Monday, September 30, 2013

TED Talk - Malcolm Gladwell: The unheard story of David and Goliath



Horizon Kinetics September 2013 Commentary - Liquidations

As Jeff Bezos prepares to take over, a look at forces that shaped The Washington Post sale

Thanks to Lincoln for passing this along. The April 2013 interview with Graham is available HERE.

A stronger network, with more capacity: How BNSF is leveraging a record $4.3 billion in capital investment

Thanks to Lincoln for passing this along.

Matthew McLennan on WealthTrack (video)

Hussman Weekly Market Comment: Sitting Ducks

How Many Fools Does It Take to Make a Bubble? – By Jason Zweig

Friday, September 27, 2013

Nassim Taleb quote

"If there is something in nature you don’t understand, odds are it makes sense in a deeper way that is beyond your understanding. So there is a logic to natural things that is much superior to our own. Just as there is a dichotomy in law: innocent until proven guilty as opposed to guilty until proven innocent, let me express my rule as follows: what Mother Nature does is rigorous until proven otherwise; what humans and science do is flawed until proven otherwise." -Nassim Taleb, Antifragile 

Jim Grant on The Daily Ticker

Charlie Munger Speech at USC - May 2007

Just in case any readers haven’t watched or read this speech in a while. This speech is also in the third edition of Poor Charlie’s Almanack, and I took some notes on it when I first watched it HERE.

Links to videos:

Q&A with Bill Gates

Thanks to Alex for passing this along.


Thursday, September 26, 2013

Seize the ACA: The Innovator’s Guide to the Affordable Care Act – by Ben Wanamaker and Devin Bean

Why We Should Choose Science over Beliefs – By Michael Shermer

Found via The Big Picture.


The article above reminded me of some quotes:

“Nothing is easier than self-deceit. For what every man wishes, that he also believes to be true.” –Demosthenes

“Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof.” –John Kenneth Galbraith

“We work really hard never to get confused with what we know from what we think or hope or wish.” –Seth Klarman

"So convenient a thing it is to be a reasonable creature, since it enables one to find or make a reason for everything one has a mind to do." –Ben Franklin

Nate Silver on Finding a Mentor, Teaching Yourself Statistics, and Not Settling in Your Career

Found via The Big Picture.

Mark Spitznagel articles

Thanks to Jim for passing these along.


Wednesday, September 25, 2013

Notes from the Pabrai Funds Chicago Annual Meeting

Nassim Taleb quote

"Subtractive knowledge is a form of barbell. Critically, it is convex. What is wrong is quite robust, what you don’t know is fragile and speculative, but you do not take it seriously so you make sure it does not harm you in case it turns out to be false." -Nassim Taleb, Antifragile

Chanos, O'Neill on Chinese Economy and Real Estate (video)

Found via ValueWalk.

Monday, September 23, 2013

Billionaires? Try Well-Grounded Heirs

A big thanks to George for passing this along. 

How do those who have achieved great financial success avoid raising spoiled brats? Members of three of America's greatest business families -- the Buffetts, the Pritzkers and the Carlsons -- show the way.


Moonwalking with Einstein

Chris over at The View from the Blue Ridge posted a great excerpt from the book Moonwalking with Einstein, which is pasted below. That book may have been the most useful one I've read over the past couple of years from an investing standpoint, as I've used what I learned from it to help me improve my filtering process when it comes to looking at investment ideas….a process that continues to evolve and (hopefully) improve.
In our gross misunderstanding of the function of memory, we thought that memory was operated primarily by rote. In other words, you rammed it in until your head was stuffed with facts. What was not realized is that memory is primarily an imaginative process. In fact, learning, memory, creativity are the same fundamental process directed with a different focus. The art and science of memory is about developing the capacity to quickly create images that link disparate ideas. Creativity is the ability to form similar connections between disparate images and to create something new and hurl it into the future. Creativity, is in a sense, future memory. 
If the essence of creativity is linking disparate facts and ideas, then the more facility you have making associations, and the more facts and ideas you have at your disposal, the better you’ll be at coming up with new ideas. 
The notion that memory and creativity are two sides of the same coin sounds counterintuitive.  Remembering and creativity seem like opposite, not complementary, processes. But the idea that they are one and the same is actually quite old, and was once even taken for granted. The Latin root inventio is the basis of two words in our modern English vocabulary: inventory and invention. And to a mind trained in the art of memory, those two ideas were closely linked. Invention was a product of inventorying. In order to invent, one first needed a proper inventory, a bank of existing ideas to draw on. Not just an inventory, but an indexed inventory. 
This is what the art of memory was ultimately most useful for. It was not merely a tool for recording but also a tool of invention and composition. The realization that composing depended on a well-furnished and securely available memory formed the basis of rhetorical education in antiquity. Brains were as organized as modern filing cabinets, with important facts, quotations and ideas stuffed into neat mnemonic cubbyholes, where they would never go missing, and where they could be recombined and strung together on the fly. The goal of training one’s memory was to develop the capacity to leap from topic to topic and make new connections between old ideas.

