Thursday, February 28, 2019


"Prices do amazing things in securities markets. And when they do something that strikes us as amazing in our direction...we will act. But we do not know today what we’re going to be doing tomorrow.... And there’s this business where somebody says, 'You should have 50 percent of your money in bonds and 35 percent in equities, and 15 —.' We don’t go through anything like that. I mean, we regard that as nonsense." --Warren Buffett (2004)

What the plow and lab-grown meat tell us about innovation - by Bill Gates (LINK)

Warren Buffett Moves the Goalposts! (LINK)

A 300-year lesson in bubble inflation - by Edward Chancellor (LINK)

Broyhill 2018 Annual Letter (LINK)

Where Joel Greenblatt sees value now (video) [H/T Linc] (LINK)

The Perils of Investing Idol Worship: The Kraft Heinz Lessons! - by Aswath Damodaran (LINK)

Status as a Service (StaaS) - by Eugene Wei (LINK)

Money Out of Nowhere: How Internet Marketplaces Unlock Economic Wealth - by Bill Gurley (LINK)

Modern Monetary Theory Isn’t Helping - by Doug Henwood [H/T @cullenroche] (LINK)

What’s the Water at the Church Lab? A Conversation Between George Church and Jorge Conde (LINK)

Conversations with Tyler (podcast): Sam Altman on Loving Community, Hating Coworking, and the Hunt for Talent (LINK)

Corner Office from Marketplace (podcast): Why no Wall Street CEO went to jail after the financial crisis [H/T Linc] (LINK)

The Tim Ferriss Show: Graham Duncan — Talent Is The Best Asset Class (LINK)

Freakonomics Radio: A Good Idea Is Not Good Enough (LINK)

Trailblazers with Walter Isaacson (podcast): Sports Analytics: What’s After Moneyball? (LINK)

The 60 Minutes segment on China's electric car industry from this past Sunday (video) (LINK)

Summary and notes from Brian Arthur's The Nature of Technology: What It Is and How It Evolves (LINK)

Nanotech Injections Give Mice Infrared Vision - by Ed Yong (LINK)

A Troubling Discovery in the Deepest Ocean Trenches - by Ed Yong (LINK)

Wednesday, February 27, 2019

When a man's actions are just and honorable...

From Benjamin Franklin: An American Life:
Through it all, Franklin remained sanguine about the possibility of spies in his midst, even though, shortly after his arrival, he had been warned to be wary by a Philadelphia woman then living in Paris. “You are surrounded with spies who watch your every movement,” she wrote. With an eye more to extolling his virtues than addressing the problem, he sent what became a famous response: 
I have long observed one rule which prevents any inconveniences from such practices. It is simply this: to be concerned in no affairs I should blush to have made public, and to do nothing but what spies may see and welcome. When a man’s actions are just and honorable, the more they are known, the more his reputation is increased and established. If I was sure, therefore, that my valet de place was a spy, as he probably is, I think I should probably not discharge him for that, if in other respects I liked him.

Tuesday, February 26, 2019


In case anyone missed it last week, I think this is the clear winner for the year's best investor letter (though at over 100 pages, "letter" may not be the correct description): Semper Augustus Investments Group: 2018 Annual Letter

Masters in Business Live, with Howard Marks of Oaktree Capital (video) (LINK)

An Investment Algorithm That Works (LINK)

The Value Chain Constraint - by Ben Thompson (LINK)

How a coat on Amazon took over a neighborhood — and then the internet [H/T @emilyleldridge] (LINK)

America’s Religion Is Work - by Derek Thompson (LINK)

Invest Like the Best Podcast: Michael Kitces – The Past, Present & Future of Financial Advice (LINK)

a16z Podcast: Capitalizing on an Autonomous Vehicle Future (LINK)

Acquired Podcast: Instagram Revisited (with Emily White) (LINK)

Pitchfork Economics with Nick Hanauer: Yuval Harari - Unedited Conversation (LINK)

Does Planet 9 Exist? - by Phil Plait (LINK)

Is the World’s Largest Animal Too Reliant on the Past? - by Ed Yong (LINK)

Book of the day (also added to the Business Biographies list): The Making of Harcourt General: A History of Growth Through Diversification 1922-1992


