Thursday, June 30, 2016


Will Brexit Spark a Much-Needed Market Revaluation? - by Steven Romick (LINK)

Education Department Forgives $171 Million in Debt Owed by Former Corinthian Students [H/T Will] (LINK)

Prime Real Estate: Amazon Has Swallowed Downtown Seattle (LINK)

Google Capital Makes First Public Company Investment in (LINK)

a16z Podcast: When Humans Meet A.I. (LINK)

Book Review - Clara Ho Tung : A Hong Kong Lady, Her Family and Her Times [H/T Tamas] (LINK)
Related book: Clara Ho Tung : A Hong Kong Lady, Her Family and Her Times
The third episode ("The Big Man Can't Shoot") of Malcolm Gladwell's Revisionist History podcast is now available (LINK)

The man who just can't win: Sam Hinkie (finally) speaks (LINK)

Edge #471: Why We're Different - A Conversation With Robert Plomin (LINK)

Using the Most Violent Explosions in the Universe to Measure Its Size (LINK)

Excitement Builds for the Possibility of Life on Enceladus (LINK)

TED Talk - Julia Galef: Why you think you're right — even if you're wrong (LINK)


The above TED Talk reminded me of Charlie Munger's discussion of the Inconsistency-Avoidance Tendency from his "The Psychology of Human Misjudgment Speech" (via Poor Charlie's Almanack). Part of of that discussion is excerpted below:
The brain of man conserves programming space by being reluctant to change, which is a form of inconsistency avoidance. We see this in all human habits, constructive and destructive. Few people can list a lot of bad habits that they have eliminated, and some people cannot identify even one of these. Instead, practically everyone has a great many bad habits he has long maintained despite their being known as bad. Given this situation, it is not too much in many cases to appraise early-formed habits as destiny. When Marley’s miserable ghost says, “I wear the chains I forged in life,” he is talking about chains of habit that were too light to be felt before they became too strong to be broken. 
The rare life that is wisely lived has in it many good habits maintained and many bad habits avoided or cured. And the great rule that helps here is again from Franklin’s Poor Richard’s Almanack: “An ounce of prevention is worth a pound of cure.” What Franklin is here indicating, in part, is that Inconsistency-Avoidance Tendency makes it much easier to prevent a habit than to change it. 
Also tending to be maintained in place by the anti-change tendency of the brain are one’s previous conclusions, human loyalties, reputational identity, commitments, accepted role in a civilization, etc. It is not entirely clear why evolution would program into man’s brain an anti-change mode alongside his tendency to quickly remove doubt. My guess is the anti-change mode was significantly caused by a combination of the following factors: 
(1) It facilitated faster decisions when speed of decision was an important contribution to the survival of nonhuman ancestors that were prey. 
(2) It facilitated the survival advantage that our ancestors gained by cooperating in groups, which would have been more difficult to do if everyone was always changing responses. 
(3) It was the best form of solution that evolution could get to in the limited number of generations between the start of literacy and today’s complex modern life. 
It is easy to see that a quickly reached conclusion, triggered by Doubt-Avoidance Tendency, when combined with a tendency to resist any change in that conclusion, will naturally cause a lot of errors in cognition for modem man. And so it observably works out. We all deal much with others whom we correctly diagnose as imprisoned in poor conclusions that are maintained by mental habits they formed early and will carry to their graves. 
So great is the bad-decision problem caused by Inconsistency-Avoidance Tendency that our courts have adopted important strategies against it. For instance, before making decisions, judges and juries are required to hear long and skillful presentations of evidence and argument from the side they will not naturally favor, given their ideas in place. And this helps prevent considerable bad thinking from “first conclusion bias.” Similarly, other modern decision makers will often force groups to consider skillful counter arguments before making decisions. 
And proper education is one long exercise in augmentation of high cognition so that our wisdom becomes strong enough to destroy wrong thinking, maintained by resistance to change. As Lord Keynes pointed out about his exalted intellectual group at one of the greatest universities in the world, it was not the intrinsic difficulty of new ideas that prevented their acceptance. Instead, the new ideas were not accepted because they were inconsistent with old ideas in place. What Keynes was reporting is that, the human mind works a lot like the human egg. When one sperm gets into a human egg, there’s an automatic shut-off device that bars any other sperm from getting in. The human mind tends strongly toward the same sort of result. 
And so, people tend to accumulate large mental holdings of fixed conclusions and attitudes that are not often reexamined or changed, even though there is plenty of good evidence that they are wrong.

Wednesday, June 29, 2016


Interview with Warren Buffett's investment manager Ted Weschler: The recipe for financial success (LINK)
Investing is kind of a game of connecting the dots. The nice thing about it is the longer you are in the business, as long as you are intellectually curious, your collection of data points of dots gets bigger and bigger. That is where someone like Warren is just incredible. He has had a passion for investing for well over 70 years. He started by the age of 10 or 12. He keeps building that library of data, the ability to recognize patterns in data. Being a successful investor you need to be hungry, intellectually curious, interested, read all the time. Read a lot of newspapers. You need a certain level of randomness in order to connect things that might give you an insight into where a business is going in five years that somebody else might not see. 
When it comes to wholly owned businesses among other factors it is about pricing power. You have something that is so attractive to the consumer that they pay a premium to walk into your store and do something. There is a number of attributes like that. But you can never just point to one thing. It is a mosaic of all sort of different things. If then you read the book of a business you can pretty quickly find out if that is a good business or not. 
I am a big fan of newspapers. I read at least one or two in paper form, the other ones on my iPad. We own a lot of newspaper at Berkshire Hathaway. I am always intrigued by who is doing what in the online business. Because everybody is coming up with presenting things in a better format. I read at least five newspapers a day. 
...I have a tradition. I always start each day with reading the local paper of the town I wake up in. Then next one would be USA Today. That gets you a general feeling for the Zeitgeist. They package the news for the entire population. From an investing standpoint it is relevant to understand what everybody is thinking. Then I generally move up to the New York Times, then the Wall Street Journal and then I end with the Financial Times. And actually I recently just started reading the Handelsblatt global edition.
Economic implications of Brexit - by Ben Bernanke (LINK)

