Friday, February 22, 2019

Semper Augustus Investments Group: 2018 Annual Letter

Chris always writes one of my favorite letters, and one of the few must-reads for me every year. And he's outdone himself this year. This is great to read in tandem with Warren Buffett's annual letter, which will be released in the morning. 


And if you want to review all of Chris' deep dives into Berkshire, I recommend his 2015 letter, followed by his 2016 interview with Kate Welling, then the 2016 letter, 2017 letter, and 2018 letter.


"It is true that in the packaged goods industry, volume trends for everybody — whether they’re fat or lean in their operation — volume trends are not good. And the test will be over time — you know, three, five years — are the operations which have had their costs cut, do they do poor, in terms of volume, than the ones, that in my judgment, look very fat?" --Warren Buffett (2016)

Howard Marks on Investing In Overpriced Markets (a video excerpt from his recent Real Vision interview) [H/T Linc] (LINK)

“She Never Looks Back”: Inside Elizabeth Holmes's Chilling Final Months at Theranos (LINK)

Warren Buffett Can’t Find Anything Big to Buy ($) (LINK)

Kraft Heinz Divulges SEC Investigation, Swings to Loss ($) (LINK)

Deutsche Bank Lost $1.6 Billion on a Bond Bet ($) (LINK)
One of the banking industry’s biggest soured bets since the financial crisis involved a complex municipal-bond investment. Warren Buffett was enmeshed in the deal.
A Blinders Off View Of The Automotive Sector - by Daniel Ruiz (LINK)

Brexit: The End of the Beginning - by Peter Zeihan (LINK)

Dalio's "The Big Debt Crisis"....the FSB Report & Financial War Games (LINK)

Different Kinds of Stupid - by Morgan Housel (LINK)

Edges That Won’t Go Away - by Ben Carlson (LINK)

Cultivating the State of Flow (LINK)

American Innovations Podcast: Coca-Cola | The Cocaine Clinician | 1 (LINK)

Freakonomics Radio: 368. Where Do Good Ideas Come From? (LINK)

Check out these amazing shots of the Anak Krakatoa caldera before and after its collapse in December 2018 (LINK)

The Surprising Reason Zebras Have Stripes - by Ed Yong (LINK)

Who’s the Cutest Little Tyrannosaur? Is It You? - by Ed Yong (LINK)

"Men do not fail commonly for want of knowledge, but for want of prudence to give wisdom the preference. What we need to know in any case is very simple." --Henry David Thoreau  [H/T Brain Pickings]

Thursday, February 21, 2019

Charlie Munger on cheerfulness

In the past Charlie Munger has called himself a "cheerful pessimist." And at the 2011 Berkshire Hathaway Annual Meeting, he mentioned that "you can be cheerful even if things are slightly deteriorating, and that’s a very good quality to have." Toward the end of his CNBC interview (28:19 mark) last week, he again brought up the importance of cheerfulness as one of his keys to living a happy life:
BECKY QUICK: Charlie, so many of the people who come here come because they're looking for advice not on business or investments as much as they're looking for just advice on life. There were a lot of questions today, people trying to figure out what the secret to life is, to a long and happy life. And--and I just wonder, if you were-- 
CHARLIE MUNGER: Now that is easy, because it's so simple. 
BECKY QUICK: What is it? 
CHARLIE MUNGER: You don't have a lot of envy. You don't have a lot of resentment, You don't overspend your income. You stay cheerful in spite of your troubles. You deal with reliable people and you do what you're supposed to do. And all these simple rules work so well to make your life better. And they're so trite. 
BECKY QUICK: How old were you when you figured this out? 
CHARLIE MUNGER: About seven. I could tell that some of my older people were a little bonkers. I've always been able to recognize that other people were a little bonkers. And it helped me because there's so much irrationality in the world. And I've been thinking about it for a long time, its causes and its preventions, and so forth. Sure it's helped me. 
And--staying cheerful...because it's a wise thing to do. Is that so hard? And can you be cheerful when you're absolutely mired in deep hatred and resentment? Of course you can't. So why would you take it on? 
BECKY QUICK: Is there any advice you would go back and give your 20-year-old self? 
CHARLIE MUNGER: Many of my children have worked out well. And I've had very little to do with it. I think they come into the world, to a certain extent, pre-made. And you just sit there and watch.... It's been simply amazing to me as a parent to note know much is sort of preordained. The shy baby is the shy adult. The booming, obnoxious, domineering baby is the booming, domineering, obnoxious adult. I've never found a way to fix that. I can be cheerful about it, but I can't fix it. I can change my reaction, but I can't change the outcome.


