podcast: Michael Duda – Investing In Brands (LINK)

Ben Thompson talks to John Gruber about Apple, and other tech (podcast) (LINK)

The History of Blood [H/T @oraunak] (LINK)

Books of the day (recommended by Khosla Ventures partner Keith Rabois in his chat with Kara Swisher):

Churchill: Walking with Destiny

The Breakthrough: Immunotherapy and the Race to Cure Cancer

The Last Days of Night

Monday, January 14, 2019


Jake Taylor's book, The Rebel Allocator, has just been released, and I'm really looking forward to reading it. Jake is the man behind the Five Good Questions interviews, and Jake's book is his mission to distill some key lessons on capital allocation that he's learned from Warren Buffett, Charlie Munger, and the other greats that many of us follow into a fictional, story format that will be interesting to a wider audience, as well as to those of us in the investing world. As Jake described it in an interview
I was working hard on a non-fiction guide to proper capital allocation. It felt like different books, podcasts, and conversations at that time were telling me I needed to write a fictional story if there was any chance of my book still mattering in ten years. The emotion of a story is all that persists. Around that same time I lost a close friend my age to a tragic hiking accident. It was a wake up call. If I were to disappear tomorrow, what kind of book would I want to leave as a literary legacy for my two young boys? It certainly wasn’t a dry, non-fiction, vanity project that no one would care about in six months. I had to try something radically different and tell a story. This lead to researching hero’s journeys and even screenplay writing to learn about character arcs and dynamic pacing to engage the reader. I hope the book reads a little like watching a movie.


John Hempton reviews the book The Myth of Capitalism (LINK)

What Amazon’s Rise to No. 1 Says About the Stock Market - by Jason Zweig (LINK)

AWS, MongoDB, and the Economic Realities of Open Source - by Ben Thompson (LINK)

How Aging Japan Defied Demographics and Revived Its Economy - by Greg Ip (LINK)

Back to Class: A Teaching Manifesto! - by Aswath Damodaran (LINK)

Dan Carlin's Hardcore History Podcast: 63 - Supernova in the East II (LINK)

Brent Beshore on The Learning Leader Show (podcast) (LINK)
Related book: The Messy Marketplace
60 Minutes video: Facial and emotional recognition; how one man is advancing artificial intelligence (LINK)

a16z Podcast: All About Synthetic Biology (LINK)

a16z Podcast: The Science and Business of Innovative Medicines (LINK)

Cal Newport on The Ezra Klein Show (podcast) (LINK)
Related book: Digital Minimalism
A review of “The Big One,” a new podcast from the Southern California NPR station KPCC about the potential devastation an earthquake could cause in Los Angeles (LINK)

What Happens When the President Doesn’t Have a Science Adviser - by Ed Yong (LINK)

A cool video of New York City in 1911 [H/T @Jesse_Livermore] (LINK)

Friday, January 11, 2019


"It makes more buy a wonderful business at a fair price, than a fair business at a wonderful price.... I’ve changed my focus...over the years in that direction.... It’s not hard when you watch businesses for 50 learn a few things about them, as to where the big money can be made. Now, you say when did it happen? It’s very interesting on that. Because what happens, even when you’re getting a new, important idea, is that the old ideas are still there. So there’s this flickering in and out of things. I mean, there was not a strong, bright red line of demarcation where we went from cigar butts to wonderful companies.... But we moved in that direction, occasionally moved back, because there is money made in cigar butts. But overall, we’ve kept moving in the direction of better and better companies." --Warren Buffett (2003)

Rob Vinall's 2018 investor letter [registration required] (LINK)

Brent Beshore on the Tropical MBA Podcast (LINK)
Related book: The Messy Marketplace
David Marcus: Great Owner-Operators in Europe (audio) (LINK)

Notes From Sohn London Investment Conference (LINK)

Why Some Platforms Thrive and Others Don’t [H/T @FourFilters] (LINK)

Blockchain Can Wrest the Internet From Corporations' Grasp - by Chris Dixon (LINK)

Misunderstanding Liquidity, Misunderstanding QT [H/T @modestproposal1] (LINK)

You Can’t Debunk MMT - by Cullen Roche (LINK)

Bob Rodriguez: Recent Market Turmoil a 'Preamble' to Bigger Crisis [H/T @jessefelder] (LINK)

RA Conversations: The Flattening Yield Curve (LINK)

Chris Cole on the Macro Voices Podcast (LINK)

Exponent Podcast: Episode 158 — A Significant Shift (LINK)

What’s Next for Education Startups (LINK)

Recode Media with Peter Kafka: Harvard’s Susan Crawford on the importance of fiber internet (podcast) (LINK)
Related book: Fiber: The Coming Tech Revolution―and Why America Might Miss It
High-performance medicine: the convergence of human and artificial intelligence - by Eric J. Topol (LINK)

Edge #525: Judith Rich Harris: 1938 - 2018 (LINK)

Plants Can Hear Animals Using Their Flowers - by Ed Yong (LINK)

Thursday, January 10, 2019

NOVA: Apollo's Daring Mission

Apollo astronauts and engineers tell the inside story of Apollo 8, the first manned mission to the moon. The U.S. space program suffered a bitter setback when Apollo 1 ended in a deadly fire during a pre-launch run-through. In disarray, and threatened by the prospect of a Soviet Union victory in the space race, NASA decided upon a radical and risky change of plan: turn Apollo 8 from an earth-orbit mission into a daring sprint to the moon while relying on untried new technologies. Fifty years after the historic mission, the Apollo 8 astronauts and engineers recount the feats of engineering that paved the way to the moon.

Link to video


Related book: Rocket Men: The Daring Odyssey of Apollo 8 and the Astronauts Who Made Man's First Journey to the Moon