And for those going to the Fairfax Financial Annual Meeting in April, here are some of the other events worth checking out:

Practical History of Financial Markets Course

The Ben Graham Dinner

Ben Graham Centre's 2019 Value Investing Conference

YYX Toronto Value Symposium (early bird rate available for those that just want to attend and not present)

Friday, February 22, 2019

Semper Augustus Investments Group: 2018 Annual Letter

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


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


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

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

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

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

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

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

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

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

Different Kinds of Stupid - by Morgan Housel (LINK)

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

Cultivating the State of Flow (LINK)

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

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

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

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

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

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

Thursday, February 21, 2019

Charlie Munger on cheerfulness

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


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

Wednesday, February 20, 2019


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

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

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

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

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

Graham & Doddsville: Winter 2019 (LINK)

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

First Mover Alpha - by Ben Carlson (LINK)

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

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

Amazon and taxes: a simple primer (LINK)

The Distrust of Intellectual Authority (LINK)

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

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

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

Tuesday, February 19, 2019

Losing your competitive position...

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

Monday, February 18, 2019


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

Martin Capital Management 2018 Annual Report (LINK)

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

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

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

Barry Diller on the Recode Decode Podcast (LINK)

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

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

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

Saturday, February 16, 2019

On the decline of civilizations...

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

Friday, February 15, 2019


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

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

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

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

Rocket Ships - by Ian Cassel (LINK)

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

Managing Technological Innovation: Industry Analysis (LINK)

Exponent Podcast: Publishers vs Apple News (LINK)

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

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

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

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

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

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

Full Charlie Munger CNBC interview

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

Link to video

Link to transcript

Thursday, February 14, 2019

Charlie Munger at the Daily Journal Annual Meeting

Charlie Munger, the 95-Year Old Berkshire Hathaway Vice Chairman & Chairman of the Daily Journal, speaks to shareholders at the newspaper’s annual meeting. Munger, in his usual, no holds barred manner, speaks for two hours. 

Link to video

Wednesday, February 13, 2019


"I will bet you that a lot of years in the future we, or you, will be able to find equities that you understand, or we understand, and that have the probability of returns at 10 percent or greater. Now, once you find a group of equities in that range, and leaving aside the problem of huge sums of money, which we have, then we just buy the most attractive. That usually means the ones we feel the surest about, I mean, as a practical matter. There’s just some businesses that possess economic characteristics that make their future prospects, far out, far more predictable than others. There’s all kinds of businesses that you just can’t remotely predict what they’ll earn, and you just have to forget about them. So, we have, over time, gotten very partial to the businesses where we think the predictability is high. But we still want a threshold return of 10 percent, which is not that great after-tax, anyway." --Warren Buffett (2003)

"Everything we do comes back to opportunity cost. But it, to some extent — in fact, to some considerable extent — we are guessing at our future opportunity cost. Warren is basically saying that he’s guessing that he’ll have opportunities in due course to put out money at pretty attractive rates of return, and therefore, he’s not going to waste a lot of firepower now at lower returns. But that’s an opportunity cost calculation. And if interest rates were to more or less permanently settle at 1 percent or something like that, and Warren were to reappraise his notions of future opportunity cost, he would change the numbers. It’s like [economist John Maynard] Keynes said, 'What do you do when you change your view of the facts? Well, you change your conduct.' But so far at least, we have hurdles in our mind which...involve, implicitly, future opportunity cost." --Charlie Munger (2003)

Who Is On the Other Side? - by Michael Mauboussin (LINK)

Safal Niveshak's Wall of Ideas (LINK)

Part 2 and Part 3 of the Money Control interview with Sanjay Bakshi [H/T Linc]

Skin in the Game: the Tradition of the Captain and His Ship - by Frank Martin (LINK)

The Cost of Apple News  - by Ben Thompson (LINK)

AR Will Spark the Next Big Tech Platform—Call It Mirrorworld - by Kevin Kelly (LINK)

Susan Crawford on the Community Broadband Bits Podcast (LINK)
Related book: Fiber: The Coming Tech Revolution―and Why America Might Miss It
Scott Adams and Naval Ravikant have another chat (video) (LINK)

Conversations with Tyler (podcast): Jordan Peterson on Mythology, Fame, and Reading People (LINK)