That last line, "I can change my reaction, but I can't change the outcome," is very Stoic, and reminded me of one of summaries I have in my Stoicism overview:
Only focus on what you can control. You cannot control what others say or how they act. You can only control how you react.

Wednesday, February 20, 2019


"Our double task is now to preserve and foster both biological evolution as Nature designed it and cultural evolution as we invented it, trying to achieve the benefits of both, and exercising a wise restraint to limit the damage when they come into conflict. With biological evolution, we should continue playing the risky game that nature taught us to play. With cultural evolution, we should use our unique gifts of language and art and science to understand each other, and finally achieve a human society that is manageable if not always peaceful, with wildlife that is endlessly creative if not always permanent." --Freeman Dyson

Biological and Cultural Evolution - An EDGE Original Essay by Freeman Dyson (LINK)

Mohnish Pabrai’s Q&A Session with JNV Kottayam Dakshana Scholars (video) (LINK)

An Evening with Ken Chenault (PBS video) [H/T Linc] (LINK)

The Greatest Investor You’ve Never Heard Of: An Optometrist Who Beat The Odds To Become A Billionaire (LINK) [Interesting article, but probably not the best title. Assuming the Forbes net worth estimate is about correct, and that losing $50 million in the early 80s margin call meant he had at least another $50 million in net worth, then the IRRs, especially considering the business income he was adding over time, are probably not worthy of the title "greatest investor" in the headline. But the lessons about buying and holding and buying what you know, especially in regards to Heico, are great.]

Graham & Doddsville: Winter 2019 (LINK)

Nobody Wants to Invest in Your Shit - by Meb Faber (LINK)

First Mover Alpha - by Ben Carlson (LINK)

The FT's articles on Wirecard are free to read online (LINK) [See also, from a year ago, Wirecard AG: The Great Indian Shareholder Robbery - by Roddy Boyd]

Your Guide to the Gold Rush of Digital Logistics (LINK)

Amazon and taxes: a simple primer (LINK)

The Distrust of Intellectual Authority (LINK)

Entrepreneurial Thought Leaders Podcast: Raj Kapoor (Lyft) and John Viera (Ford Motor Company) - Mobilizing the Future (LINK)

The Tony Robbins Podcast: Timing is everything | Daniel Pink on the best time for meetings, taking breaks and creative breakthroughs (LINK)
Related book: When: The Scientific Secrets of Perfect Timing
Dan Carlin's Hardcore History: Addendum: EP7 Hardcore History On Fire (LINK)

Is the Insect Apocalypse Really Upon Us? - by Ed Yong (LINK)
Claims that insects will disappear within a century are absurd, but the reality isn’t reassuring either.
Book of the day [H/T @paulg]: Making of Europe: Conquest, Colonization and Cultural Change 950-1350

Tuesday, February 19, 2019

Losing your competitive position...

From Warren Buffett, at the 2003 Berkshire Hathaway Annual Meeting
Generally speaking, if you lose your competitive position — the Packard Motor Company had the premier car in the mid-’30s. The Cadillac was not the premier — it was the Packard. 
And then they went downscale one year and they never came back. They jumped their sales that one year because everybody wanted to own a Packard, and now you could own one a little cheaper. But they never regained that upscale image again. 
And certain department stores have done that, too. They’ve had a upscale image. And you can always juice up your sales, particularly if you’ve got a great upscale image, by having, you know, this sale or that sale, and going downmarket.  
It’s very hard to back upmarket again, and you’ve seen some great department stores that have had that — or specialty stores — that had that problem. 

