Friday, December 30, 2016


A Portrait of the Investing Columnist as a (Very) Young Man - by Jason Zweig (LINK)

Mohnish Pabrai's Interview with CNBC-TV 18 (videos) (LINK)

Ponzi Schemes & Ego - by Ben Carlson (LINK)
Related book: Ego Is the Enemy
Active Investing: Seeking the Elusive Edge! - by Aswath Damodaran (LINK)

The fourth industrial revolution: a primer on Artificial Intelligence (AI) [H/T @AlexRubalcava] (LINK)

Three minutes with Hans Rosling will change your mind about the world [H/T @BillGates] (LINK)

TEDxDartmouth 2011- Thalia Wheatley: How the Brain Perceives Other Minds - March 6, 2011 (video) [H/T @Jesse_Livermore] (LINK)

What It’s Like to Stand at the Threshold to Space - By Mike Massimino [H/T @StevenLevy] (LINK)
Related book: Spaceman: An Astronaut's Unlikely Journey to Unlock the Secrets of the Universe

Thursday, December 29, 2016


From Ego Is the Enemy:
According to Seneca, the Greek word euthymia is one we should think of often: it is the sense of our own path and how to stay on it without getting distracted by all the others that intersect it. In other words, it’s not about beating the other guy. It’s not about having more than the others. It’s about being what you are, and being as good as possible at it, without succumbing to all the things that draw you away from it. It’s about going where you set out to go. About accomplishing the most that you’re capable of in what you choose. That’s it. No more and no less. (By the way, euthymia means "tranquillity" in English.) 
It's time to sit down and think about what's truly important to you and then take steps to forsake the rest. Without this, success will not be pleasurable, or nearly as complete as it could be. Or worse, it won't last. 
...So why do you do what you do? That’s the question you need to answer. Stare at it until you can. Only then will you understand what matters and what doesn’t. Only then can you say no, can you opt out of stupid races that don’t matter, or even exist. Only then is it easy to ignore "successful" people, because most of the time they aren’t—at least relative to you, and often even to themselves. Only then can you develop that quiet confidence Seneca talked about.
From Seneca's essay "On Tranquility" (via Dialogues and Essays):
For a long time now, Serenus, I assure you, I have been asking myself in silence to what I should liken this mental state of yours, and the closest parallel I can find is the condition of those who, having gained release from a lengthy and serious illness, are sometimes affected by feverish fits and minor disorders, and, despite being freed from the final traces of these, are still troubled by feelings of doubt and, now in full health, hold out their wrists to their doctors, complaining unfairly about any feeling of warmth in their body. With these people, Serenus, it is not that they are not quite well physically, but that they are not quite used to being well, just as even a tranquil sea will show a ripple or two, especially when it has subsided after a storm. Accordingly, you have no need of those harsher measures that we have already passed over, that of sometimes opposing yourself, of sometimes getting angry with yourself, of sometimes fiercely driving yourself on, but rather of the one that comes last, having confidence in yourself and believing that you are on the right path and have not been sidetracked by the footprints crossing over, left by many rushing in different directions, some of them wandering close to the path itself. But what you long for is a thing that is great, supreme, and very close to the state of being a god: to be unshaken. 
This constant state of mental composure the Greeks call euthymia, on which Democritus has written an outstanding treatise; I call it tranquillity; for it is unnecessary to imitate and reproduce words in Greek lettering: the actual thing under discussion needs to be designated by some name which must have the force, not the form, of the Greek term. Our enquiry, then, is directed at how the mind should proceed always on a steady and favourable course, may have good intentions towards itself, and may take pleasure in regarding its state and have no interruption mar this joy, but remain in a peaceful condition, at no time raising itself up or casting itself down: this will be tranquillity.

Related previous post: Areté

Related link: Apatheia vs Ataraxia: what’s the difference?

Wednesday, December 28, 2016

Charlie Munger on Sit-on-Your-Ass Investing

From Poor Charlie's Almanack:
If you buy something because it's undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That's hard. But if you buy a few great companies, then you can sit on your ass. That's a good thing. 
We're partial to putting out large amounts of money where we won't have to make another decision.

Tuesday, December 27, 2016


Michael Lewis talks with Adam Grant about The Undoing Project (LINK)

Invest Like the Best podcast: Shane Parrish – Mastering Mental Models (LINK)

How I Built This podcast -- Warby Parker: Dave Gilboa & Neil Blumenthal (LINK)

a16z Podcast: The Realities of Aging / When Healthcare Is Local  (LINK)

How Can I Hurt You? - by Ian Cassel (LINK)
If a competitor had unlimited resources, how quickly could they duplicate the company’s competitive advantage? This is a simple question that I ask myself and management when I try to measure the moat of a microcap company. Microcap companies are small companies and often times vulnerable to larger competitors with more resources. Paraphrased, even further, How Can I Hurt You?, is very powerful.
Five industries under threat from technology [H/T @HurriCap] (LINK)
Travel agents, manufacturers, insurers, advisers and car repair garages face strain
The World’s Largest Hedge Fund Is Building an Algorithmic Model From its Employees’ Brains (LINK)

Coach Designs Strategy to Stop Getting Beaten at Its Own Game [H/T @chriswmayer] (LINK)

The key takeaway from Bill Gates and Warren Buffett's all-time favorite book [H/T @HurriCap] (LINK)
Related book: Business Adventures
23 Questions With François Rochon of Giverny Capital (GuruFocus) [H/T @Kevin_Holloway] (LINK)

Books of the day:

William Tecumseh Sherman: In the Service of My Country: A Life

Entertainment Industry Economics: A Guide for Financial Analysis

Travel Industry Economics: A Guide for Financial Analysis

Monday, December 26, 2016

Leo Tolstoy quote

From A Calendar of Wisdom:
"Only when we forget about ourselves, when we get out of the thoughts of ourselves, can we fruitfully communicate with others, listen to them, and influence them."

