Friday, August 30, 2013

Nassim Taleb quotes

From Antifragile:
Remember from the logic of the barbell that it is necessary to first remove fragilities.

I have used all my life a wonderfully simple heuristic: charlatans are recognizable in that they will give you positive advice, and only positive advice, exploiting our gullibility and sucker-proneness for recipes that hit you in a flash as just obvious, then evaporate later as you forget them. Just look at the “how to” books with, in their title, “Ten Steps for—” (fill in: enrichment, weight loss, making friends, innovation, getting elected, building muscles, finding a husband, running an orphanage, etc.). Yet in practice it is the negative that’s used by the pros, those selected by evolution: chess grandmasters usually win by not losing; people become rich by not going bust (particularly when others do); religions are mostly about interdicts; the learning of life is about what to avoid. You reduce most of your personal risks of accident thanks to a small number of measures.

Further, being fooled by randomness is that in most circumstances fraught with a high degree of randomness, one cannot really tell if a successful person has skills, or if a person with skills will succeed—but we can pretty much predict the negative, that a person totally devoid of skills will eventually fail.

Now when it comes to knowledge, the same applies. The greatest—and most robust—contribution to knowledge consists in removing what we think is wrong—subtractive epistemology.

In life, antifragility is reached by not being a sucker.

Thursday, August 29, 2013

Summary of Albert Edwards' latest...

Via ValueWalk. And just in case readers haven't read them yet, SocGen put out collections of Albert Edwards' and James Montier's letters from 2008 a few years ago, and then also put out a collection of Dylan Grice's letters from 2009-2012. I think they are some of the best combinations of getting both a top-down and bottom-up picture of the 2007-2012 crisis period as it unfolded, and as it continues to unfold.


The Brazilian Billionaire Who Controls Your Beer, Your Condiments, and Your Whopper

Daniel Kahneman interview

Jared Diamond interview

If the embedded video doesn't play, try clicking on THIS link.

Jared Diamond from Nautilus on Vimeo.

Wednesday, August 28, 2013

Ruane, Cunniff & Goldfarb Investor Day Transcript (2013)

Found via The Corner of Berkshire & Fairfax.


Related previous posts:

Rob Arnott on CNBC



Related previous post: Mind the (Expectations) Gap: Demographic Trends and GDP – By Rob Arnott and Denis Chaves

Bill Gates: Innovation & Opportunity—The Contribution of Computing to Improving Our World (video)


Nassim Taleb quote

"Someone with a linear payoff needs to be right more than 50 percent of the time. Someone with a convex payoff, much less. The hidden benefit of antifragility is that you can guess worse than random and still end up outperforming. Here lies the power of optionality—your function of something is very convex, so you can be wrong and still do fine—the more uncertainty, the better. This explains my statement that you can be dumb and antifragile and still do very well."

-Nassim Taleb, Antifragile

Tuesday, August 27, 2013

Robert Shiller on CNBC: Risk of weakening housing market

Found via ValueWalk.


Revisiting “Moneyball” with Paul DePodesta

Bill Gates on His Foundation's Health and Education Campaigns

Why I spent 10th grade online - By Sophia Pink

Tim Harford: The man who gives geeks a good name


Monday, August 26, 2013

Stocks as overvalued now as at 2007 high - By Mark Hulbert

Great Moments in Hot Stock Tips - By Jason Zweig

Howard Marks interviewed by Hugo Scott-Gall

Via Zero Hedge:

The bottom line is that even though knowing financial history is important, requiring people to study it won’t make a big difference, because they'll ignore its lessons. There's a very strong tendency for people to believe in things which, if true, would make them rich. Demosthenes said, "For that a man wishes, he generally believes to be true" Just like in the movies, where they show a person in a dilemma to have an angel on one side and a devil on the other, in the case of investing, investors have prudence and memory on one shoulder and greed on the other. Most of the time greed wins. As long as human nature is part of the investment environment, which it always will be, we’ll experience bubbles and crashes.


Hugo Scott-Gall: What things in your skill set have served you well?

Howard Marks: While knowing financial analysis and accounting is essential, almost any smart person can acquire those skills and get a rough idea of the merits of a company. Superior investors are those who understand both fundamentals and markets and have a better sense for what a given set of merits is worth today and what it will be worth in the future. I don't think I became less able to do financial analysis over time, but I engaged much more in understanding and sensing markets and values: the “big picture”. A lot of my contribution comes from understanding history and investor behaviour, from inferring what's going on around me, and from controlling my emotions.