Paul Krugman with Gillian Tett at the 92nd Street Y [This was from a couple of months ago, so pre-Brexit, but Brexit gets discussed after China.] (video) (LINK) [China discussion around the 25:40 mark... "China looks ready to have a possibly scary bust. China is having a capital flight now...Last year it was a trillion dollars...China is a bomb ready to go off."]

Andy Andres: "Sabermetrics 101: Introduction to Baseball Analytics" | Talks at Google (video) (LINK)

Brain Pickings: Schopenhauer on What Makes a Genius and the Crucial Difference Between Talent and Genius (LINK)
Related books: The World as Will and Representation, Vol. 1The World as Will and Representation, Vol. 2  [I also highly recommend Schopenhauer's The Wisdom of Life.]
100 Million Years of Decorating Yourself In Junk (LINK)

Book of the day: Do Humankind's Best Days Lie Ahead?: The Munk Debates
In the seventeenth semi-annual Munk Debates, which was held in Toronto on November 6, 2015, pioneering cognitive scientist Steven Pinker and bestselling author Matt Ridley squared off against noted philosopher Alain de Botton and bestselling author Malcolm Gladwell to debate whether humankind’s best days lie ahead.

Tuesday, June 28, 2016


Why Do Most Acquisitions by Microcaps Destroy Shareholder Value? - by Ian Cassel (LINK)

[I don't have any position in Subsea 7 at the current time, but I like it when companies put out videos like this that help one to understand the business a little better.] .... Projects – Premier Oil Catcher Area Development – North Sea (LINK)

BoE injects £3.1bn of liquidity into banks after Brexit (LINK)
The Bank of England has pumped £3.1bn into the country’s banking system following the UK’s decision to leave the EU. 
The liquidity injection is the last of the central bank’s three scheduled special auctions announced before the UK referendum and designed to quell any panic about the state of the country’s lenders. 
It is the first operation that has taken place since the UK voted to leave the EU on June 23. The BoE allotted £3.072bn to lenders, having received bids amounting to £6.3bn. Most of the collateral offered was the lowest ‘Level C ‘ grade assets, according to the Bank’s data.
Raoul Pal and Grant William discuss Brexit (video) (LINK)

The Brexit Possibility - by Ben Thompson (LINK)

How do you make the Olympics pay? Fudge the figures (LINK)

Stealthy Black Hole Spotted by Accident (LINK)

This book was hard to find for a while, but now it appears there are quite a few cheap used copies available for those that missed it before: Sense and Nonsense in Corporate Finance

This was released yesterday, and after a quick flip through my copy, it looks like it'll be an interesting book for those that like to dig into the details of accounting: The End of Accounting and the Path Forward for Investors and Managers

Monday, June 27, 2016


On an investment note, if you're looking to be greedy when others are getting a little fearful in the U.K. micro-cap land, valuations and volumes in some nicely positioned small companies are back at attractive levels. I can't discuss much here at the current time given that we are active in the space at Boyles, but just wanted to point it out as an area of potential opportunity for those interested.

Farnam Street: Why Are No Two People Alike? (Part 2) (LINK)
Related book: No Two Alike
Fluent Innovation: Using Behavioural Science to Make Your Next Big Idea a Success (video) (LINK)

Quantum Computing: A Primer (video) (LINK)

When You Dial 911 and Wall Street Answers [H/T @koster13] (LINK)

Hussman Weekly Market Comment: Brexit and the Bubble in Search of A Pin (LINK)
First things first. While the full attention of financial market participants is focused on “Brexit” - last week’s British referendum to exit the European Union - the singular factor to recognize here is that the vulnerability of the financial markets to steep losses has very little to do with Brexit per se. Rather, years of yield-seeking speculation, encouraged by central banks, had already brought the financial markets to a precipice prior to last week’s vote. It’s not entirely clear whether Brexit is a sufficient catalyst to burst the bubble, as we recall that the failure of Bear Stearns in early-2008 was followed by a period of calm before the crisis was sealed by Lehman's failure, and numerous dot-com stocks had already been obliterated by September 2000, when the tech bubble began its collapse in earnest. We’ll take the evidence as it comes, but we’re certainly defensive at present, for reasons that have little to do with Brexit at all.

Sunday, June 26, 2016


If you haven't listened to it yet, Malcolm Gladwell gave some interesting thoughts on what he thinks a college education and experience should entail in his chat with Tim Ferriss, starting at the 57:27 mark in the audio HERE. He also recommended a couple of books; one that appears to be out of print, Merchant Princes, and another, Strangers to Ourselves, that has also been recommended by Nassim Taleb and Danny Kahneman.