Monday, February 18, 2019


"Most people are going to get a very small real return from investment after considering inflation and taxes. I think that’s an iron law of the world and if, for a brief period, some of us do better than that, we ought to be very thankful. One of the great defenses to being worried about inflation is not having a lot of silly needs in your life. In other words, if you haven’t created a lot of artificial demand to drown in consumer goods, why, you have a considerable defense against the vicissitudes of life." --Charlie Munger (2004)

Martin Capital Management 2018 Annual Report (LINK)

Investors Get Burned After Betting on Electric-Car Metals (LINK)
Markets like stocks and oil have rebounded this year, but cobalt and lithium continue to fall
What Happens When Techno-Utopians Actually Run a Country [H/T @patrickc] (LINK)

The Tim Ferriss Show: Jim Collins — A Rare Interview with a Reclusive Polymath (LINK)

Grant’s Current Yield Podcast: Take 5 (LINK)

Barry Diller on the Recode Decode Podcast (LINK)

a16z Podcast: Who’s Down with CPG, DTC? (And Micro-Brands Too?) (LINK)

Healthy Eating and Intermittent Fasting - by Jana Vembunarayanan (LINK)

Opportunity lost... but more will arise - by Phil Plait (LINK)
On June 10, 2018, the people of Earth received their last transmission from the Opportunity rover of Mars. 
Now, 248 days later, scientists and engineers at NASA's Jet Propulsion Lab have had to make a hard decision: They have declared the rover dead. The mission is over.

Saturday, February 16, 2019

On the decline of civilizations...

A longer excerpt from the The Lessons of History on the decline of civilizations: 
When the group or a civilization declines, it is through no mystic limitation of a corporate life, but through the failure of its political or intellectual leaders to meet the challenges of change. 
The challenges may come from a dozen sources, and may by repetition or combination rise to a destructive intensity. Rainfall or oases may fail and leave the earth parched to sterility. The soil may be exhausted by incompetent husbandry or improvident usage. The replacement of free with slave labor may reduce the incentives to production, leaving lands untilled and cities unfed. A change in the instruments or routes of trade—as by the conquest of the ocean or the air—may leave old centers of civilization becalmed and decadent, like Pisa or Venice after 1492. Taxes may mount to the point of discouraging capital investment and productive stimulus. Foreign markets and materials may be lost to more enterprising competition; excess of imports over exports may drain precious metal from domestic reserves. The concentration of wealth may disrupt the nation in class or race war. The concentration of population and poverty in great cities may compel a government to choose between enfeebling the economy with a dole and running the risk of riot and revolution. 
Since inequality grows in an expanding economy, a society may find itself divided between a cultured minority and a majority of men and women too unfortunate by nature or circumstance to inherit or develop standards of excellence and taste. As this majority grows it acts as a cultural drag upon the minority; its ways of speech, dress, recreation, feeling, judgment, and thought spread upward, and internal barbarization by the majority is part of the price that the minority pays for its control of educational and economic opportunity. 
As education spreads, theologies lose credence, and receive an external conformity without influence upon conduct or hope. Life and ideas become increasingly secular, ignoring supernatural explanations and fears. The moral code loses aura and force as its human origin is revealed, and as divine surveillance and sanctions are removed. In ancient Greece the philosophers destroyed the old faith among the educated classes; in many nations of modern Europe the philosophers achieved similar results. Protagoras became Voltaire, Diogenes Rousseau, Democritus Hobbes, Plato Kant, Thrasymachus Nietzsche, Aristotle Spencer, Epicurus Diderot. In antiquity and modernity alike, analytical thought dissolved the religion that had buttressed the moral code. New religions came, but they were divorced from the ruling classes, and gave no service to the state. An age of weary skepticism and epicureanism followed the triumph of rationalism over mythology in the last century before Christianity, and follows a similar victory today in the first century after Christianity.
Caught in the relaxing interval between one moral code and the next, an unmoored generation surrenders itself to luxury, corruption, and a restless disorder of family and morals, in all but a remnant clinging desperately to old restraints and ways. Few souls feel any longer that "it is beautiful and honorable to die for one's country." A failure of leadership may allow a state to weaken itself with internal strife. At the end of the process a decisive defeat in war may bring a final blow, or barbarian invasion from without may combine with barbarism welling up from within to bring the civilization to a close. 
Is this a depressing picture? Not quite. Life has no inherent claim to eternity, whether in individuals or in states. Death is natural, and if it comes in due time it is forgivable and useful, and the mature mind will take no offense from its coming. But do civilizations die? Again, not quite. Greek civilization is not really dead; only its frame is gone and its habitat has changed and spread; it survives in the memory of the race, and in such abundance that no one life, however full and long, could absorb it all. Homer has more readers now than in his own day and land. The Greek poets and philosophers are in every library and college; at this moment Plato is being studied by a hundred thousand discoverers of the "dear delight" of philosophy overspreading life with understanding thought. This selective survival of creative minds is the most real and beneficent of immortalities. 
Nations die. Old regions grow arid, or suffer other change. Resilient man picks up his tools and his arts, and moves on, taking his memories with him. If education has deepened and broadened those memories, civilization migrates with him, and builds somewhere another home. In the new land he need not begin entirely anew, nor make his way without friendly aid; communication and transport bind him, as in a nourishing placenta, with his mother country. Rome imported Greek civilization and transmitted it to Western Europe; America profited from European civilization and prepares to pass it on, with a technique of transmission never equaled before. 
Civilizations are the generations of the racial soul. As life overrides death with reproduction, so an aging culture hands its patrimony down to its heirs across the years and the seas. Even as these lines are being written, commerce and print, wires and waves and invisible Mercuries of the air are binding nations and civilizations together, preserving for all what each has given to the heritage of mankind. 

