Related book: The Case against EducationSurgical Checklists Save Lives — but Once in a While, They Don’t. Why? - by Siddhartha Mukherjee (LINK)
Related books: 1) An Extraordinary Time; 2) The Great A&P; 3) The BoxCialdini Asks: Richard Thaler (video) [H/T ValueWalk] (LINK)
Related previous link: All about Network Effects (and podcast follow-up)Tony Robbins on The School of Greatness podcast (LINK)
Related book (released today): Unshakeable: Your Financial Freedom PlaybookCormac McCarthy Explains Why He Worked Hard at Not Working: How 9-to-5 Jobs Limit Your Creative Potential [H/T @mjmauboussin] (LINK)
"We spend a very small amount of time thinking about competition. We spend almost all the time trying to improve the service. And that's because there's nothing we can do about the competition."
"To be great at business is like being great at chess. You have to anticipate which series of things 7, 8 moves down are likely to happen, and by the time in chess you go 7 or 8 moves, the tree of possibilities is at the limits of human understanding. And so you have to prune the branches.'That's probably not going to happen, so I'm not going to explore that.' And if you prune wrong, then you get check-mated. And that's the same thing in business."
"In Amazon's case, I would say they've exceeded the amount of investment that I would have thought they'd put in, and they've spent a tremendous amount of money in the area and some of the shows, as you said, are working out. But I would imagine that from a focus standpoint, it's just not at the core of what they do. The core of Amazon retail and AWS are operational excellence and margin efficiency. And entertainment is a very different thing. But I say that and then I look at Jeff Bezos and I think, not only is he running one of the most amazing companies in the world, but then he's also doing Blue Origin, and also doing The Washington Post. And so I feel like we're competing with an unusual person. And so the normal limits of.... Normally you could not combine all the competencies they're trying to do in Amazon and have that work with entertainment. But because Jeff is there, it's kind of scary."
"I've never taken notes. I never kept notes when I was a student. I just read what I please when I feel like reading it, and I think what I think when I feel like thinking it. And that's my system. I don't think it's the right system for everybody, but it seems to have worked well enough for me to enable me to get by."
Paper money fuels corruption, terrorism, tax evasion and illegal immigration—so the U.S. should get rid of the $100 bill and other large notesa16z Podcast: Ethereum, App Coins, and Beyond (LINK)
Part 1: What Will Happen to Berkshire After Buffett?On Note Taking (LINK)
Part 2: The Beauty of the Berkshire Model
Part 3: The Blemishes of the Berkshire Model
Part 4: Audience Q&A Session 1
Part 5: Audience Q&A Session 2
Related book: Where Good Ideas Come From
Related quote: "One of the most important commitments I've learned is that anytime you learn anything, and you find it has any form of value, the most important thing you want to do is--while you're still in state, while it's still important, while it's still in your mind--you want to take some form of action.... Write down two or three key principles that you want to remember, or action items, and ideally do something to share it or do something to act on it today. Remember, knowledge is not power. Knowledge is potential power. If you really look at what makes someone successful versus not, it all comes down to execution. Execution trumps knowledge every day of the week." -Tony Robbins (source)The Rise and Fall of American Growth (audio) (LINK)
Related book: The Rise and Fall of American GrowthDimon Says Online Lenders’ Funding Not Secure in Tough Times (LINK)
Related previous post: A quick diversification thought...
We have a choice about where to aim the lens of our attention. We can relive past injustices, settle old grudges and nurse festering sores. We can imagine failure, build up its potential for destruction, calculate its odds. Or, we can imagine the generous outcomes we're working on, feel gratitude for those that got us here and revel in the possibilities of what's next.Tony Robbins now has a business podcast (LINK)
Related book: From Third World to First: The Singapore Story - 1965-2000Secret Tut Chamber? Egypt Calls Experts To Examine Evidence (LINK)
Related 2002 documentary: World of Mysteries - Tutankhamun
Mr Gawande discovered that the good checklist is short but not too short. If the list is long, none of the items on it are taken very seriously. You can easily persuade people to agree to things when you ask them to mechanically click or tick their way through a list of questions. Consider the lack of attention you give to the many privacy questions asked by websites or questions on an immigration form. It turns out you can easily persuade people to declare their involvement in genocide or intention to subvert the constitution of the US by inserting the relevant question in a long list of immigration queries, all of which expect the answer yes.
So the good checklist is selective – it doesn’t cover mistakes that are rarely made; no one goes on holiday without their suitcase. Or mistakes that don’t matter – toothpaste is available almost everywhere.
Flying – and surgery – lend themselves to checklists because there is a large element of routine, and because the consequences of an elementary error can be devastating. The first factor makes it possible to compile a useful list, the second encourages people to use it.
But Mr Gawande’s most important discovery was that the power of the checklist came from a less obvious source. The list empowers members of a team to monitor each other. Adherence to the list allows the nurse to correct the surgeon, the co-pilot to review the captain. The successful travel list is likely to be a family rather than an individual endeavour.
At a press conference in 2001, when Warren Buffett was asked how he evaluated new business ideas, he said he used 4 criteria as filters.