After Fleeing the Nazis, a Legacy That Won’t Run Dry [H/T @jasonzweigwsj] (LINK)
The frugal couple bumped into young Warren Buffett. Now they’ve left millions to Israeli water research.
Warren Buffett - Opinion on Brexit and EU [from early May] [H/T @HurriCap] (video) (LINK)

Steve Keen on the Macro Voices podcast (LINK) [The podcast also seems to have some of the older Real Vision TV interviews, such as Kyle Bass interviewing John Burbank, as one example. More available HERE.]

BIS 86th Annual Report (LINK)
There is an urgent need to rebalance policy in order to shift to a more robust and sustainable global expansion and address accumulated vulnerabilities, the BIS writes in its main economic review of the year. It calls for prudential, fiscal and structural policies to play a greater role.
Puerto Rico Governor suspends payments on infrastructure debt [H/T @BarbarianCap] (LINK)

Craft Brewers Go High-Tech [H/T Abnormal Returns] (LINK)

Interview with Disney CEO Bob Iger [H/T @Kevin_Holloway] (LINK)

Interview with outgoing Illumina CEO Jay Flatley [H/T @EricTopol] (LINK)

A Portrait of the Overperforming Salesperson [H/T @RobertCialdini] (LINK)

What Old Monkeys and Old Humans Have in Common [H/T @TheLeakeyFndtn] (LINK)

Friday, June 24, 2016


Howard Marks on Bloomberg talking Brexit (video) (LINK)

James Grant on CNBC talking Brexit (video) (LINK)

Do the Experts Know Anything? - by Justin Fox (LINK)

As Jason Zweig said on Twitter "Love him or hate him, fascinating interview with Pres. Obama"....The ‘Anti-Business’ President Who’s Been Good for Business (LINK)

Words of Wisdom and Advice for Aspiring Value Investors (LINK)

ValueWalk's Interview with Cook & Bynum Capital (Part 1) (LINK)

Exponent podcast: Episode 084 — A New World Order (LINK)

Books mentioned plenty of times on this blog before, but seem worth mentioning again on a day like today:

Superforecasting: The Art and Science of Prediction

The Signal and the Noise: Why So Many Predictions Fail--but Some Don't

Thursday, June 23, 2016

Stoicism audiobooks

For those interested, I noticed some new audiobook narrations have been made from the great works of Stoicism over the last few of months:

From Epictetus: 

From Seneca:

Previously, I had mentioned the audio versions of Seneca's letters that Tim Ferriss worked on with John Robinson to put together, which are linked to below. There was an audio quality issue with the "On the Shortness of Life" essay that was included at the beginning of Volume 1 which received some criticism (deservedly so). I'm not sure if it's fixed yet, but I don't believe the issue was widespread throughout the rest of the recordings. So what I'd recommend if you are interested in getting the letters is to listen to the sample of the version of the letters above, and then listen a sample of the ones linked to below, and see which narration your own ears prefer.

If you want to top off your library with the other well-known work of Stoicism, here is the narration I've liked best so far of the couple I've listened to:  Meditations - by Marcus Aurelius.

And if you want an overview of Stoicism before getting into the works of the key figures, William Irvine's A Guide to the Good Life: The Ancient Art of Stoic Joy is a good intro.


Will Berkshire Hathaway Eventually Get Broken Up By Activists? (LINK)
Related book: Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism
a16z Podcast: Fintech Revolution or Evolution? (LINK)

The second episode ("Saigon, 1965") of Malcolm Gladwell's Revisionist History podcast is now available (LINK)

How It's Made - Skyscraper (video) (LINK)

How It's Made - Batteries (video) (LINK)

Wednesday, June 22, 2016


Jim Grant's speech to the Washington CFAs (LINK)

Tesla Offers to Acquire SolarCity (LINK)
Related previous article: Elon Musk Supports His Business Empire With Unusual Financial Moves
Elon Musk Aims to Shore Up SolarCity by Having Tesla Buy It (LINK)

Jim Chanos: ‘Brazen' SolarCity deal is ‘corporate governance at its worst’ (video) (LINK)

Rebalancing, wealth transfers, and the growth of Chinese debt - By Michael Pettis (LINK)

Farnam Street: Why Are No Two People Alike? (Part 1) (LINK)
Related book: No Two Alike
Brain Pickings: Abraham Lincoln’s Tough-Love Letter to His Step-Brother About Laziness and Work Ethic (LINK)
Related book: Lincoln: Speeches and Writings 1832-1858
Alan Watts - How to melt anxiety (video/audio) (LINK)
Related book: The Wisdom of Insecurity: A Message for an Age of Anxiety (now also an audiobook
Related link: An Antidote to the Age of Anxiety: Alan Watts on Happiness and How to Live with Presence
Quote of the day, from 1995: “The nature of information itself is changing….This is just the beginning….We are crossing a technology threshold that will forever change the way we learn, work, socialize and shop.  It will affect all of us and businesses of every type in ways far more pervasive that most people recognize.” -Bill Gates (Crains Detroit Business, January 2, 1995) [H/T 25iq]

Tuesday, June 21, 2016


Malcolm Gladwell on The Tim Ferriss Show (podcast) (LINK)

The heroes of 'Flash Boys' just scored a landmark victory, but the battle isn't over [H/T Linc] (LINK)