Friday, February 15, 2019


"If we put the problem further back, and ask what determines whether a challenge will or will not be met, the answer is that this depends upon the presence or absence of initiative and of creative individuals with clarity of mind and energy of will (which is almost a definition of genius), capable of effective responses to new situations (which is almost a definition of intelligence). If we ask what makes a creative individual, we are thrown back from history to psychology and biology—to the influence of environment and the gamble and secret of the chromosomes." --Will and Ariel Durant (The Lessons of History)

A lesson for the Democratic left from Adam Smith - by Roger Lowenstein (LINK)

Amazon’s Pullout From Queens, N.Y., Stuns Real-Estate Industry (LINK)

When Investing on Auto-Pilot Isn’t Enough - by Jason Zweig ($) (LINK)

Rocket Ships - by Ian Cassel (LINK)

The final installment (Part 4) of the Money Control interview with Sanjay Bakshi (LINK) [PDF of Parts 1-4]

Managing Technological Innovation: Industry Analysis (LINK)

Exponent Podcast: Publishers vs Apple News (LINK)

Brex Founder Henrique Dubugras on The Twenty Minute VC Podcast [H/T @anuhariharan] (LINK)

American Innovations Podcast: Making Decisions with Malcolm Gladwell (LINK)

Edge #529: Alzheimer's Prevention - A Conversation with Lisa Mosconi (LINK)

TED Talk: The age of genetic wonder | Juan Enriquez (LINK)

Strategies for Seizing the Day - by Ryan Holiday (LINK)

A Kindle Daily Deal today ($1.99) is a book I've heard several people recommend: Shadow Divers: The True Adventure of Two Americans Who Risked Everything to Solve One of the Last Mysteries of World War II 

Full Charlie Munger CNBC interview

CNBC’s Becky Quick sits down with legendary Berkshire Hathaway Vice Chairman Charlie Munger for a one-on-one conversation after the Daily Journal Annual Meeting in Los Angeles. 

Link to video

Link to transcript