Related previous posts:

David Epstein on EconTalk


Related books:

Related previous posts:

WSJ: Our Chat With Jeremy Grantham

Found via The Big Picture.

How The Economic Machine Works In 30 Minutes - by Ray Dalio



Chris Martenson interviews Jim Rickards


Alpha Hedge West Conference Notes

Via Market Folly:

Hussman Weekly Market Comment: Psychological Ether

Friday, September 20, 2013

Garrett Hardin quote

For all but the last few hundred years of human history the dominant worldview was a limited view: resources were limited, human nature was fixed, and spending beyond one’s income was a sin. This essentially conservative perception prevailed until about 1600. Then science and technology shook the foundations. One presumed limit after another was shown to be, in part, false.
The “Don’t worry” theories of population control amount to a reaffirmation of the religious idea of Providence. Professional publicists know there is always a good living to be made by catering to the public’s craving for optimistic reports. Such behavior finds no justification in the attitude of the Buddha, expressed five centuries before Christ: “I teach only two things: the cause of human sorrow and the way to become free of it.” The present work, though written by a non-Buddhist, proceeds along the Buddhist path—first to reveal the causes of human sorrow in population matters and then to uncover promising ways to free ourselves of the sorrow.
Hearing the Buddha’s statement today many people think, “How depressing! Why accept such a pessimistic outlook on life?” But they are wrong: it is not a pessimistic view if we reword it in terms that are more familiar to our science-based society. Reworded: “Here’s something that isn’t working right. I want to fix it, but before I can do that I have to know exactly why it doesn’t work right.” One who looks for causes before seeking remedies should not be condemned as a pessimist. In general, a great deal of looking for causes must precede the finding of remedies.

The Problems with a Growing Population


Related site:

Related previous posts:

Miguel Barbosa’s Interview with Albert Bartlett

Arithmetic, Population, & Energy and The Crash Course 

Video: Arithmetic, Population and Energy - FULL LENGTH 

Video: Al Bartlett Interview

Warren Buffett and Brian Moynihan on CNBC


Warren Buffett, Brian Moynihan Speak at Georgetown


Wednesday, September 18, 2013

Jim Chanos quote

From his appearance on Bloomberg yesterday:
"My view is, just as an analyst, that any business that is predicated on selling overpriced products to consumers and/or distributors is ultimately a flawed business model."
The comment was in response to a question on Herbalife, but it is applicable across the board. When there is a desire for a certain product or service, the companies that can meet that demand with the right combination(s) of quality and price should win in the end. This is probably as applicable to “nutritional” beverages as it is with higher education, insurance, retail, etc. It can often be hard to tell who the winners will be, as the people running the business can have a huge impact on that outcome; like when you have fanatics like Sam Walton, Les Schwab, Rose Blumkin, or Jeff Bezos, for example, entering difficult, competitive businesses and succeeding. But it is easier to tell who the losers will probably be, which I think gets a bit to Nassim Taleb’s idea that it is easier to detect fragility than to estimate the probability of success. Figuring out the timing of when the fragile break or the flawed business model fails, however, is the tricky part (i.e. Keynes' comment about the market staying irrational longer than you can stay solvent.)

Companies Unplug From the Electric Grid, Delivering a Jolt to Utilities

Thanks to Matt for passing this along.