George Soros warns on Brexit (LINK)
To start off, sterling is almost certain to fall steeply and quickly if there is a vote to leave– even more so after yesterday’s rebound as markets reacted to the shift in opinion polls towards remain. I would expect this devaluation to be bigger and more disruptive than the 15% devaluation that occurred in September 1992, when I was fortunate enough to make a substantial profit for my hedge fund investors, at the expense of the Bank of England and the British government. 
It is reasonable to assume, given the expectations implied by the market pricing at present, that after a Brexit vote the pound would fall by at least 15% and possibly more than 20%, from its present level of $1.46 to below $1.15 (which would be between 25% and 30% below its pre-referendum trading range of $1.50 to $1.60). If sterling fell to this level, then ironically one pound would be worth about one euro – a method of “joining the euro” that nobody in Britain would want.
US Railroad Carloads Below 2009/2010 Lows (LINK)

Rigonomics: Is $50 a barrel enough to revive global oil production? (LINK)

Raoul Pal - The Need to Study Real World Economics - Warwick Economics Summit 2015 [video from a little over a year ago] (LINK)

TV Advertising's Surprising Strength — And Inevitable Fall - by Ben Thompson (LINK)

"So busy doing my job, I can't get any work done" - by Seth Godin (LINK)

Quote of the day: "Intuition is pattern recognition. Use with caution: if future doesn't resemble past, lessons of experience can lead us astray." -Adam Grant (source)

Monday, June 20, 2016


Latticework of Mental Models: Lindy Effect (LINK)

No One Knows What Will Happen (LINK)

Kevin Kelly on EconTalk (LINK)
Related book: The Inevitable
The 2016 BP Statistical Review of World Energy (LINK)

China: Is peak coal part of its problem? (LINK)

Richard Duncan interview discussing China's economy (video) [H/T ValueWalk] (LINK)

Eric Hoffer and the Creation of Fanatical Mass Movements (LINK)
Related book: The True Believer  
Related previous post: Eric Hoffer videos

Sunday, June 19, 2016


New paper from Michael Mauboussin et al. - Operating Leverage: A Framework for Anticipating Changes in Earnings [H/T @HurriCap] (LINK)

Why Farnam Street Optimizes for Loyalty, not Pageviews (LINK)

A Dozen Things Learned from Elon Musk About Business and Investing (LINK)

Everything Is More Expensive Than It Looks - by Jason Zweig (LINK)

IEX Outduels Citadel, NYSE as ‘Flash Boys’ Exchange Approved (LINK)

Raghuram Rajan Unexpectedly Leaves RBI (LINK)

Mohamed El-Erian on life after Pimco (LINK)

The LSE In Conversation with Steve Schwarzman (audio) (LINK)

How Bill Nye, the Science Guy, Spends His Sundays [H/T @mikedariano] (LINK)

Saturday, June 18, 2016

Buffett Partnership, control situations and Dempster Mill

I thought this was a good reminder of Warren Buffett's reasons for holding control situations (especially when he thought the market was on the high side of valuation), as well as a reminder of how concentrated he was willing to be. From Mr. Buffett's January 1962 letter to partners:
We are presently involved in the control of Dempster Mill Manufacturing Company of Beatrice, Nebraska. Our first stock was purchased as a generally undervalued security five years ago. A block later became available, and I went on the Board about four years ago. In August 1961, we obtained majority control, which is indicative of the fact that many of our operations are not exactly of the "overnight" variety. 
Presently we own 70% of the stock of Dempster with another 10% held by a few associates. With only 150 or so other stockholders, a market on the stock is virtually non-existent, and in any case, would have no meaning for a controlling block. Our own actions in such a market could drastically affect the quoted price. 
Therefore, it is necessary for me to estimate the value at yearend of our controlling interest. This is of particular importance since, in effect, new partners are buying in based upon this price, and old partners are selling a portion of their interest based upon the same price. The estimated value should not be what we hope it would be worth, or what it might be worth to an eager buyer, etc., but what I would estimate our interest would bring if sold under current conditions in a reasonably short period of time. Our efforts will be devoted toward increasing this value, and we feel there are decent prospects of doing this. 
Dempster is a manufacturer of farm implements and water systems with sales in 1961 of about $9 million. Operations have produced only nominal profits in relation to invested capital during recent years. This reflected a poor management situation, along with a fairly tough industry situation. Presently, consolidated net worth (book value) is about $4.5 million, or $75 per share, consolidated working capital about $50 per share, and at yearend we valued our interest at $35 per share. While I claim no oracular vision in a matter such as this, I feel this is a fair valuation to both new and old partners. Certainly, if even moderate earning power can be restored, a higher valuation will be justified, and even if it cannot, Dempster should work out at a higher figure. Our controlling interest was acquired at an average price of about $28, and this holding currently represents 21% of partnership net assets based on the $35 value. 
Of course, this section of our portfolio is not going to be worth more money merely because General Motors, U.S. Steel, etc., sell higher. In a raging bull market, operations in control situations will seem like a very difficult way to make money, compared to just buying the general market. However, I am more conscious of the dangers presented at current market levels than the opportunities. Control situations, along with work-outs, provide a means of insulating a portion of our portfolio from these dangers.

Friday, June 17, 2016


The activist playbook is nearly 90 years old — and the first chapter was written by Warren Buffett's mentor [H/T Linc] (LINK)
Related book: Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism 
John Hempton: Some thoughts on very low interest rates (LINK)

Uber, disruptive innovation, and regulated markets (LINK)

Exponent podcast: Episode 083 — Microsoft & LinkedIn versus Apple & WWDC (LINK)

Book of the day: The Seventh Sense: Power, Fortune, and Survival in the Age of Networks - by Joshua Cooper Ramo [Ramo was also on Charlie Rose last night discussing the book, but the video is not yet available.]