Sunday, December 25, 2016

A good conscience is a continual Christmas...

“Let no pleasure tempt thee, no profit allure thee, no ambition corrupt thee, no example sway thee, no persuasion move thee, to do any thing which thou knowest to be evil; so shalt thou always live jollily; for a good conscience is a continual Christmas.” –Ben Franklin

Friday, December 23, 2016


Howard Marks and Rajath Shourie: CAIA Australia (video) (LINK) ["We don't have a trading mentality. We have a value mentality. We don't think, 'Hey, that's going to go up.'... We try and figure out the value and buy for less. And if we can buy things for significantly less than they're worth, then we'll do it. We don't buy to keep busy. We don't buy for the purpose of putting money to work.... To be a good investor, and to run a good investment business, I think you have to be very mature.... To do well, it's very desirable to be able to delay gratification.... Waiting is an extremely important part of investing." -Howard Marks]

Move Over Small Dogs Of The Dow, Here Come The Uber Cannibals - by Mohnish Pabrai & Yingzhuo Zhao (LINK)

NYU Stern's "In Conversation with Mervyn King" Series Presents Michael Lewis (video) [H/T ValueWalk] (LINK)
Related book: The Undoing Project
Billion Dollars To Bust: Health & Tennis Corp. Of America (LINK)

Latticework Of Mental Models: Lucretius Problem (LINK)

Of What Use is Deferred Tax Expense to Financial Analysts? (LINK)

Life’s Work: An Interview with Jerry Seinfeld [H/T @iancassel] (LINK)

Lawrence Levy: "To Pixar and Beyond [...]" | Talks at Google (LINK)
Related book: To Pixar and Beyond: My Unlikely Journey with Steve Jobs to Make Entertainment History
Frequently Asked Questions - by Derek Sivers (LINK)

Freakonomics Radio (podcast): How to Be More Productive (Rebroadcast) (LINK)

Why time management is ruining our lives - by Oliver Burkeman (LINK)
All of our efforts to be more productive backfire – and only make us feel even busier and more stressed

Leo Tolstoy quote

From A Calendar of Wisdom:
"Stop blaming other people, and you will feel what an alcoholic feels when he stops drinking, or what a smoker feels when he stops smoking. You will feel that you have brought relief to your soul." -Leo Tolstoy

Thursday, December 22, 2016

Otis Booth on Charlie Munger

From the section in Poor Charlie's Almanack about Munger being "the Abominable No-Man":
"Charlie realizes that it is difficult to find something that is really good. So, if you say 'No' ninety percent of the time, you're not missing much in the world."
This also reminded me of a couple of other quotes:
"The difference between successful people and really successful people is that really successful people say no to almost everything." –Warren Buffett 
"Just give me a few decent things to do and I’ll ignore the rest of the world." –Charlie Munger

Wednesday, December 21, 2016


Farnam Street: The Self Education of Louis L’Amour (LINK)

Some great links and thoughts from Guy Spier (LINK)

The 2016 Stratechery Year in Review (LINK)

Woe to Those Disrupted by Amazon (LINK)

‘Anonymous Billionaire’ in the Spotlight After 1,000% Rally [H/T Matt] (LINK)

EROEI Calculations for Solar PV Are Misleading (LINK)

Andrew Moore, dean of Carnegie Mellon's school of computer science, on Charlie Rose discussing artificial intelligence and robotics (video) (LINK)

This book, which was released yesterday, looks interesting: The Activist Director: Lessons from the Boardroom and the Future of the Corporation 

Josh Waitzkin also mentioned a couple of books on the Tim Ferriss podcast worth mentioning. The first was the Gia-Fu Feng and Jane English translation of the Tao Te Ching. And the other was Sebastian Junger's Tribe: On Homecoming and Belonging.

Things that don't make sense...

There are a bunch of great quotes and ideas in the latest Tim Ferriss podcast ("Becoming the Best Version of You"). Below are a couple that I wanted to make sure to save for future reference from Adam Robinson (slightly edited for clarity and emphasis):

First, on things that don't make sense:
One of the key things to investing, and I think this is a life truism, is to be aware when you hear a voice in your head that says, and you usually squint your eyes or you'll hear someone say the following words: that doesn't make sense. And that's always a sign of something really powerful.  
...I was talking to Sam Zell, a great real estate investor, and all he does, he reads the newspaper and all he's looking for are things that don't make sense. So I said, "Give me an example, Sam." And he says, "Okay. I'm reading the newspaper and I see that there's a Starbucks that's just opened up (this is like 15-20 years ago) in Mongolia." And he thinks to himself, "Mongolia? I thought they drink tea. What's with that?" He's so curious about this because it makes no sense that he takes his private jet, flies to Mongolia, and he discovers that they've started mining. This was the beginning of the big China infrastructure build. And the only reason he knew about it was that "it didn't make any sense."  
So I'm telling you that's the key thing. People stumble on these ideas and they dismiss them. They go, "Eh, that doesn't make any sense." But I'm telling you that's where the gold mine is; things that don't make sense. That's all I pay attention to now.
And on one's career and character:
One of my favorite quotes was by one of my heroes, Juan Belmonte.... He said, "No life worthy of the name consists of anything more than the continual series of struggles to develop one's character through the medium of whatever one has chosen as a career." Which is fascinating because now your career becomes re-framed as merely something with which you're going to develop your character. 