What’s Happening to Bonds and Why? – By Mohamed A. El-Erian

Value Investing Congress Notes: New York 2013

From Market Folly:

Tuesday, September 17, 2013

Be Foxy - by Jana Vembunarayanan

A great post on the fox/hedgehog dynamic.

Link to: Be Foxy

Jim Chanos on Bloomberg (video)

Quote about George Soros...

I thought the quote below was a great thought, and really distinguishes the difference between the investing styles of someone like Warren Buffett and someone like George Soros, both of whom were wildly successful doing it their own way. This is from the book More Money Than God: Hedge Funds and the Making of a New Elite:

“Soros saw no point in knowing everything about a few stocks in the hope of anticipating small moves; the game was to know a little about a lot of things, so that you could spot the places where the big wave might be coming.”

Inside Dropbox’s Quest to Bury the Hard Drive

If you haven’t tried Dropbox yet but would like to, my referral link (for free extra storage) is HERE. Thanks.

Drew Houston, the 30-year-old CEO and cofounder of Dropbox, is supposed to be having his Steve Jobs moment. In an auditorium packed with elite coders and Silicon Valley insiders in July, Houston is debuting new features he says will transform Dropbox into the mobile era’s answer to the hard drive. This is DBX, the company’s first developers conference. It’s Houston’s bid to convince the software industry to buy into his grand vision—and the Wi-Fi isn’t working. The demo team is trying to show off a digital drawing app that allows you to sketch on your iPad in, say, San Francisco and have the sketch appear simultaneously on a colleague’s device anywhere in the world. It was meant to be the centerpiece of Houston’s pitch for his ambitious new strategy. Dropbox is known for its supremely useful cloud storage service, which lets you drop files into a folder that can be accessed from any computer. But going forward, the company wants to power a new breed of syncable apps that would let you share any kind of data with anyone across any device. In theory it’s an epic shift that would put Dropbox at the center of everyone’s digital life, turning it into a powerhouse on the level of Facebook, Google, Amazon, and Apple. But it’s hard to see that when the demo doesn’t work. After an awkward moment, Houston returns to center stage. But if the glitch has rattled him, he doesn’t show it. “You’d think that I would be sad about what just happened,” Houston tells the audience. “Actually this is a really good omen.” He explains that the Wi-Fi also failed when he was onstage launching the original Dropbox in September 2008. Back then he was trying to sell the world on just how wonderful and simple his new magic folder was. Instead, nothing happened. But in the five years since, it’s clear: “Things worked out.” Indeed. In little more than half a decade, Dropbox has grown from a few lines of code banged out in a bus station to a go-to service with 200 million users saving more than a billion files every day. So there’s reason to believe it can pull of its plan to become what the company calls the “pervasive data layer.” In this vision, Dropbox acts as a kind of virtual infrastructure that lets you access all your digital stuff whenever, wherever—via tablet or PC, iOS or Android. Leave off playing Angry Birds on your phone and pick up the game at the same spot on your iPad or your television or the touchscreen in your car. Devices become dumb windows for accessing the information—your information—in Dropbox’s cloud. That’s where your stuff lives. And you’ll pay Dropbox for more space because you will want to put more stuff there.

Tad Montross’ Presentation at RVS on Tail Risk

A big thanks to the reader who was kind enough to pass this along. Other presentations from this year are available HERE, and from previous years HERE.

Berkshire Billionaire Found With More Shares Than Gates

Thanks to Matt for passing this along.

Broyhill Asset Management: Muni Diaries


UPDATE: The Turnkey Analyst blog posted a list of closed-end muni funds trading at discounts to NAV, HERE.

Monday, September 16, 2013

Live from the Bakken: A year in America's oil patch

A friend of a friend decided to head to the Bakken and blog about his experiences there. It should be very interesting to follow.

Link to blog: Live from the Bakken

On the Origin of Celebrity – By Robert Sapolsky

A big thanks Kjetil for passing this along.

Learning from Superinvestors: The Wisdom of Tom Russo

Hussman Weekly Market Comment: Baby Steps

Why the Dow—Quirks and All—Is Beating the S&P 500 – By Jason Zweig

Ray Dalio Interview with the Academy of Achievement (October 2012)

A big thanks to Remmelt for passing this along. [Update: And another big thanks to Jean-Pierre for passing the iTunes link to this along, HERE.]