Trailblazers with Walter Isaacson Podcast -- Home Cooking: Technology Worth Savoring (LINK)

A review of A Zen Way of Baseball by Sadaharu Oh and David Falkner (LINK)

Small Teams of Scientists Have Fresher Ideas - by Ed Yong (LINK)

Tuesday, February 12, 2019


Bill and Melinda Gates' Annual Letter: We didn’t see this coming (LINK)

Bill Gates interview on The Vergecast (LINK)

Paul Tudor Jones: We have a mania going on in buybacks (video) (LINK)

How Bad Is the China Slowdown? U.S. Companies Offer Some Answers ($) (LINK)

Invest Like the Best Podcast: Alex Danco – Scarcity, Abundance and Bubbles (LINK)

The trap of early feedback - by Seth Godin (LINK)

"And what is this newfound love for the ice giants?" - by Phil Plait (LINK)

Today's Audible Daily Deal has been recommended to me by a couple of people: Prediction Machines: The Simple Economics of Artificial Intelligence

Paul Volcker & Ray Dalio | State of the US Economy & Government

Link to video


Related book: Keeping At It: The Quest for Sound Money and Good Government

Monday, February 11, 2019


"We like to go in heavy. I mean, if we want to invest in a business through the stock market, we want to put a lot of money in. We do not believe in a little of this and a little of that.... Good ideas are too scarce to be parsimonious with once you find them." --Warren Buffett (2003)

Big News for Small Business from Berkshire Hathaway [H/T Linc] (LINK)

How Jeff Bezos Sees the Press: An Interview with the Journalist Brad Stone (LINK)

Forget the 401(k). Let’s Invent a New Retirement Plan. - by Jason Zweig (LINK)

FDR Weighs In on the Buyback Debate - by Jason Zweig ($) (LINK)
Amid the Great Depression, the president warned about the ‘evil’ of companies that weren’t returning enough cash to investors
Star Stockpicker Exits the Hedge Fund Stage ($) (LINK)
The golden age of the star stock picker has come and gone. 
Big names like Peter Lynch, David Einhorn, and Bruce Berkowitz are today either fuzzy memories or else they’ve gone through enough rocky patches to tarnish their once-stellar track records. 
Yet in a little noticed move, the most successful fundamental stock picker of them all quietly stepped down as portfolio manager last month—Steve Mandel of Lone Pine Capital.
Sanjay Bakshi on discovering Buffett, and how investors can profit from inefficient markets (Part 1) [H/T Linc] (LINK)

January 2019 Data Update 8: Dividends and Buybacks - Fact and Fiction - by Aswath Damodaran (LINK)

The Five Families of Feces [H/T @BrentBeshore] (LINK)
The porta-potty business is as dirty as you’d think. But one man keeps coming up smelling like roses.
Lessons from Keith Rabois [H/T @benthompson] (Essay 1, Essay 2)

Zucked author Roger McNamee on the Recode Decode Podcast (LINK)
Related book: Zucked: Waking Up to the Facebook Catastrophe
Breathe easy: You have an extra 600 million years before Andromeda crashes into us - by Phil Plait (LINK)

The Women Who Contributed to Science but Were Buried in Footnotes - by Ed Yong (LINK)

Friday, February 8, 2019


"We’d love to have a business that could earn 20 percent on a hundred million now. And if we put a billion more in it, it would earn 20 percent more on that billion. But...those businesses are so rare. There are a lot of promises of those businesses, but we’ve practically never seen one. There’ve been a few. Most of the great businesses generate lots of money. They do not generate lots of opportunities to earn high returns on incremental capital." --Warren Buffett (2003)

A fantastic collection of book notes and excerpts [H/T Matt] (LINK)

Why Time Horizon Works - by Morgan Housel (LINK)

My View On: The Green New Deal - by Cullen Roche (LINK)

There's No Good Reason to Trust Blockchain Technology (LINK)

If Self-Discipline Feels Difficult, Then You’re Doing It Wrong - by Mark Manson (LINK)

Five Good Questions Podcast: Kenneth Jeffrey Marshall - Good Stocks Cheap (LINK)

Exponent Podcast: Why Exponent Isn’t On Spotify (LINK)