Tuesday, December 20, 2016

Michael Lewis with Malcolm Gladwell: The Undoing Project

Link to video


Related book: The Undoing Project


For audiobook listeners, it looks like Robert Cialdini's book Influence: The Psychology of Persuasion was made available in audio format a couple of months ago.

Reflections on the Trump Presidency, One Month after the Election - by Ray Dalio (LINK)

Patagonia’s Philosopher-King [H/T @Kevin_Holloway] (LINK) [From a few months ago, but after listening to Chouinard on the How I Built This podcast, I'm looking forward to reading this.]
Related book: Let My People Go Surfing
Uber's Loss Exceeds $800 Million in Third Quarter on $1.7 Billion in Net Revenue (LINK)

Tim Ferriss podcast: Becoming the Best Version of You (LINK)
This is a special episode of The Tim Ferriss Show. The audio is from a live conversation with not one, not two, but three guests: Josh Waitzkin, Ramit Sethi, and Adam Robinson.
Book of the day: Probability: For the Enthusiastic Beginner

Quote of the day: "In my view many men would have attained to wisdom, had they not supposed they had already done so." -Seneca (via Dialogues and Essays)

Monday, December 19, 2016


The Birth & Death Of A Consumer Franchise: Waldbaum’s (LINK)

Rising Rates Ripple Through Mortgage Market (LINK)

The Inside Story of Apple's $14 Billion Tax Bill [H/T @HurriCap] (LINK)

The End of Cloud Computing (video) (LINK)
“I’m going to take you out to the edge to show you what the future looks like.” So begins a16z partner Peter Levine as he takes us on a “crazy” tour of the history and future of cloud computing — from the constant turns between centralized to distributed computing, and even to his “Forrest Gump rule” of investing in these shifts.
How I Built This podcast -- Melissa & Doug: Melissa And Doug Bernstein (LINK)
Melissa and Doug Bernstein's first success was a wooden 'fuzzy puzzle' of farm animals. Today, Melissa & Doug makes over 2,000 kinds of toys and serves as an antidote to the rise of digital toys.
When a Physicist Asked the FBI to Stop Calling Because He Helped Make the Atomic Bomb [H/T @HurriCap] (LINK)

Tarantulas, Killer Caterpillars, and the Most Misunderstood Bugs (LINK)

Investing quote of the day, from Security Analysis:
"Security analysis is a severely practical activity, and it must not linger over matters that are not likely to affect the ultimate judgment."

Saturday, December 17, 2016


Nate Silver Interviews Michael Lewis About His New Book, ‘The Undoing Project’ [H/T Linc] (LINK)
Related book: The Undoing Project
Steven Johnson: By the Book (LINK)
Related book: Wonderland
We Have Not “Reached an Innovation Plateau” - by Tren Griffin (LINK)

François Trahan on Wealthtrack (video) (LINK)
An an exclusive interview, Wall Street’s number one ranked strategist, Cornerstone Macro’s François Trahan makes a stunning call. The bull market is almost over and it’s time to get defensive.

Friday, December 16, 2016


Vancouver Homes Are So Pricey the Government Will Pitch In [H/T Matt] (LINK)

Stranger Things Are Going Into China's Overseas Shopping Basket [H/T Matt] (LINK)

Lazy Work, Good Work - by Morgan Housel (LINK)

Latticework Of Mental Models: Chauffeur knowledge (LINK)

Muddy Waters' latest short report (LINK)
We are short China Huishan Dairy Holdings (6863 HK / “Huishan”) because we believe it is worth close to Zero. We conclude Huishan is a fraud. In this first report on Huishan, we detail the following conclusions and supporting facts.
Exponent podcast: Episode 098 — Shattered Glass (LINK)
Ben and James discuss real estate and Opendoor, and the types of startups that will succeed in the future.
Megadiamonds point to metal in mantle (LINK)

Why you should turn off push notifications right now - by Dan Ariely (LINK)
The cost of being distracted is much higher than we realise
Quote of the day: "The greatest truth is the most simple one." -Leo Tolstoy (via A Calendar of Wisdom)