Hussman Weekly Market Comment: The Outlook Will Shift as Conditions Shift

Market conditions will change, not least because the belief in some “monetary put option” itself is superstition (see Following the Fed to 50% Flops), and not least because the Fed has announced – in what should be no uncertain terms – that it intends to taper this policy going forward. Moreover, despite the view that economic factors are the Fed's sole consideration and that small disappointments will cause the Fed to “flinch,” the members of the Federal Reserve Open Market Committee have become increasingly aware of the diminishing effectiveness and growing distortions resulting from QE. This is evident in recent speeches even by “dovish” members. The FOMC has also noted that “an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.”

Sunday, August 25, 2013

John Mauldin: France: On the Edge of the Periphery

Tim Harford: A lesson from the other ‘sage’ of investing

Friday, August 23, 2013

Warren Buffett on Financial Audits, Corporate Boards, and U.S. Business Regulation (2007)

Found via the Corner of Berkshire & Fairfax. It looks like there's two different panels and I haven't watched them yet, but along with Buffett, you have Hank Paulson, Jamie Dimon, John Thain, Jeff Immelt, Alan Greenspan, Paul Volcker, and Robert Rubin, among others....i.e. a bunch of people who would figure prominently in the financial crisis the following year.


Nassim Taleb quotes

From Antifragile:
Squeezes are exacerbated by size. When one is large, one becomes vulnerable to some errors, particularly horrendous squeezes. The squeezes become nonlinearly costlier as size increases. 
In spite of what is studied in business schools concerning “economies of scale,” size hurts you at times of stress; it is not a good idea to be large during difficult times. Some economists have been wondering why mergers of corporations do not appear to play out. The combined unit is now much larger, hence more powerful, and according to the theories of economies of scale, it should be more “efficient.” But the numbers show, at best, no gain from such increase in size—that was already true in 1978, when Richard Roll voiced the “hubris hypothesis,” finding it irrational for companies to engage in mergers given their poor historical record. Recent data, more than three decades later, still confirm both the poor record of mergers and the same hubris as managers seem to ignore the bad economic aspect of the transaction. There appears to be something about size that is harmful to corporations. 
As with the idea of having elephants as pets, squeezes are much, much more expensive (relative to size) for large corporations. The gains from size are visible but the risks are hidden, and some concealed risks seem to bring frailties into the companies. 
Large animals, such as elephants, boa constrictors, mammoths, and other animals of size tend to become rapidly extinct. Aside from the squeeze when resources are tight, there are mechanical considerations. Large animals are more fragile to shocks than small ones—again, stone and pebbles. Jared Diamond, always ahead of others, figured out such vulnerability in a paper called “Why Cats Have Nine Lives.” If you throw a cat or a mouse from an elevation of several times their height, they will typically manage to survive. Elephants, by comparison, break limbs very easily.

Daily Journal Tells SEC Munger Knows Best Buying Stocks


Thursday, August 22, 2013

Science Reveals Why Calorie Counts Are All Wrong

Grant's Interest Rate Observer: SummerBreak Issue

Naked Statistics - Stripping the Dread from the Data



Related book: Naked Statistics: Stripping the Dread from the Data - By Charles Wheelan



I think that it is also a mistake to assume that the ten-thousand-hour idea applies to every domain. For instance, Epstein uses as his main counterexample the high jumper Donald Thomas, who reached world-class level after no more than a few months of the most rudimentary practice. He then quotes academic papers making similar observations about other sports—like one that showed that people could make the Australian winter Olympic team in skeleton after no more than a few hundred practice runs. Skeleton, in case you are curious, is a sport in which a person pushes a sled as fast as she can along a track, jumps on, and then steers the sled down a hill. Some of the other domains that Epstein says do not fit the ten-thousand-hour model are darts, wrestling, and sprinting. “We’ve tested over ten thousand boys,” Epstein quotes one South African researcher as saying, “and I’ve never seen a boy who was slow become fast.”

As it happens, I have been a runner and a serious track-and-field fan my entire life, and I have never seen a boy who was slow become fast either. For that matter, I’ve never met someone who thinks a boy who was slow can become fast. Epstein has written a wonderful book. But I wonder if, in his zeal to stake out a provocative claim on this one matter, he has built himself a straw man. The point of Simon and Chase’s paper years ago was that cognitively complex activities take many years to master because they require that a very long list of situations and possibilities and scenarios be experienced and processed. There’s a reason the Beatles didn’t give us “The White Album” when they were teen-agers. And if the surgeon who wants to fuse your spinal cord did some newfangled online accelerated residency, you should probably tell him no. It does not invalidate the ten-thousand-hour principle, however, to point out that in instances where there are not a long list of situations and scenarios and possibilities to master—like jumping really high, running as fast as you can in a straight line, or directing a sharp object at a large, round piece of cork—expertise can be attained a whole lot more quickly. What Simon and Chase wrote forty years ago remains true today. In cognitively demanding fields, there are no naturals.