- Can I understand it? If it passes this filter,
- Does it look like it has some kind of sustainable competitive advantage? If it passes this filter,
- Is the management composed of able and honest people? If it passes this filter,
- Is the price right? If it passes this filter, then we write a check
Related book: On the MoveWhy These 10 Famous Thinkers Napped (LINK)
Since the Beckman was founded, the interdisciplinary model has spread around the world, countering the trend towards specialization that had dominated science since the Second World War. Cross-cutting institutes have sprouted up in the United States, Europe, Japan, China and Australia, among other places, as researchers seek to solve complex problems such as climate change, sustainability and public-health issues. The interdisciplinary trend can be seen in publication data, where more than one-third of the references in scientific papers now point to other disciplines. “The problems in the world are not within-discipline problems,” says Sharon Derry, an educational psychologist at the University of North Carolina at Chapel Hill who studies interdisciplinarity. “We have to bring people with different kinds of skills and expertise together. No one has everything that's needed to deal with the issues that we're facing.”
Book of the day (mentioned in the above article): The New Production of Knowledge: The Dynamics of Science and Research in Contemporary SocietiesEven so, supporters of interdisciplinary research say that it has been slow to catch on, and those who do cross academic disciplines face major challenges when applying for grants, seeking promotions or submitting papers to high-impact journals. In many cases, scientists say, the trend is nothing more than a fashionable label. “There's a huge push to call your work interdisciplinary,” says David Wood, a bioengineer at the University of Minnesota in Minneapolis. “But there's still resistance to doing actual interdisciplinary science.”
Related book: The Education of a Value InvestorDavid Tepper: Good time to take money off the table (video) (LINK)
“If cars are better—and they clearly are—drivers must be worse (adjusted for mileage),” Mr. Buffett said in an email. Given that mileage is up only around 3%, Mr. Buffett said he found it hard to draw any other inference from the data than distracted driving to explain the much larger jump in fatalities this year.Warren Buffett: Poverty In The U.S. 'Makes No Sense' (LINK)
Benjamin Wey, a Wall Street financier who helped numerous Chinese companies get access to U.S. markets through “reverse mergers,” was arrested Thursday and charged with manipulating the companies’ shares to allegedly net himself tens of millions of dollars in illegal profits.CREATIVE DESTRUCTION POWERED BY ARM (LINK)
Related book: Applied Minds: How Engineers ThinkWhat Is Coding? (LINK)
Related books:
Code: The Hidden Language of Computer Hardware and Software
But How Do It Know? - The Basic Principles of Computers for EveryoneBrain Pickings: Jared Diamond on the Root of Inequality and How the Mixed Blessings of “Civilization” Warped Our Relationship to Daily Risk (LINK)
Related book: Guns, Germs, and Steel: The Fates of Human Societies
Related documentary (DVD): Guns, Germs, and Steel [Also on YouTube, HERE.]
Related book: Learn or Die [This book was also released on Audible a couple of days ago.]Howard Marks on Bloomberg TV, discussing the topic of his last memo (video) [H/T ValueWalk] (LINK)
Related book: Zero to OneHayman Capital Targets Shire in Next Pharma Battle (LINK)
The firm is a fundamental economic unit of contemporary human societies. Studies on the general quantitative and statistical character of firms have produced mixed results regarding their lifespans and mortality. We examine a comprehensive database of more than 25 000 publicly traded North American companies, from 1950 to 2009, to derive the statistics of firm lifespans. Based on detailed survival analysis, we show that the mortality of publicly traded companies manifests an approximately constant hazard rate over long periods of observation. This regularity indicates that mortality rates are independent of a company's age. We show that the typical half-life of a publicly traded company is about a decade, regardless of business sector. Our results shed new light on the dynamics of births and deaths of publicly traded companies and identify some of the necessary ingredients of a general theory of firms.Can you win at anything if you practise hard enough? [H/T @tferriss] (LINK)
Related book: Bounce: Mozart, Federer, Picasso, Beckham, and the Science of SuccessThe Healing Power of Your Own Medical Records (LINK)
DANIEL KAHNEMAN: Before asking you what are the questions you are asking yourself, I want to say that I've now read your book Sapiens twice and in that book you do something that I found pretty extraordinary. You cover the history of mankind. It seems to be like an invitation for people to dismiss it as superficial, so I read it, and I read it again, because in fact, I found so many ideas that were enriching. I want to talk about just one or two of them as examples.
Your chapter on science is one of my favorites and so is the title of that chapter, "The Discovery of Ignorance". It presents the idea that science began when people discovered that there was ignorance, and that they could do something about it, that this was really the beginning of science. I love that phrase.
And in fact, I loved that phrase so much that I went and looked it up. Because I thought, where did he get it? My search of the phrase showed that all the references were to you. And there are many other things like that in the book.