Humility and learning

I thought this was an especially good excerpt from the book Ego Is the Enemy:
With accomplishment comes a growing pressure to pretend that we know more than we do. To pretend we already know everything. Scientia infla (knowledge puffs up). That’s the worry and the risk—thinking that we’re set and secure, when in reality understanding and mastery is a fluid, continual process. 
The nine-time Grammy– and Pulitzer Prize–winning jazz musician Wynton Marsalis once advised a promising young musician on the mind-set required in the lifelong study of music: “Humility engenders learning because it beats back the arrogance that puts blinders on. It leaves you open for truths to reveal themselves. You don’t stand in your own way. . . . Do you know how you can tell when someone is truly humble? I believe there’s one simple test: because they consistently observe and listen, the humble improve. They don’t assume, ‘I know the way.’” 
No matter what you’ve done up to this point, you better still be a student. If you’re not still learning, you’re already dying. 
It is not enough only to be a student at the beginning. It is a position that one has to assume for life. Learn from everyone and everything. From the people you beat, and the people who beat you, from the people you dislike, even from your supposed enemies. At every step and every juncture in life, there is the opportunity to learn—and even if the lesson is purely remedial, we must not let ego block us from hearing it again. 
Too often, convinced of our own intelligence, we stay in a comfort zone that ensures that we never feel stupid (and are never challenged to learn or reconsider what we know). It obscures from view various weaknesses in our understanding, until eventually it’s too late to change course. This is where the silent toll is taken. 
Each of us faces a threat as we pursue our craft. Like sirens on the rocks, ego sings a soothing, validating song—which can lead to a wreck. The second we let the ego tell us we have graduated, learning grinds to a halt. That’s why Frank Shamrock said, “Always stay a student.” As in, it never ends. 
The solution is as straightforward as it is initially uncomfortable: Pick up a book on a topic you know next to nothing about. Put yourself in rooms where you’re the least knowledgeable person. That uncomfortable feeling, that defensiveness that you feel when your most deeply held assumptions are challenged—what about subjecting yourself to it deliberately? Change your mind. Change your surroundings.


The one thing I'd add to the last paragraph above is that sometimes the best solution isn't to pick up a book on a topic you know next to nothing about, but to re-read one of the great books on a topic you do know something about. Especially if you haven't read it in a while—and have thus had new life experiences since you've read it—it may provide new insights, or better understanding, and help you achieve mastery of whatever is the subject at hand. And as Seneca advised a long time ago: "There are too many mediocre books which exist just to entertain your mind. Therefore, read only those books which are accepted without doubt as good."

Thursday, December 15, 2016


Brooks CEO shares the best business advice Warren Buffett ever gave him [H/T Vishal] (LINK)

Boyd Group Income Fund (TSX:BYD.UN): Terry Smith and Brock Bulbuck’s Collision Course with Success - by Ian Cassel (LINK)

Inside Quebec’s Great, Multi-Million-Dollar Maple-Syrup Heist [H/T @chriswmayer] (LINK)
With the value of maple syrup at roughly $1,300 a barrel, it’s time everyone knew about FPAQ, the Canadian group that controls 72 percent of the world’s supply. Rich Cohen investigates how its methods may have led to one of the greatest agricultural crimes in all of history.
A review of Book of Value: The Fine Art of Investing Wisely (LINK)

Freakonomics Radio (podcast) -- Bad Medicine, Part 3: Death by Diagnosis (LINK)

a16z Podcast: Produce or Perish! (What We Eat) (LINK)

Steven Pressfield on the James Altucher podcast (LINK)
Related books: 1) The War of Art; 2) Do the Work; 3) Turning Pro
Three News Stories About Humans in Space (LINK)

How It`s Made | Gold (video) (LINK)

The Secret Life of Time [H/T @TimHarford] (LINK)

Investing thought of the day (via Poor Charlie's Almanack): "Old moats are getting filled in and new moats are harder to predict, so it's getting harder." -Charlie Munger

Book of the day (recommended by Danny Meyer in a recent podcast appearance): The Cathedral Within: Transforming Your Life by Giving Something Back

Wednesday, December 14, 2016

Edge and investing

A couple of days ago, John Huber wrote an excellent blog post called What is Your Edge? I recommend it if you haven't read it yet, and (cue the confirmation bias) pretty much agree with every he said. As someone who spends much of my time looking at small and micro-cap stocks, it got me thinking about a couple of things that I wanted to write down here, as the writing process helps me keep thinking out loud.

First, I think this statement is entirely true: 
I also think that many investors think they have found information in small-caps that others don’t have. One of the advantages of writing a blog is I hear from a lot of readers, and in the past when I have mentioned small cap stocks, I’m amazed at how many people have already researched the company I’m looking at, and have found the same information I found.
As both an investor and a blogger, I've experienced the exact same thing. It is hard to get an information edge in today's world, and if you are looking at small and micro-cap stocks, there are likely plenty of other people looking at the same ones, at the same time. I think the reason this happens much of the time has to do with earnings-multiple obsession. I think many people that claim to be following a value/Buffett and Munger approach to investing are actually taking the Ben Graham approach of going to the grocery store every day and seeing what's on sale (i.e. what looks cheap based on a given multiple), as opposed the Buffett and Munger approach of going to the grocery store every day and looking at one's favorite items (i.e. the types of businesses one would really like to own if they ever go on sale).