Evan Osnos joins Dorothy Wickenden to discuss the new Republican and Democratic rhetoric about economic inequities, as the parties look toward the 2020 elections. (podcast) (LINK)

Thursday, February 7, 2019

Howard Marks on the current environment

Here are some comments from Howard Marks on the Oaktree Capital Group earnings call from a couple of days ago that I thought were worth highlighting:
So where do we stand today? I see the fourth quarter price action as a dash of cold water that cooled off some unwarranted enthusiasm. All of a sudden, credit spreads widened, and it was hard to raise money or refinance debt. I take these as signs of helpful prudence. That said, those losses now have been recovered to a large degree, so I'd say investors were chastened but back to being optimistic, especially with developments with the Fed and trade with China now perceived as positive. 
I continue to believe that asset prices are relatively high, and as the fourth quarter proved, investor psychology is fragile. As we begin 2019, the outlook for defaults in corporate credit remains quite benign, with strategists projecting high yield bond and leveraged loan defaults about 1.5%, well below the long-term averages in the areas of 3%. Thus, a supply of U.S. distressed, tradeable investment opportunities may continue to be modest. We saw in the fourth quarter the ability of our teams to deploy capital into some high-quality traded credit opportunities in weak times. As 2019 has started off with a relief rally, the focus of the distressed debt teams active pipeline has reverted to private deals in Europe and Asia and attractive opportunities in sectors such as telecom, healthcare and retail. 
Now is a good time to have dry powder, and we do, given the outstanding amounts of low-quality debt and fallen angel candidates, BB debt that could be downgraded. They are significantly greater than they were prior to past times of expanded opportunity. 
On the one hand, the issuance of low-grade debt has been very strong, plus the issuance of BBBs, which has the potential to become low-rated, and the -- it may or may not be synonymous, but the standards for credit issuance has been very loose. I put out a memo on September 26 entitled "The Seven Worst Words in the World," Too Much Money Chasing Too Few Deals. The consequence of that condition is always a weakening in the strength of deals, in addition to an increase in the pricing, so more issuance, lower quality and, obviously, some fragility in investor attitudes. Some things did get cheap in the fourth quarter, and we were able to put $4 billion to work, which I think is a good plus. Not merely the existence of the opportunities, but the fact that despite the crumbling -- seemingly  crumbling environment around us, our people were able to gut it out and put money to work. And that's what we should do, but it's always nice to see it happen.  
On the other hand, as you indicate, part of the weakening of deal structures over the last several years has been the disappearance of covenants. And when there are no covenants, it means everything else being equal that any distress that does arise, defaults, I should say, that does arise, tends to happen later. It can't happen for technical reasons, breach of covenant, and it can only happen for money reasons. So all things being equal, the defaults will come later than they otherwise would have. But they'll probably be worse because by the time companies default having been able to go on for -- and do business for a long time in breach of covenants, they would tend to dissipate more of their assets. So the rating agencies, for example, have estimated that recoveries will be considerably less from this round of financing than at the historic levels. So many crosscurrents.  
I think that I would sum up by saying that the stage has been set through what we call around here the unwise extension of credit and in particular, the heavy reliance on adjusted EBITDA for an elevated -- for our fourth occasion of elevated opportunities. We had great opportunities in the funds that were formed in 1991, '01/'02, '06/'07, great opportunities. And we think that the pieces are in place for the fourth such opportunity, but we need an igniter. And that will probably require a recession because, especially given the absence of covenants, you're unlikely to get much of a pickup in defaults and, thus, in opportunities for us until you get a recession. 
And I'll throw in that in the fourth quarter, in December, when things were cascading down, I was starting to salivate. I mean, we were seeing debt prices plummet, spreads widen out very substantially by a couple hundred basis points, total inability to issue a high yield bond in December for the first time in many years. We had a month without any issuance. So at that moment, we were optimistic both as to the timing and the size of Opps XI and, of course, with the recovery. We're a counter-indicator, so with the recovery, now we're less optimistic. But these things will change a lot between now and then. 
I'd love to say we're smarter. But most of it is that our approach to investing emphasizes good participation in benchmark returns when they're good and protection against declines when there are declines. And so we really get to show our stuff in tough quarters, and I think we did, as a result. I think that's most of it. There's nothing specific. For many years, we've been fully invested but cautiously. And the fourth quarter was a period when it paid off extremely well, and there haven't been many such periods. But I'm proud of having remained fully invested. That's really the key.  
Our caution has permitted us the confidence to remain fully invested over this period. And that means that we have participated in most or all or sometimes even more than the benchmark returns. And then, when the stuff hits the fan to outperform on the way down, that's really our ideal.