You've spoken about individuals who shape the world we live in and the particular qualities they share. What is the process these people, "the shapers," go through that perhaps the rest of us do not? 
Ray Dalio: I think for everybody, in order to be successful, there are five steps that you go through essentially. But everybody has their goals. What is their goal and passion? So you have goals. And then what happens is you're going after your goals and you encounter your problems. So encountering problems, and then the big difference between people is how they approach those problems. People who get bummed out by the problems don't learn from it. Who learns from them? So those who recognized the problems are excited that they get into those problems or mistakes. Mistakes are learning experiences. The pain that comes for that mistake, every time you have pain it's an indication that something is at odds. So the people who have the pain are the people then who will go into that and realize that if they solve that pain, solve that problem, understand what that is representative of -- not just the one problem -- but that problem is a certain type of problem that will happen over and over and over again in your life, and if you can solve, "How do I deal with that kind of problem?" The third thing that everybody needs to do is, if they have problems on the way to their goals, that they diagnose those problems and they get to the root cause -- the real root cause. The real root is often -- is typically -- what people are like. Can you go to what you're like? Can you go to your mistakes? Can you go to your weaknesses? Right. Can you go to other people's mistakes and weakness? Some people, because of ego barrier, can't do that, so if they don't recognize their own mistakes, their own weaknesses, or other's mistakes and weaknesses -- what the root cause may be and what they're like because of ego barriers -- if they can't go there, they're going to repeat those mistakes. They're going to have them over and over again. So it's the process essentially of saying, at that stage, "What am I like?" Everybody has strengths and everybody has weaknesses. The weaknesses are the other side of the strengths. So let's say if you're a right brain/creative person, you may not be reliable. Because just the way you think necessitates you to think a certain way, that means you can't think in another way. That means you're going to keep bumping into that thing that's standing in your way. But unless you can embrace, "I'm not reliable," right, and deal with it, you won't get around it. It's still going to continue to be a barrier. Right. So the diagnosis to the root cause is important. So then if you diagnose, then you have to design what you are going to do about it that works. So let's say you are very creative but not reliable. Okay, you have to find the means of first of all embracing that, and then saying, "If I'm not reliable, what do I? Do I work with a reliable person? Do I learn reliability? Do I have some compensating mechanism?" Because I can't let that lack of reliability stand in the way of my goal. As long as I keep doing that I'm going to keep running into problems. 
So you have to design what you do about the problems. And then when you're designing what to do about the problems, you have to follow it through. You have to follow through, or do the thing you design. Doing the thing you design requires self-discipline and so on. People have to do those things in order to be successful. Right. They have to know what their goals are. They have to diagnose their problems down to the root cause, the real root cause. They have to design ways to get around them, and then they have to have the self-discipline to follow that. It's a continuous iterative process. So that's what we keep doing. I would say that all of the shapers are doing that. So they don't mind the problems. That's their adventure. A wonderful book is Einstein's Mistakes. You hear his struggles. He wouldn't have been cutting-edge, he wouldn't have been inventive if he didn't go through that. So when you're looking at the personality characteristics, the personality characteristics lend themselves to doing that five-step process well. 

In his book The Outliers, Malcolm Gladwell says it takes something like 10,000 hours of working at something to become remarkable, to become extraordinary. I think you're also describing a person who is very driven, who has great tenacity and doesn't let things get in the way of the goal. 
Ray Dalio: Yes, of course. It's an element, but...It's the mixture of the elements that matter. You could have a tremendous tenacity, but you're studying, you're learning, you're trying to memorize and remember everything that you're being taught and you're really trying hard. You could have great tenacity. You need the making sense of something, you need to embrace reality. You need these other dimensions. Right. So I think the things that we started to talk about just before, the things that these people have a need for is: First, they need to -- most fundamentally - make sense of things, which is a very different kind of learning process. It's a very internalized learning process. It's not a memory-based process. So none of these people -- unlike the population as a whole -- none of these people have a desire to follow instructions.