This isn't just about quality vs. cheap, or growth vs. value. As Buffett and Munger stress, growth is simply a component of value (sometimes a positive, and sometimes a negative) and almost everything is a bad value at one price and a good value at another price. But with small companies, there is often less of a chance for a durable moat to have formed around the business, which means extrapolating current earnings too far into the future (as a multiple is essentially implying) can often lead to what many people call a value trap—something that looks cheap on the surface but where margins, and thus earnings, may be at risk going forward. In other words, while it may be a good place to look, it also may be more likely that the business deserves to be trading at that low multiple. As Brian Bares said in an interview a couple of years ago, when asked about the biggest mistake investors make:
I would say that—especially to the value crowd that sort of follows the Buffett/Munger philosophy—it's this mistaken notion that a low P/E stock can potentially outperform.... Companies with low valuations on rule-of-thumb metrics like price-to-earnings, price-to-cash flow, price-to-book are often indicative, even in the small and micro-cap space, of broken businesses.
What might be the reasons for these so-called "value traps?" From what I've seen among smaller companies, the major reason has to do with underestimating the role of competition (which includes competitors that may not even exist yet, but that may be enticed to enter the industry if returns on capital are attractive, or capital is plentiful). As Charlie Munger has said: "We have found in a long life that one competitor is frequently enough to ruin a business." That quote is one that I always keep close at hand, as is this excerpt from Ed Chancellor's introduction to the book Capital Returns:
From the investment perspective, the key point is that returns are driven by changes on the supply side. A firm’s profitability comes under threat when the competitive conditions are deteriorating. The negative phase of the capital cycle is characterized by industry fragmentation and increasing supply. The aim of capital cycle analysis is to spot these developments in advance of the market. New entrants noisily trumpet their arrival in an industry. A rash of IPOs concentrated in a hot sector is a red flag; secondary share issuances another, as are increases in debt. Conversely, a focus on competitive conditions should alert investors to opportunities where supply conditions are benign and companies are able to maintain profitability for longer than the market expects. An understanding of competitive conditions and supply side dynamics also helps investors avoid value traps (such as US housing stocks in 2005–06). 
Of course, the thing we are all looking for is a low multiple that doesn't deserve to be low because there is a long runway of profitable growth ahead. And if it doesn't deserve to be low and the growth transpires, then you are likely to get a re-rating as well as the growth, which can lead to the big home runs. But simply depending on a re-rating from a low multiple to justify investment is a tough game to play. And if one is willing to look 5-10 years out instead of the next quarter or year, then the multiple—unless at an extreme and especially at the higher end of that time frame—matters much less than whether or not one was right about the business. There's less competition in thinking this way, no matter what size company one is researching. As John concluded his post: 
In summary, I think the “edge” is less about knowing more than everyone else about a specific stock, and more about the mindset, the discipline, and the time horizon that you maintain as an investor. Thinking long-term is a commonly talked-about potential advantage, but one that is much less often acted upon. If you are a professional investor that is set up to capitalize on this, or an individual investor who has the right mindset, you can give yourself a significant edge in the stock market.
Below is a Peter Lynch example that I like on how important the long-term compounding of earnings growth per share can be. If you pay a 20x multiple for Company A and the multiple stays the same at year 10, you get 6-bagger. If you pay 10x for Company B and the multiple stays the same, you get a 2.5-bagger. And even if the multiple contracts on Company A from 20x to 10x, you still end up with more money than company B. 

As a final note, it's also important to remember that looking and thinking long-term shouldn't come at the expense of the anecdote to hubris, overconfidence and, as Ben Graham described it, the "vicissitudes of time": Margin of Safety. 

Tuesday, December 13, 2016


Bill Gates on CNBC (video) (LINK)

Bill Gates says investing in clean energy makes sense even if you don't believe in climate change (LINK)

How I Built This podcast -- Patagonia: Yvon Chouinard (LINK) ["The hardest thing in the world is to simplify your life, because everything pulls you to be more and more complex."]
Related book: Let My People Go Surfing
Canadian National Railway: The Great Railroad Construction Robbery - by Roddy Boyd (LINK)

Elizabeth Warren Condemns the Wrong Man - by Andrew Ross Sorkin (LINK)

The State of Technology at the End of 2016 - by Ben Thompson (LINK)

TED Talk -- Kevin Kelly: How AI can bring on a second Industrial Revolution (LINK)
Related book: The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future

Monday, December 12, 2016


Kindle edition on sale for $1.99 today: Antifragile: Things That Gain from Disorder - by Nassim Nicholas Taleb

Malcolm Gladwell’s latest article: Daniel Ellsberg, Edward Snowden, and the Modern Whistle-Blower (LINK)

Brian Moynihan on Charlie Rose (video) (LINK)

Sohn London Conference Notes 2016 (LINK)

Hussman Weekly Market Comment: Economic Fancies and Basic Arithmetic (LINK)
The past several weeks have brought an enormous amount of loose economic analysis encouraging investors to expect a meaningful surge in economic growth and corporate profits. Most of this hope rests on projections of higher deficit spending and increased domestic investment. It might benefit investors to consider these arguments more closely, and with greater focus on a century of economic evidence than on the verbal arguments of enthusiastic talking heads. 
While there is a strong correlation between growth in gross domestic investment and growth in real GDP, the slope of that relationship is only about 0.2, meaning that even if the growth rate of real gross domestic investment was driven from the recent growth trend of zero all the way back to the previous post-war growth rate of 3.5%, the overall impact on real GDP growth would only be about 0.7% annually, placing the level of U.S. real GDP about 2.8% higher 4 years from today than it would otherwise be. That’s not an annual growth rate, but a cumulative gain. 
Granted, if even a 0.7% boost to annual GDP growth was sustained, it would have a major impact on long-term living standards over a 20-30 year period. But investors have a screw loose if they believe that the overall prospects for GDP growth over the coming 4 years have changed significantly. 
Let’s do some arithmetic here. The primary determinants of GDP growth over time are 1) growth in total employment plus 2) growth in real output per hours worked. There’s a little bit of cyclical variation due to changes in average hours worked, but that difference only shows up meaningfully during recessions. In practice, nearly all of the variation in GDP growth over time is explained by the sum of employment growth plus productivity growth. 
Let’s look at each.
a16z Podcast: The Internet Is Your Movement (LINK)