Thursday, June 16, 2016


Jim Grant on Fed, Signet (video) (LINK)
Discussing the Federal Reserve's outlook on the U.S. economy and Signet CEO's criticism of Grant's bearish report with Jim Grant, Founder & Editor of Grant's Interest Rate Observer.
Hopcat bar owner's Titanic holdings are sinking fast [H/T Linc] (LINK)
Enterpreneur Mark Sellers has seen a lot of success in recent years as CEO of Barfly Ventures LLC, the Grand Rapids-based company which owns a growing string of popular Hopcat bars in college towns throughout the Midwest. 
But Sellers' early investment in Premium Exhibits Inc., a company that owns and exhibits artifacts of the RMS Titanic, which sank in 1912, and other attractions, have been sinking fast in recent weeks. 
The Atlanta-based company's stock price fell to 20 cents per share – down 17 cents, or 45 percent -- in trading on Wednesday, June 15, after the company announced it was entering Chapter 11 bankruptcy.
Bolivia rejects 'offensive' chicken donation from Bill Gates (LINK)

An interview with Professor Richard Thaler [H/T @jasonzweigwsj] (LINK)

The first episode ("The Lady Vanishes") of Malcolm Gladwell's Revisionist History podcast is now available (LINK)

Gladwell was also on the latest episode of Recode Media with Peter Kafka (audio) (LINK)

a16z Podcast: Apple and the Widgetification of Everything (LINK)

Edge #470: Deontology Or Trustworthiness? - A Conversation Between Molly Crockett and Daniel Kahneman (LINK)

This looks like it'll be an interesting book when it is released in a couple of weeks: The End of Accounting and the Path Forward for Investors and Managers

Wednesday, June 15, 2016

Small thoughts and actions, consistently applied, leading to great insights

“The way to win is to work, work, work, work and hope to have a few insights.” —Charlie Munger

One of the things I find most enjoyable about being both an investor and taking Charlie Munger’s multidisciplinary approach to life and learning is when I come across overlapping ideas or descriptions that help explain how the world works, especially when they can be applied to investing. When these mental models show up in more than one discipline they seem enduring and valuable and worth remembering.

Siddhartha Mukherjee’s description of Mendel’s discovery of heredity, as told in his excellent book The Gene, is one such example. As with many discoveries, including Charles Darwin and evolution shortly before Mendel and heredity, the process involved making tiny daily steps, continually repeated, that eventually led to a leaping synthesis of discovery:

Mendel’s notebook was filled with tables and scribblings, with data from thousands of crosses. His thumbs were getting numb from the shelling.  

“How small a thought it takes to fill someone’s whole life,” the philosopher Ludwig Wittgenstein wrote. Indeed, at first glance, Mendel’s life seemed to be filled with the smallest thoughts. Sow, pollinate, bloom, pluck, shell, count, repeat. The process was excruciatingly dull—but small thoughts, Mendel knew, often bloomed into large principles. If the powerful scientific revolution that had swept through Europe in the eighteenth century had one legacy, it was this: the laws that ran through nature were uniform and pervasive. The force that drove Newton’s apple from the branch to his head was the same force that guided planets along their celestial orbits. If heredity too had a universal natural law, then it was likely influencing the genesis of peas as much as the genesis of humans. Mendel’s garden plot may have been small—but he did not confuse its size with that of his scientific ambition.

“The experiments progress slowly,” Mendel wrote. “At first a certain amount of patience was needed, but I soon found that matters went better when I was conducting several experiments simultaneously.” With multiple crosses in parallel, the production of data accelerated. Gradually, he began to discern patterns in the data—unanticipated constancies, conserved ratios, numerical rhythms. He had tapped, at last, into heredity’s inner logic.

Darwin is well known to have been an average student, and Mendel probably wouldn’t have even earned the title average in his time, having failed the exam he needed to pass in order to become a teacher twice before giving up. But while having a broad knowledge base about many things is often the path to success in an endeavor, the world is also apt to reward specialization. Mendel’s hard work, tinkering and, to use an investing term, ability to stay within his circle of competence—his garden—produced insights that led to major breakthroughs in the understanding of inheritance (though his work wasn't appreciated in his own lifetime for him to receive praise):

Between 1857 and 1864, Mendel shelled bushel upon bushel of peas, compulsively tabulating the results for each hybrid cross (“yellow seeds, green cotyledons, white flowers”). The results remained strikingly consistent. The small patch of land in the monastery garden produced an overwhelming volume of data to analyze—twenty-eight thousand plants, forty thousand flowers, and nearly four hundred thousand seeds. “It requires indeed some courage to undertake a labor of such far-reaching extent,” Mendel would write later. But courage is the wrong word here. More than courage, something else is evident in that work—a quality that one can only describe as tenderness.

It is a word not typically used to describe science, or scientists. It shares roots, of course, with tending—a farmer's or gardener's activity—but also with tension, the stretching of a pea tendril to incline it toward sunlight or to train it on an arbor. Mendel was, first and foremost, a gardener. His genius was not fueled by deep knowledge of the conventions of biology (thankfully, he had failed that exam—twice). Rather, it was his instinctual knowledge of the garden, coupled with an incisive power of observation—the laborious cross-pollination of seedlings, the meticulous tabulation of the colors of the cotyledons—that soon led him to findings that could not be explained by the traditional understanding of inheritance.

