Leucadia Annual Meeting Notes

From The Inoculated Investor blog:

2009 Leucadia Annual Meeting Notes

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Related previous post: Leucadia 2008 Letter to Shareholders

Genius: The Modern View - By David Brooks

A big thanks to Miguel for passing this article along, as it applies to a subject that I am very interested in.

Some people live in romantic ages. They tend to believe that genius is the product of a divine spark. They believe that there have been, throughout the ages, certain paragons of greatness — Dante, Mozart, Einstein — whose talents far exceeded normal comprehension, who had an other-worldly access to transcendent truth, and who are best approached with reverential awe.

We, of course, live in a scientific age, and modern research pierces hocus-pocus. In the view that is now dominant, even Mozart’s early abilities were not the product of some innate spiritual gift. His early compositions were nothing special. They were pastiches of other people’s work. Mozart was a good musician at an early age, but he would not stand out among today’s top child-performers.

What Mozart had, we now believe, was the same thing Tiger Woods had — the ability to focus for long periods of time and a father intent on improving his skills. Mozart played a lot of piano at a very young age, so he got his 10,000 hours of practice in early and then he built from there.

The latest research suggests a more prosaic, democratic, even puritanical view of the world. The key factor separating geniuses from the merely accomplished is not a divine spark. It’s not I.Q., a generally bad predictor of success, even in realms like chess. Instead, it’s deliberate practice. Top performers spend more hours (many more hours) rigorously practicing their craft.

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Related previous post: What it takes to be great

Related books:

Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else

The Talent Code: Greatness Isn't Born. It's Grown. Here's How.

Outliers: The Story of Success

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HERETICAL THOUGHTS ABOUT SCIENCE AND SOCIETY - By Freeman Dyson

At the Wesco Annual Meeting, Charlie Munger said that we should listen more to Freeman Dyson and less to Al Gore. Here’s a good article to start on that path (thanks for the link, Bud). I think the first paragraph is very applicable to investing as well. The public prefers to hear investors and economists on TV (i.e. CNBC) that sound like they know what is going to happen. They make predictions and draw out models, and then end up strongly believing in those models. Very few people seem to go on the financial news stations and say "I just don't know."

1. The Need for Heretics

In the modern world, science and society often interact in a perverse way. We live in a technological society, and technology causes political problems. The politicians and the public expect science to provide answers to the problems. Scientific experts are paid and encouraged to provide answers. The public does not have much use for a scientist who says, “Sorry, but we don’t know”. The public prefers to listen to scientists who give confident answers to questions and make confident predictions of what will happen as a result of human activities. So it happens that the experts who talk publicly about politically contentious questions tend to speak more clearly than they think. They make confident predictions about the future, and end up believing their own predictions. Their predictions become dogmas which they do not question. The public is led to believe that the fashionable scientific dogmas are true, and it may sometimes happen that they are wrong. That is why heretics who question the dogmas are needed.

As a scientist I do not have much faith in predictions. Science is organized unpredictability. The best scientists like to arrange things in an experiment to be as unpredictable as possible, and then they do the experiment to see what will happen. You might say that if something is predictable then it is not science. When I make predictions, I am not speaking as a scientist. I am speaking as a story-teller, and my predictions are science-fiction rather than science. The predictions of science-fiction writers are notoriously inaccurate. Their purpose is to imagine what might happen rather than to describe what will happen. I will be telling stories that challenge the prevailing dogmas of today. The prevailing dogmas may be right, but they still need to be challenged. I am proud to be a heretic. The world always needs heretics to challenge the prevailing orthodoxies. Since I am heretic, I am accustomed to being in the minority. If I could persuade everyone to agree with me, I would not be a heretic.

We are lucky that we can be heretics today without any danger of being burned at the stake. But unfortunately I am an old heretic. Old heretics do not cut much ice. When you hear an old heretic talking, you can always say, “Too bad he has lost his marbles”, and pass on. What the world needs is young heretics. I am hoping that one or two of the people who read this piece may fill that role.

The Economist: A special report on health care and technology

Link to PDF: A special report on health care and technology

Video: Interview with Wang Chuanfu of BYD

In case you missed it, Charlie Munger called BYD a “damn miracle” at the Berkshire Hathaway Annual Meeting, and gave very high praise to Wang Chuanfu and the thousands of engineers at BYD.

I found these videos on Simoleon Sense. Miguel does such an amazing job with his blogs that I decided to give him his own box on the right hand side so that anyone reading this blog can have quick access to his blogs.

Related Link: What business is BYD really in?

Introducing the Kindle DX

Amazon.com has just introduced the new and larger Kindle DX to the world on its HOME PAGE (video demonstration: HERE).

You can pre-order it now for $489. I would recommend getting the cover and clip-on light as well:

Kindle DX

Amazon Kindle DX Leather Cover

Mighty Bright XtraFlex2 Clip-On Light

GMO: Jeremy Grantham's 1Q 2009 letter

The Loss of “Near Certainties” in Investing

First, let me lament the loss of near certainties in investing. The financial and economic collapse that I described as “the most widely predicted surprise in the history of finance” about 18 months ago is behind us. More precisely, we believed that bubbles had formed in global profit margins, risk premiums, and U.S. and U.K. housing prices, and that all three were “near certainties” to break, with severe consequences for the economic and financial system. All have thoroughly burst and are in their overcorrection phase with the single exception of U.K. house prices, which I’m confident will do their duty. Normally there are, of course, no near certainties in investing. Life is not meant to be that easy. Asset allocators have been blessed in the last 10 years with a large collection of extraordinary outliers. As my favorite quote by Mandelbrot (1983) says, “Even though economics is a very old subject, it has not truly come to grips with the main difficulty, which is the inordinate practical importance of a few extreme events.” If this last 10 years did not prove him right, nothing will. Since 1988, we have been offered 8 or 10 2-sigma events. (A 2-sigma event is our definition of an important bubble or bust.) All of these events were bubbles, and all behaved themselves by bursting. Now, sadly, there are probably none. Government bonds are the one serious candidate. In our opinion, they are badly overpriced but probably not by enough to justify the bubble title. Global equity markets are still cheap, but in major markets are nowhere near 2-sigma, 40-year bust levels. Some small-scale 2-sigma bargains may exist in the fixed income markets in rate differentials, but need skillful analysis and knowledge to disentangle from value traps. And, they are a very far cry from, say, the opportunities offered by buying credit default swaps at a handful of basis points on overleveraged financials in early 2007. So, all in all, welcome back to the age of guesswork.

Bill Gates at the Berkshire Meeting

Berkshire Hathaway and Markel Meeting Notes

From The Inoculated Investor blog:

2009 Berkshire Hathaway Annual Meeting Notes

Markel Annual Meeting Notes

Warren Buffett on CNBC and other Berkshire related links

Links:

Bloomberg and CNBC with Charlie Munger

One on One with Charlie Munger

Top 5 Quotes From Berkshire Hathaway Annual Meeting

Live from the Berkshire Shareholders meeting [extensive notes from the meeting]