"Charlie and I don’t have the faintest idea what our cost of capital is at Berkshire, and we think the whole concept is a little crazy, frankly. But it’s something that’s taught in the business schools, and you have to be able to answer the questions or you don’t get out of business school. But we have a very simple arrangement in terms of what we do with money—we look for the most intelligent thing we can find to do.... And so, we measure alternatives against each other, and we measure alternatives against dividends, and we measure alternatives against repurchase of shares. But I have never seen a cost of capital calculation that made sense to me." --Warren Buffett (2003)

"It’s your alternatives that are competing for the use of your time or money, that matter in judging whether you take action or not. And of course, those vary greatly from time to time and from company to company. And we tend to make all of our financial decisions based on our opportunity costs, just as like they teach in freshman economics. And the rest of the world has gone off on some crazy kick where they can create a standard formula, and that’s cost. They even get a cost of equity capital for some business that’s old and filthy rich. It’s a perfectly amazing mental malfunction." --Charlie Munger (2003)

Spotify’s Podcast Aggregation Play - by Ben Thompson (LINK)

How Globalization Saved the World and Damned the West - by Derek Thompson (LINK)

A quick note on the resignations at the top of National Australia Bank - by John Hempton (LINK)

Freakonomics Radio: Raghuram Rajan Predicted the Last Crisis. What’s the Next One? (LINK)

American Innovations Podcast: Rubber | Trials and Tribulations | 3 (LINK)

A New Way to Keep Mosquitoes From Biting - by Ed Yong (LINK)

Wednesday, February 6, 2019


"We conclude that the concentration of wealth is natural and inevitable, and is periodically alleviated by violent or peaceable partial redistribution. In this view all economic history is the slow heartbeat of the social organism, a vast systole and diastole of concentrating wealth and compulsive recirculation." --Will and Ariel Durant (The Lessons of History)

Mark and Jonathan Boyar chat with ⁦‪Kate Welling (LINK)

Baupost’s Seth Klarman Hires Investment Chief to Manage Foundation’s Assets [H/T Will] (LINK)

Unnerving Words of an Idiosyncratic Genius (LINK)

A Crypto-Mystery: Is $136 Million Stuck or Missing? ($) (LINK)

Four Key Product Principles from WeChat’s Creator (LINK)

M33 Followup: The massive and fierce beauty of an enormous stellar nursery - by Phil Plait (LINK)

Tuesday, February 5, 2019


"I get these people that...want to send me books with EBITDA in it, and I just tell them, you know, 'I’ll look at that figure when you tell me you’ll make all the capital expenditures.' If I’m going to make the capital expenditures, there’s very few businesses where I think I can spend a whole lot less than depreciation year after year and maintain the economic strength of the business. So I think the EBITDA has been a term that has cost a lot of investors a lot of money.... It’s not a non-cash expense. It’s a cash expense. You just spend it first. I mean the cash is gone, and it’s a delayed recording of cash. How anybody can turn that into something they use as a metric that talks about earnings is beyond me. " --Warren Buffett (2003)

"I think you would understand any presentation using the word EBITDA, if every time you saw that word you just substituted the phrase, 'bullshit earnings.'" --Charlie Munger (2003)

Excerpts from Warren Buffett’s shareholder letters over the years discussing share repurchases (LINK)

Thoughts on Share Repurchases and Capital Allocation (July 2018) (LINK)

Where Big Leaps Happen - by Morgan Housel (LINK)

Invest Like the Best Podcast: Keith Wasserman – Real Estate Investing (LINK)

Flip the Script: Drugmakers Blame Middlemen for Price Hikes ($) (LINK)

Transparent Hospital Pricing Exposes Wild Fluctuation, Even Within Miles (LINK)

Facebook: Where Friendships Go to Never Quite Die (LINK)

The Story of the Senate [H/T @jposhaughnessy] (LINK)

This Dinosaur Had a Mohawk of Horns - by Ed Yong (LINK)

Lab Out Loud Podcast: 4000 Exoplanets and Counting (LINK)
For our 200th episode, Lab Out Loud welcomes Phil Plait (The Bad Astronomer) back to the show. Phil joins co-hosts Brian Bartel and Dale Basler to discuss the current status of exoplanet discovery and shares a glimpse of what we might find in the future. Listen to the show to hear Phil discuss new techniques and technology in planet hunting, looking for life on other worlds and the role of science in science fiction.