To me, much of the above can be compared to the investing process. We compile lists of businesses we like, own and would like to own, and then study them deeply in order to gain insights into what the information we gather says about the past and current states of those businesses and their management teams. And we use that information to try and gain further insight into what the future may hold. Often, progress comes slowly, but when one is a focused investor who doesn't swing at many pitches, the occasional deep insight that leads to a big idea, assuming one has the gumption to act on it, can make all the difference.

Tuesday, June 14, 2016


George Washington’s Practical Self-Education (LINK)
Related book: A Powerful Mind: The Self-Education of George Washington
The $3.5 Million Buffett Lunch Special (LINK)

Warren Buffett’s Dicey Power Play [H/T Will] (LINK)

Henry Kravis Q&A: ‘Worry About What You Might Lose on the Downside’ [H/T @iancassel] (LINK)

One Unspoken Reason Behind the LinkedIn Sale [H/T Linc] (LINK)

Microsoft and Apple Double Down - by Ben Thompson (LINK)

Leithner Letter Nos. 200-204 (July-October 2016) (LINK)

Non-GAAP Measures: An Investor Perspective (CFA Webinar) (LINK)

German 10-Year Government Bond Yields Dip Below Zero for First Time (LINK)

Hussman Weekly Market Comment: Like Water Out of a Sponge (LINK)
Last week, the 10-year Treasury yield dropped to just 1.6%. Technician Walter Murphy noted that his index of global 10-year yields also plunged to an all-time low. The overall structure of global bond yields is undoubtedly the outcome of years of aggressive monetary easing, though the break to fresh lows among European bank stocks may convey some additional information content. Of course, the compression of prospective investment returns isn’t limited to bonds. On the basis of the valuation measures best correlated with actual subsequent S&P 500 total returns across history, prospective 10-12 year S&P 500 nominal total returns have declined to just 0-2% by our estimates, with negative real expected returns on both horizons.
a16z Podcast: Move Fast But Don’t Break Things (When It Comes to Computational Biology) (LINK)

On Reading Issues of Wired from 1993 to 1995 (LINK)

Malcolm Gladwell: Why mass shootings, like Orlando's club attack, keep happening (video) (LINK)
Related Gladwell article from last year: THRESHOLDS OF VIOLENCE

Sunday, June 12, 2016


The video of Atul Gawande's recent commencement speech is HERE. And the video of Nassim Taleb's recent commencement speech is HERE

Comedian Billy Crystal delivers funny and touching eulogy for Muhammad Ali (video) [H/T The Big Picture] (LINK)

The Definitive Oral History of Online Travel [A big thanks to the friend that passed this along.](LINK)

Berkshire Energy Units Barred From Selling Power at Market Rates [H/T Will] (LINK)

A top psychologist says there's only one way to become the best in your field — but not everyone agrees [H/T Linc] (LINK)
Related book: Peak: Secrets from the New Science of Expertise
An Ivy League professor explains how a 1980s game theory experiment suggests how morality could have evolved [H/T Linc] (LINK)

Motivate People by Encouraging Them to Make Choices [H/T @RobertCialdini] (LINK)
It sounds a little naive and pie in the sky. But weeks later, people were more satisfied in their jobs through this tiny intervention and their managers said they performed better...Kids need choice. There’s this really awesome theory of human motivation — that human beings all want three things. One is to be competent, one is to belong, and one is [to] be free, as in to have choice, to not be told what to do but to choose what to do. Kids will never fully develop a passion for something unless at some point and in some way they feel they have chosen what they’re doing as opposed to having it chosen for them. 
Related books: 

Mike Rowe: Don't Follow Your Passion

Link to video

[H/T @kevin2kelly]


Related links:

‘Find your passion’ is terrible career advice

Warren Buffett and 'Dilbert' creator Scott Adams differ on passion

Related books:

How to Fail at Almost Everything and Still Win Big

So Good They Can't Ignore You: Why Skills Trump Passion in the Quest for Work You Love

Saturday, June 11, 2016


Atul Gawande's California Institute of Technology commencement address: THE MISTRUST OF SCIENCE (LINK)

Philip Plait recommends the best books on the Wonders of the Universe (LINK)
The books: 1) Bang!by Brian May, Patrick Moore, and Chris Lintott; 2) How I Killed Pluto and Why It Had It Comingby Mike Brown; 3) A Man on the Moonby Andrew Chaikin; 4) Why Does E=mc2?by Brian Cox and Jeff Forshaw; 5) The Demon-Haunted Worldby Carl Sagan.
‘Hobbit’ relatives found after ten-year hunt (LINK

AI, Deep Learning, and Machine Learning: A Primer (LINK)

Mystery Bid of $3,456,789 Wins Lunch With Warren Buffett (LINK)

Shareholders Are Disappearing Before Our Eyes - by Jason Zweig (LINK)

Tesla: Just Another Car Company - by Charley Grant (LINK)