The Endgame at Saturn Begins (LINK)
The Cassini spacecraft has been orbiting Saturn since 2004, and is one of the most successful missions NASA has ever done. We’ve learned vast amounts of knowledge about the gigantic planet, its moons, and its rings. 
But all good things … after more than a decade of Cassini sending back data and devastatingly beautiful images, NASA has decided to end the mission. With its final days approaching, NASA has decided to take more chances with it. The spacecraft has been sent into a series of risky trajectories, passing over Saturn’s north pole, then diving through the ring plane just outside the rings. These will be the closest approaches to the rings since Cassini first arrived at Saturn.
PBS Documentary on nuclear weapons (2015): The Bomb (video) (LINK)
It began innocently enough. In 1938, two German chemists accidentally discovered how to split the nucleus of the uranium atom: nuclear fission. Einstein’s E=mc2 equation predicted that the amount of energy released from just one atom would be enormous. 
Physicists all over the world immediately realized that fission might make a bomb of extraordinary power — and that Nazi Germany might be capable of creating one. The fear of Adolph Hitler getting a nuclear weapon led to a race to deter him by developing such a bomb first. Thus began a chain of events that would lead inexorably to Hiroshima, the nuclear arms race, the hydrogen bomb, the Cuban Missile Crisis and some of the greatest fear and tension ever in world history.

Sunday, December 11, 2016


Michael Lewis talks with Barry Ritholtz (podcast) (Part 1) (LINK)
Related book: The Undoing Project
Inside Costco: The Magic in the Warehouse (LINK)

Why Mohnish Pabrai Likes GM, Fiat, and Southwest Air (LINK)

Why is Customer Acquisition Cost (CAC) like a Belly Button? - by Tren Griffin (LINK)

Howard Buffett Steps Down From Coke Board to Focus on Charity [H/T Will] (LINK)

Kevin Kelly's updated version of his essay "1,000 True Fans" (LINK)

Understanding Social Platforms (free eBook) (LINK)

Is Sugar Killing Us? - by Gary Taubes (LINK)
Related book (Taubes' new book, which will be released December 27th): The Case Against Sugar
Scott Adams' "Persuasion Reading List," updated to include the book Impossible to Ignore (LINK)

Books of the day:

The Age of Wonder: The Romantic Generation and the Discovery of the Beauty and Terror of Science - by Richard Holmes

Sir William Herschel: His Life and Works

Saturday, December 10, 2016

Seneca on learning from the great minds of the past

This reminded me of Charlie Munger's comment about making friends among the eminent dead. From On the Shortness of Life:
...if it is our wish, by greatness of mind, to pass beyond the narrow limits of human weakness, there is a great stretch of time through which we may roam. We may argue with Socrates, we may doubt with Carneades, find peace with Epicurus, overcome human nature with the Stoics, exceed it with the Cynics.… We may fairly say that they alone are engaged in the true duties of life who shall wish to have Zeno, Pythagoras, Democritus, and all the other high priests of liberal studies, and Aristotle and Theophrastus, as their most intimate friends every day. No one of these will be ‘not at home,’ no one of these will fail to have his visitor leave more happy and more devoted to himself than when he came, no one of these will allow anyone to leave him with empty hands; all mortals can meet with them by night or by day. 
...No one of these will force you to die, but all will teach you how to die; no one of these will wear out your years, but each will add his own years to yours; conversations with no one of these will bring you peril, the friendship of none will endanger your life, the courting of none will tax your purse. From them you will take whatever you wish; it will be no fault of theirs if you do not draw the utmost that you can desire. What happiness, what a fair old age awaits him who has offered himself as a client to these! He will have friends from whom he may seek counsel on matters great and small, whom he may consult every day about himself, from whom he may hear truth without insult, praise without flattery, and after whose likeness he may fashion himself.

[H/T Massimo]

Friday, December 9, 2016


Michael Lewis on Charlie Rose discussing his new book, The Undoing Project (video) (LINK)

Latticework Of Mental Models: Hyperbolic Discounting (LINK)

Robert Shiller on CNBC (video) (LINK)

Tim Ferriss on CNBC discussing his new book, Tools of Titans (video) (LINK)

What Comes After Mobile? - by Benedict Evans (LINK)

Speaking Truth to Power: An Interview With Peter Buffett (LINK)
Related book: Life is What You Make It: Find Your Own Path to Fulfillment

Serenity and stability...

From The Daily Stoic:
“For if a person shifts their caution to their own reasoned choices and the acts of those choices, they will at the same time gain the will to avoid, but if they shift their caution away from their own reasoned choices to things not under their control, seeking to avoid what is controlled by others, they will then be agitated, fearful, and unstable.” —EPICTETUS 
...Epictetus is reminding you that serenity and stability are results of your choices and judgment, not your environment. If you seek to avoid all disruptions to tranquility—other people, external events, stress—you will never be successful. Your problems will follow you wherever you run and hide. But if you seek to avoid the harmful and disruptive judgments that cause those problems, then you will be stable and steady wherever you happen to be.