I had a conversation a few years back with Charlie Munger and he mentioned that he always had someone to talk to about investments. So I said, "Oh you mean like Mr. Buffett." And he said, "Well, it wasn't always Warren. But I've always had someone to talk to." In fact recently he said that -- I think at the Daily Journal Meeting -- even Einstein needed someone to talk to. Each human brain processes the same information differently. And to the extent that you can find someone who's thoughtful and not processing data similar to you, it would be useful to have those conversations. But I think that that is different from having a team. So if you have, say, analysts under you, and they report to you, then the incentives and the dynamics of that exchange are very different from having a peer where there is no vested interest of any kind, and [it's just] two people having conversations about thoughts. So I never appreciated... I think for most of the history of Pabrai Funds I operated making decisions on my own. And I have a good friend, Guy Spier, and usually he and I will talk about things that either he's looking at or I'm looking at, and many times we don't agree. And many times I'll buy things that he won't buy or he'll buy things that I don't buy, and so on. So if you look at our portfolios, they are way different from each other. But I've found it very useful to have those conversations because, actually, Guy runs a fund on his own. Neither of us has any economic interest in the other fund. We don't gain or lose anything by what happens. And I'm confident that he's confident that we are candid in sharing our beliefs and perspectives. And that's useful.
So I think that it is valuable to have that type of a relationship, and it doesn't even need to be an off-the-charts person. I think just having someone else... One of the things that happened just this year actually, in Omaha, I was at this brunch and Charlie Munger was there. And he was sitting there and nobody was next to him. So I decided to help the guy out and give him some company, just so he doesn't get bored, and I took Guy with me. And I said, "Charlie, this is the person I talk to about my investments." And Charlie immediately got very interested. He's kind of checking Guy out. And then Guy says to him, "I don't know why Mohnish cares to talk to me because I really have nothing to add to anything he usually comes up with." So Charlie says, "Well, going through the process of talking to someone else about your ideas requires you to put them together in a certain kind of format and manner that can be articulated to the other person. And that process is useful in seeing some flaws in your argument." So then Guy says to Charlie, "You know, Mohnish could actually just do that with a monkey." And Charlie says, "Yes, but the problem is that Mohnish would know it's a monkey. And so it wouldn't work."
So with Charlie, I saw in that interaction, and I've seen it when I've talked to him, he puts a huge amount of weight on that notion of having another person to bounce things off of. And so I actually don't move on anything now until I've had at least one conversation, and sometimes many conversations [with Guy]. And as I said, we may not agree, but exactly as Charlie said, it forces me to put my thoughts in an organized manner, and hear some perspectives that may be different and such. So it's a huge advantage, but I think you have to set it up where there's no vested interest, there's no axe to grind, and it's a trusted relationship.
In this piece, I’m going to show that the profit margin expansion seen in the U.S. corporate sector over the last two decades has been driven largely by gains in the financial and technology sectors. I’m then going to examine arguments for and against the sustainability of this shift.Barry Ritholtz talks to Bill Gross (Part 2) (LINK)
Last week, the ECB announced that it will begin a new program of quantitative easing on March 15 – a delay that allows plenty of time for various rugs to be pulled out, if the experience of recent years is informative. Assuming that the program proceeds as announced, the ECB envisions bond purchases of 60 billion euros per month. Fully 92% of these purchases must be made by the central banks of individual countries in the Eurosystem, with the ECB sharing the risk of losses on only 20% of it (12% being investment-grade institutional debt, and 8% being the sovereign debt of Euro-area countries). This was essentially as expected, but - thus far - without an option for national central banks to treat their share of purchases as discretionary. I still suspect that this shoe will drop in the weeks ahead, but there's actually a much more important factor driving our outlook.Broyhill Case Study: Time Warner Value Creation (LINK)
Once a year, I consider the question, “If I could own only one stock, what would it be?” This year I wrote about Cowen Group, Inc. & Co. (COWN) in my first-quarter letter. Cowen is traditionally known for being a boutique broker-dealer which has been around for nearly 100 years. Actually, the public company, Cowen Group, Inc. & Co., was bought a few years ago by Ramius LLC, which was a 20-year-old privately owned alternative equity management firm. It was a very successful firm and bought the broker-dealer to have a permanent capital base, expand its operations and capitalize on the synergies between the two firms. What we have seen is a very successful turnaround of the broker-dealer business—it has now been profitable for the last five quarters. Ramius LLC has grown its assets under management from $9.4 billion to $11.6 billion from year end to July 1, 2014. The stock still trades below its tangible asset value despite having two businesses that are operating very solidly now. We think it is a very misunderstood company. If you said “Cowen Group, Inc. & Co.,” most investors would still think of the broker-dealer business, which was in trouble a few years ago, and not even realize that this successful $11+ billion asset management business was the driving force behind the company. Additionally, it has very strong leadership. The CEO is Peter Cohen, who was the CEO of Shearson Lehman Hutton from 1983 to 1990. He and his team, who founded Ramius LLC years ago, have very significant stock in the company, so we feel good about the incentive structure.And for those micro-cap investors out there that might be interested, we recently released our Boyles Q4 letter and mentioned two recent purchases: Mastermyne Group Limited (ASX:MYE) and Cambria Automobiles plc (AIM:CAMB). As always, this is for information purposes only and not a recommendation to buy or sell a security. We currently own shares in both companies but that may change at any time. Please do your own work before making an investment decision.