Addendum to Howard Marks's recent memo, Economic Reality (LINK)
Addendum, June 13:  There’s been a lot of response since the memo that follows was originally published on May 26.  In the discussions that have ensued, I realized that I should have led with something like this:
Ultimately, economics is the study of choice.  Because choices range over every imaginable aspect of human experience, so does economics. . . .  
How do individuals make choices:  Would you like better grades?  More time to relax?  More time watching movies?  Getting better grades probably requires more time studying, and perhaps less relaxation and entertainment.  Not only must we make choices as individuals, we must make choices as a society.  Do we want a cleaner environment?  Faster economic growth?  Both may be desirable, but efforts to clean up the environment may conflict with faster economic growth.  Society must make choices. . . .  
We would always like more and better housing, more and better education – more and better of practically everything.  
If our resources were . . . unlimited, we could say yes to each of our wants – and there would be no economics.  Because our resources are limited, we cannot say yes to everything.  To say yes to one thing requires that we say no to another.  Whether we like it or not, we must make choices.  
Our unlimited wants are continually colliding with the limits of our resources, forcing us to pick some activities and to reject others.  Scarcity is the condition of having to choose among alternatives.  (Macroeconomics Principles, Libby Rittenberg and Tim Tregarthen.  Emphasis added)
Because of the above, we make economic choices every day.  Everyone knows choices like these are inescapable.   
Everyone, that is, except for politicians.  The politician promises better grades and more leisure time.  A cleaner environment and faster economic growth.  That’s what caused me to write the memo: in politics and government – unlike the real world – the word “or” often goes out the window, replaced by “and.”  No choices are necessary.   
A few months ago I saw a cartoon featuring caricatures of two primary opponents.  Under one it said “bulls**t” and under the other it said “free s**t.”  There’s bound to be a lot of the former in any election season, but economics tells us the latter is unrealistic.  I wrote this memo to help readers understand why.

Friday, June 10, 2016


As a reminder, the latest Audible $4.95 sale ends on June 13th. The titles that stood out to me are HERE. The full list is available HERE. And if you don't have an Audible membership yet, you can sign up for a free trial, with comes with 2 free books, HERE.

Latticework of Mental Models: Cognitive Dissonance (LINK)

Eric Schmidt on Charlie Rose (video) (LINK)

Exponent podcast: Episode 082 — A Podcast About Podcasts (LINK)

A discussion with PacifiCorp's Stefan Bird [H/T Linc] (Part 1, Part 2)
PacifiCorp is at the heart of Berkshire Hathaway Energy’s growing utility empire. We recently sat down with Stefan Bird, president and chief executive of their Pacific Power unit, in his Portland office for a wide-ranging discussion. 
Foreign Demand Soars for U.S. Treasurys, the ‘One-Eyed King [H/T @jasonzweigwsj] (LINK)
The global hunger for U.S. government debt is intensifying as investors seek better returns from the negative yields and record-low rates found in Japan and Europe. 
On Thursday, an auction of 30-year Treasury debt attracted some of the highest demand ever from overseas buyers, at a yield of 2.475%, the lowest for the 30-year bond since January 2015. 
It was the second sale in as many days to draw strong foreign interest. On Wednesday, the Treasury sold $20 billion of 10-year notes with a record share going to buyers outside the U.S., offering a yield of 1.702%, down sharply from the 2.461% investors got a year ago. 
U.S. Treasurys are the “one-eyed king,’’ said David Keeble, global head of interest-rates strategy at Crédit Agricole SA. “There is just a shortage of yield on the planet.’’ 
The 30-year German government bond yielded 0.63% on Thursday. The bond of that term in Japan was even stingier, at 0.30%. In Switzerland, the 30-year bond yielded 0.07%. Bond yields move inversely to prices. 
The 10-year Japanese and Swiss bonds both yielded below zero. 
Bill Gross of Janus Capital Group Inc. said in a comment on the firm’s Twitter feed that global yields were the lowest “in 500 years of recorded history” and warned that the large mass of negative-yielding bonds around the world is “a supernova that will explode one day.”
Book of the day: The Ant and the Peacock

Thursday, June 9, 2016


Bill Gates: Why I Would Raise Chickens (LINK)

A Bearish George Soros Is Trading Again (LINK)

A 2% Yield on a 50-Year Gilt? Bonkers. Totally Bonkers (LINK)

IEX CEO Brad Katsuyama on lies, 'Flash Boys,' and egregious pricing [H/T Abnormal Returns] (LINK)

Malcolm Gladwell on The Brian Lehrer Show discussing his new podcast, which will start on June 16 (audio) (LINK)

Malcolm Gladwell on The Bill Simmons podcast (mostly discussing basketball) (LINK)

Book of the day: The Joy of x: A Guided Tour of Math, from One to Infinity

Quality investing...

Quality investing is a way to pinpoint the specific traits, aptitudes and patterns that increase the probability of a particular company prospering over time – as well as those that decrease such chances. 
In our view, three characteristics indicate quality. These are strong, predictable cash generation; sustainably high returns on capital; and attractive growth opportunities. Each of these financial traits is attractive in its own right, but combined, they are particularly powerful, enabling a virtuous circle of cash generation, which can be reinvested at high rates of return, begetting more cash, which can be reinvested again. 
A simple example illustrates their power. Say a company generates free cash flow of $100 million annually. Its return on invested capital is 20% and it has ample opportunity to reinvest all cash in expansion at the same rate. Sustained for ten years, this cycle of cash generation and reinvestment would drive a greater than six-fold increase in free cash. Albert Einstein famously referred to compound interest as the eighth wonder of the world. Compound growth in cash flow can be equally miraculous. The profound point is that the critical link between growth and value creation is the return on incremental capital. Since share prices tend to follow earnings over the long term, the more capital that can be deployed at high rates of return to drive greater earnings growth, the more valuable a company becomes. Warren Buffett summarized the point best: “Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.” The best investments, in other words, combine strong growth with high returns on capital. 
It is relatively easy to identify a company that generates high returns on capital or which has delivered strong historical growth – there are plenty of screening tools which make this possible. The more challenging analytical endeavor is assessing the characteristics that combine to enable and sustain these appealing financial outputs. 
Above all, the structure of a company’s industry is critical to its potential as a quality investment: even the best-run company in an over-supplied, price-deflationary industry is unlikely to warrant consideration. On top of this, there are bottom-up, company-specific factors that must be understood. In combination with attractive industry structures, these form the building blocks which can enable a company to deliver sustained operational outperformance and attractive long-term earnings growth.