Thursday, December 8, 2016


Information on the documentary "Becoming Warren Buffett," that airs January 30th on HBO (LINK)

Google Makes So Much Money, It Never Had to Worry About Financial Discipline—Until Now [H/T Matt] (LINK)

Facebook's Investors Criticize Marc Andreessen For Conflict of Interest (LINK)

Why active fund managers should cheer the rise of ETFs (LINK)

A Short History Of The Most Important Economic Theory In Tech (LINK)
Twenty years ago, W. Brian Arthur popularized a concept that forever changed Silicon Valley—with a little help from Cormac McCarthy.
Freakonomics Radio (podcast): Bad Medicine, Part 2: (Drug) Trials and Tribulations (LINK)
How do so many ineffective and even dangerous drugs make it to market? One reason is that clinical trials are often run on "dream patients" who aren't representative of a larger population. On the other hand, sometimes the only thing worse than being excluded from a drug trial is being included.
Brain Pickings: Tim Ferriss on How He Survived Suicidal Depression and His Tools for Warding Off the Darkness (LINK)
Related book: Tools of Titans
Massimo Pigliucci on Seneca's essay "On the Shortness of Life" (LINK)
Related book (which includes a couple of other essays): On the Shortness of Life 
Related audiobook: On the Shortness of Life, On the Happy Life, and Other Essays: Essays, Volume 1
National Geographic’s Best Photographs of 2016 (LINK)

Wednesday, December 7, 2016


Warren Buffett Says Donald Trump Won't Derail the Economy [H/T Will] (LINK)

Transcript of the 2016 FRMO Corporation Annual Meeting of Shareholders [H/T Daniel] (LINK)

OpenDoor: A Startup Worth Emulating - by Ben Thompson (LINK)

Tim Ferriss on the James Altucher podcast (Part 1) (LINK)
Related book: Tools of Titans
From Deep Tallies to Deep Schedules: A Recent Change To My Deep Work Habits - by Cal Newport (LINK)
Related book: Deep Work
Scientists Turn Nuclear Waste into Diamond Batteries That’ll Last for Thousands of Years (LINK)

Covering the Cops - By Calvin Trillin [A 1986 article described by Charles Duhigg (on the James Altucher podcast) as being "one of the best-written pieces on the face of the planet."] (LINK)

[Trillin is also the author of Messages from My Father, a book one of Charlie Munger's children once sent to him, and in which Munger then sent to the rest of his family. See pages 44-45 of Poor Charlie's Almanack for the story.]

Tuesday, December 6, 2016


My Favorite Books of 2016 - by Bill Gates (LINK)
The books: 1) String Theory - by David Foster Wallace; 2) Shoe Dog - by Phil Knight (also a great audiobook narration); 3) The Gene - by Siddhartha Mukherjee; 4) The Myth of the Strong Leader - by Archie Brown; 5) The Grid - by Gretchen Bakke
The Bad Side of a Good Idea - by Morgan Housel (LINK)
The number of publicly traded U.S. companies peaked in 1996 at 7,322. Today there are just over 3,700, according to Wilshire Associates. The U.S. population has risen nearly 50% since 1975, and real GDP has tripled. But the number of public companies has declined 21%. 
Understanding why this happening, how we got here, and what we can do about it is an important topic we wanted to tackle. So we put together a report.
Bill Gross' December 2016 Investment Outlook (LINK)

A chat between T. Boone Pickens and Joe Nocera (video) (LINK)

a16z Podcast: Health Data — A Feedback Loop for Humanity (LINK)

Edge #483: How Should a Society Be? - A Conversation With Brian Christian (LINK)
Related book: Algorithms to Live By: The Computer Science of Human Decisions
Michael Lewis on CNBC (Video 1, Video 2) [Lewis' comment about Amos Tversky's advice for people to get out of anything they don't want to be doing: "[Tversky] said don't worry about making up an excuse for not being there. Just get up and start walking, and it's amazing how quickly your mind will formulate the words as to why you have to leave."]

As Michael Lewis makes the rounds for his new book, Jeff Gramm linked to a couple of his older articles that may of interest: 1) Milken's Morals, and Ours - By Michael Lewis (1990); and 2) The Master of Money - By Michael Lewis (2009) [a review of The Snowball, Alice Schroeder's biography on Warren Buffett]

Also released today: Tools of Titans - by Tim Ferriss

Book of the day: My Voice Will Go with You: The Teaching Tales of Milton H. Erickson

Monday, December 5, 2016


From Michael Lewis, a Portrait of the Men Who Shaped ‘Moneyball’ (LINK)
Related book (released tomorrow): The Undoing Project
Video: Author Michael Lewis on "The Undoing Project" [H/T Linc] (LINK)