Monday, February 4, 2019


"I don’t worry about what I don’t know. I worry about being sure about what I do know." --Warren Buffett (2003)

"Mostly, Berkshire, in its history, has bought common stocks that practically couldn’t fail. But occasionally, Berkshire just makes an intelligent gamble where there’s plenty of chance of failure, but there’s enough chance of success so the gamble is worth taking." --Charlie Munger (2003)

Raising Your Own Rates Even if the Fed Won’t - by Jason Zweig (LINK)
The Federal Reserve signaled on Wednesday that it will be “patient” before raising interest rates again, but you should put your money in motion. 
In a few minutes and with a few clicks of a mouse, you can crank up the yield on your cash by two percentage points, often adding hundreds—even thousands—of dollars to your investment income annually. The only hard part is overcoming your own inertia. 
The nearly $8 trillion of cash in savings deposits at commercial banks is earning interest at an average rate of 0.09%. The more than $1 trillion of cash at brokerage firms is paying investors just under 0.3% on average, estimates Peter Crane, president and publisher of Crane Data, a firm that monitors cash and other short-term investments. 
Meanwhile, savings accounts at online banks and short-term U.S. Treasury securities are yielding 2% to 2.5%. Savings accounts are federally insured against loss, generally up to $250,000; U.S. Treasurys are considered risk free.
Real Vision has made the November 2017 conversation between Grant Williams and Marc Cohodes free to the public [since a new conversation was released this past Friday] (video) (LINK)

One-time bond king Bill Gross to retire from Janus Henderson (LINK)

a16z Podcast: Product-Market Sales Fit (What Comes First?) (LINK)

Jack Dorsey talks with Joe Rogan (podcast) (LINK)

Compounding Knowledge (LINK)

T R I A N G U L U M - by Phil Plait (LINK)

Friday, February 1, 2019


"Inflation is always a latent danger to an economy. I mean I always think of inflation as being in remission at all times, because it’s something that has a cause that will recur, in terms of human behavior, from time to time, I think, in terms of how legislatures behave and governments behave. So, I think that the probability of high inflation at some point during the next, say, 20 or 30 years is — it’s not a low probability." --Warren Buffett (2003)

The syllabi of Michael Mauboussin's class at Columbia (HERE) and Jerry Neumann’s class at Columbia (HERE) have some great reading recommendations.

Oaktree Capital's Howard Marks speak from the Context Summit – Jan. 30, 2019 (video) (LINK)

Howard Marks on CNBC (LINK)

Origins of Greed and Fear - by Morgan Housel (LINK)

New Details on Amazon, Berkshire Hathaway, JPMorgan Health Venture Emerge in Court Battle ($) (LINK)

Making sense of insider buys/sells - by Chris Mayer (LINK)

MMT: The Good, the Bad and the Ugly - by Cullen Roche (LINK)

The Absolute Return Letter - February 2019: Another Zimbabwe In the Offing? (LINK)

Fire in Venezuela, Part III of, um, II - by Peter Zeihan (LINK)

Exponent Podcast: 161 — Vigilante Justice (LINK)

American Innovations Podcast: Rubber | Things Heat Up | 2 (LINK)

TED Talk: An astronaut's story of curiosity, perspective and change | Leland Melvin (LINK) [Melvin was also one of the astronauts featured in the excellent National Geographic series "One Strange Rock."]

Astronomers accidentally discover a nearby galaxy in a Hubble image! - by Phil Plait (LINK)

Ancient-human species mingled in Siberia’s hottest property for 300,000 years (LINK)

The Special Sleep That Kicks In During a Sickness - by Ed Yong (LINK)

The Wild Experiment That Showed Evolution in Real Time - by Ed Yong (LINK)