Wednesday, June 8, 2016


Buffett Praises Amazon's Jeff Bezos, Offers Optimism for America (LINK)
Speaking at a panel discussion in Long Island City, New York on the state of small business in America, Buffett called Bezos, the chief executive of retailer Inc, a "classic example" of how business owners can succeed by focusing not just on satisfying their customers, but delighting them. 
"Twenty years ago he had a very, very, very small business," but Bezos today is still "thinking about how to further delight his customer," said Buffett, who has run his Omaha, Nebraska-based conglomerate Berkshire Hathaway Inc since 1965.
To grow the economy, grow small businesses (Op-Ed by Warren Buffett, Lloyd Blankfein, Michael Bloomberg and Michael Porter) (LINK)

Bezos Says Amazon to Up India Investment to $5 Billion [H/T @manualofideas] (LINK)
"I can assure you it’s only the beginning and as we say in Amazon, it’s only day one," Bezos said, adding that the investments would help start-ups in India and accelerate the country's role as a hub for innovation and digital entrepreneurship.
Nassim Taleb gives a Commencement Address [H/T Farnam Street] (LINK)
I am just describing my life. I hesitate to give advice because every major single piece of advice I was given turned out to be wrong and I am glad I didn’t follow them. I was told to focus and I never did. I was told to never procrastinate and I waited 20 years for The Black Swan and it sold 3 million copies. I was told to avoid putting fictional characters in my books and I did put in Nero Tulip and Fat Tony because I got bored otherwise. I was told to not insult the New York Times and the Wall Street Journal; the more I insulted them the nicer they were to me and the more they solicited Op-Eds. I was told to avoid lifting weights for a back pain and became a weightlifter: never had a back problem since. 
If I had to relive my life I would be even more stubborn and uncompromising than I have been. 
One should never do anything without skin in the game. If you give advice, you need to be exposed to losses from it. It is an extension to the silver rule. So I will tell you what tricks I employ
Sequoia Fund Dumps Roughly Half Its Valeant Stake [H/T @williamgreen72] (LINK)

Vital Lessons on Disruption From the Demise of Corporate Giants - by Peter Diamandis (LINK)

What Was the Greatest Era for Innovation? A Brief Guided Tour (LINK)

The internet is still at the beginning of its beginning - by Kevin Kelly (LINK)
Related book: The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future 
Shane Parrish on The Science of Success podcast (LINK)

"Um" and "like" and being heard - by Seth Godin (LINK)

Living Fish Found Inside Jellyfish in Bizarre Underwater Scene (LINK)

Physicists have opened up a thrilling wonderland [H/T @george_cooper__] (LINK)
One way of investigating matter is to engineer collisions between particles, and then detect the particles that flutter out of the debris; this is how the elementary Higgs boson particle was conjured up at Cern. To this end, Attila Krasznahorkay at Hungary’s Institute for Nuclear Physics, fired protons at lithium isotopes, which produced unstable beryllium nuclei. These beryllium nuclei then decayed, as expected, into electron-positron pairs that flew away from each other at various angles. 
But, anomalously, these electron-positron pairs seemed to have a fondness for shooting away from each other at 140 degrees. The simplest explanation was a new, intermediate particle in the radioactive decay mix. Calculations suggested a mass of 17 megaelectronvolts (MeV), around 7,000 times lighter than the Higgs boson. 
While the Higgs was forecast to exist, this new nimble particle was not. That is why the team spent three years checking their results before going public. It is, as Alice muses while being bamboozled by the Red Queen, exactly like a riddle with no answer. 
One exciting possibility is that the new particle is a missing link between our familiar world of matter and the unseen world of dark matter.

Tuesday, June 7, 2016


Max Olson has added the Blue Chip Stamps 1977 letter to that collection (LINK)

Howard Marks on Bloomberg TV [H/T ValueWalk] (Video 1, Video 2, Video 3)
Related previous post: Howard Marks Memo: Economic Reality
Sol Price on Becoming Your Customer’s Best Friend (LINK)
Related book: Sol Price: Retail Revolutionary & Social Innovator
Bruce Berkowitz on the latest developments with Fannie Mae and Freddie Mac [H/T ValueWalk] (LINK)

Get it while you can....Uber swallows $3.5B in Saudi cash, 21st Century Fox backs an email newsletter, and more (LINK)

Richard Thaler at the LSE (podcast) [H/T Tamas] (LINK)
Related book: Misbehaving: The Making of Behavioral Economics
The Future of Podcasting - by Ben Thompson (LINK)

a16z Podcast: Not If, But How -- When Technology is Inevitable (with Kevin Kelly) (LINK)
Related book: The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future 
Book of the day (just released): The Founder’s Mentality: How to Overcome the Predictable Crises of Growth