There’s a Big New Investor in Stock Markets: The State (LINK)
Two of the world’s most important stock markets have a big new investor—the state.
About 30% of all the companies in Japan’s three main equity indexes now count the country’s central bank as one of their top 10 shareholders, according to a Wall Street Journal analysis of data as of the end of September. Six years ago, the Bank of Japan’s presence in the market was trivial.
In China, two major state-owned investment funds that are part of the so-called national team have become top 10 shareholders in 39% of listed companies over the past year, according to UBS, which analyzed shareholdings as of the end of September.
Huawei’s Hard-Charging Workplace Culture Drives Growth, Demands Sacrifice [H/T Matt] (LINK)

Stephen Hawking: This is the most dangerous time for our planet (LINK)
We can’t go on ignoring inequality, because we have the means to destroy our world but not to escape it
A few notes I took after reading Michael Mauboussin’s Base Rate book - by Stefan Cheplick (LINK)

Latticework of Mental Models: Illusion Of Control (LINK)

The myth of quick - by Seth Godin (LINK)

Five Things You Notice When You Quit the News (LINK)

Some nice thoughts about reading in a Tweetstorm from Patrick O’Shaughnessy (LINK)

For Kindle readers, I just noticed that some of the books that Charlie Munger has recommended have been made available in Kindle format over the last few years, such as: Models of My Life, Ice Age, and A Matter of Degrees.

Saturday, December 3, 2016


The Formula for Valuing All Assets (LINK)

25iq: A Dozen Things I’ve Learned About Negotiation - by Tren Griffin (LINK)

John Carreyrou and Michael Siconolfi of The Wall Street Journal discuss the investigation of Theranos (video) (LINK)

Dallas Stares Down a Texas-Size Threat of Bankruptcy [H/T @pcordway] (LINK)

Southeastern Asset Management's fall webcast transcript [H/T @chriswmayer] (LINK)

Mutual Fund Observer, December 2016 (LINK)

James Gleick on the Masters in Business podcast (LINK)
Related books: 1) Time Travel: A History; 2) The Information: A History, A Theory, A Flood; 3) Chaos: Making a New Science (I remember Robert Sapolsky saying this was one of the first-ever books he immediately started re-reading when he finished it. He also assigned it to his students, in what I believe may have been his Human Behavioral Biology course.); 4) Genius: The Life and Science of Richard Feynman; 5) Isaac Newton
Exponent podcast: Episode 097 — Google Versus AWS (LINK)

John Donahoe: Dump the Myth of the High Achiever (article and video) [H/T @anuhariharan] (LINK)

If you're looking for holiday gift ideas, Kevin Kelly's Cool Tools book is worth considering. He also has a Cool Tools blog and email newsletter.

Friday, December 2, 2016

Seth Klarman on liquidity

From Margin of Safety:
When investors do not demand compensation for bearing illiquidity, they almost always come to regret it. 
Most of the time liquidity is not of great importance in managing a long-term-oriented investment portfolio. Few investors require a completely liquid portfolio that could be turned rapidly into cash. However, unexpected liquidity needs do occur. Because the opportunity cost of illiquidity is high, no investment portfolio should be completely illiquid either. Most portfolios should maintain a balance, opting for greater illiquidity when the market compensates investors well for bearing it. 
A mitigating factor in the tradeoff between return and liquidity is duration. While you must always be well paid to sacrifice liquidity, the required compensation depends on how long you will be illiquid. Ten or twenty years of illiquidity is far riskier than one or two months; in effect, the short duration of an investment itself serves as a source of liquidity. 
...In times of general market stability the liquidity of a security or class of securities can appear high. In truth liquidity is closely correlated with investment fashion. During a market panic the liquidity that seemed miles wide in the course of an upswing may turn out only to have been inches deep. Some securities that traded in high volume when they were in favor may hardly trade at all when they go out of vogue.   
When your portfolio is completely in cash, there is no risk of loss. There is also, however, no possibility of earning a high return. The tension between earning a high return, on the one hand, and avoiding risk, on the other, can run high. The appropriate balance between illiquidity and liquidity, between seeking return and limiting risk, is never easy to determine. 

Thursday, December 1, 2016


Business Blunder: Pancake Flipper Al Lapin Jr. & International Industries (IHOP) (LINK)

IP Capital (Brazil) with a discussion on Amazon in its Q3 report (LINK)

The Absolute Return Letter, December 2016 (LINK)

Michael Hudson and Steve Keen discussing macro (Real Vision TV transcript) (LINK)

Macro Voices podcast -- Art Berman: OPEC Production Cut, Crude Oil Outlook (LINK)

An interesting podcast worth checking out: The Distance [H/T Aaron] (LINK)
The Distance is a podcast by Basecamp about longevity in business, featuring the stories of businesses that have endured for at least 25 years and the people who got them there.
Freakonomics Radio (podcast) -- Bad Medicine, Part 1: The Story of 98.6 (LINK)
We tend to think of medicine as a science, but for most of human history it has been scientific-ish at best. In the first episode of a three-part series, we look at the grotesque mistakes produced by centuries of trial-and-error, and ask whether the new era of evidence-based medicine is the solution.
Brain Pickings -- Genes and the Holy G: Siddhartha Mukherjee on the Dark Cultural History of IQ and Why We Can’t Measure Intelligence (LINK)
Related book: The Gene: An Intimate History
It’s Personal: Five Scientists on the Heroes Who Changed Their Lives (LINK)

World's Largest Cluster of Sinkholes Discovered (LINK)

Seneca on Cato: the best quotes (LINK)