Related books:

Related previous posts:

Whitman, Diz on risk

Risk is a word that should not be used without an adjective in front of it. Just because a common stock might have a lot of market risk (i.e., a plunge in OPMI [Outside Passive Minority Investor] market price) and a company might have a lot of investment risk (i.e., the business is unlikely to survive as a going concern) does not mean that adequately secured lenders to the corporation are taking any credit risk at all. Creditors can be confident that the loan will remain a performing loan or that in a reorganization, they will receive a value of principal amount plus interest and interest on interest. General risk really does not exist.

Tuesday, August 20, 2013

Nassim Taleb quotes

From Antifragile:
Those recommending the nutritional policies fail to understand that “steadily” getting your calories and nutrients throughout the day, with “balanced” composition and metronomic regularity, does not necessarily have the same effect as consuming them unevenly or randomly, say by having a lot of proteins one day, fasting completely another, feasting the third, etc. 
This is a denial of hormesis, the slight stressor of episodic deprivation. For a long time, nobody even bothered to try to figure out whether variability in distribution—the second-order effect—mattered as much as long-term composition. Now research is starting to catch up to such a very, very simple point. It turns out that the effect of variability in food sources and the nonlinearity in the physiological response is central to biological systems. Consuming no protein at all on Monday and catching up on Wednesday seemingly causes a different—better—physiological response, possibly because the deprivation, as a stressor, activates some pathways that facilitate the subsequent absorption of the nutrients (or something similar). And, until a few recent (and disconnected) empirical studies, this convexity effect has been totally missed by science—though not by religions, ancestral heuristics, and traditions. And if scientists get some convexity effects (as we said about domain dependence, doctors, just like weight lifters, understand here and there nonlinearities in dose response), the notion of convexity effects itself appears to be completely missing from their language and methods. 
Health benefits are convex to speed (up to a point, of course).

The Canadian Model: Invented in South Dakota?

Found via Abnormal Returns. It looks like the South Dakota Annual Report is also available HERE.

Monday, August 19, 2013

Gene Breakthroughs Spark a Revolution in Cancer Treatment

Warren Buffett thanks BofA CEO Moynihan for $5.3 billion profit


The Most Successful People Practice Better, Not More

Thanks to Barry for passing this along.


Related previous post: What it takes to be great

Get 1GB Free Space By Linking Mailbox App With Dropbox

Via ValueWalk. I just did this and it only took a couple of minutes. Well worth the effort for an extra 1GB of free storage.

Hussman Weekly Market Comment: A Warning Regarding Broken Speculative Peaks

John Mauldin: Signs of the Top

Chapter 1 of "The Manual of Ideas" book

I spent a little time this weekend digging into John Mihaljevic’s new book, The Manual of Ideas: The Proven Framework for Finding the Best Value Investments. I think it is a great addition to the value investor’s library. But you can decide for yourself after reading Chapter 1, which is available from Wiley via the link below (the table of contents is also available HERE).

Saturday, August 17, 2013

Chris Martenson interviews Michael Pettis


Nassim Taleb quote

From Antifragile:
A Black Swan event and how it affects you—its impact on your finances, emotions, the destruction it will cause—are not the same “ting.” And the problem is deeply ingrained in standard reactions; the predictors’ reply when we point out their failures has typically been “we need better computation” in order to predict the event better and figure out the probabilities, instead of the vastly more effective “modify your exposure” and learn to get out of trouble, something religions and traditional heuristics have been better at enforcing than naive and cosmetic science.

Richard Fisher interview excerpts

Via ValueWalk:

“I argued that when I argued against this program so I am happy to see and they have one of the best research departments in the entire Federal Reserve system. The point is we’ve gone through this program, interest rates have been at historic lows, we’ve had a secular trend as well as this final crescendo, which was assisted by the Federal Reserve program. I think it certainly helped corporations clean up their balance sheets. I don’t think there’s any question about that. At the same time, there were some costs. Savers have been hit, small banks and other intermediate bank sizes have been hurt in terms of their interest rate margins. It has exacerbated that decline in interest rate margins that occurred over the last 20 years. So there are costs and benefits. Again, the benefits of QE3 and the efficacy of that program are constantly being analyzed and we’ll just see what the committee as a whole, because it is a committee of 19 people, decides under Chairman Bernanke’s leadership in September and in subsequent meetings.”

Interview with David Epstein: How Athletes Get Great


Related book: The Sports Gene

There is also a video interview, broken into a few clips, with Epstein on the book HERE.

For Jeff Bezos, a new frontier

Found via Abnormal Returns.