Links

With Western Union considering the sale of its business payments unit, and Univar agreeing to buy Wilbur Ross's Nexeo for about $2 billion, Boyar Value Group has been kind enough to allow free access [with registration] to reports they've done on those companies over the last few months: LINK TO REPORTS

Massif Capital research report: Mining for Innovation (LINK)

Different Kinds of Smart - by Morgan Housel (LINK)

Trailblazers with Walter Isaacson Podcast -- Watches: Innovation on Time (LINK)

Walter Isaacson and guests engage in a timely discussion on how humans throughout history answer one of our most fundamental questions: “When?” So, what makes the industry tick? And how can we expect time to change in the future?

Crazy/Genius Podcast: Can Artificial Intelligence Be Smarter Than a Human Being? (LINK)

Y Combinator Podcast: SEO Advice from SurveyMonkey Director of SEO and Growth, Eli Schwartz (LINK)

Who is Michael Ovitz? (podcast) (LINK)

Related book: Who Is Michael Ovitz?

Why Your Vacuum Clogs but a Manta Ray Doesn’t - by Ed Yong (LINK)

The Lingering Curse That’s Killing Killer Whales - by Ed Yong (LINK)

Howard Marks Memo: The Seven Worst Words in the World

Link to Memo: The Seven Worst Words in the World

This month marks the tenth anniversary of Lehman Brothers' bankruptcy filing on September 15, 2008, and with it the arrival of the terminal melt-down phase of the Global Financial Crisis. Enough time has passed for the trauma of the Global Financial Crisis to have worn off; memories of those terrible times to have grown dim; and the reasons for stringent credit standards to have receded into the past. Investors have had plenty of time to get used to monetary stimulus and reliance on the Fed to inject liquidity to support economic activity. 

In today's market environment, the possible effects of economic overstimulation, increasing inflation, contractionary monetary policy, rising interest rates and thus rising corporate debt service burdens do create uncertainty. So, is there again "too much money chasing too few deals"? 

Links

"There can't be a rule that always works.... These things cannot be reduced to a rule. The market operates so as to confound rule makers.... It all comes down to judgment. If we're going to have superior investment performance we have to have superior judgment. You can work on your processes, both intellectually and emotionally, but superior judgment isn't something you can order up. And not everybody can necessarily attain it. I think that one of the most important things is to dismiss the concept of a process or rule that always works in the absence of superior judgment." --Howard Marks

Howard Marks on The Tim Ferriss Show — How to Master Market Cycles (LINK)

Related book: Mastering the Market Cycle

Gorilla Games (adventur.es): Q3 2018 Update on What Amazon Means for the Rest of Us (LINK)

One Day [Working] at Amazon: In The Belly Of The Beautiful Beast - By Mills Snell (adventur.es) (LINK)

Instagram’s CEO - by Ben Thompson (LINK)

Sanjay Bakshi: Excerpts from “The Character of Physical Law” by Richard Feynman (LINK)

Geoffrey Miller on The Joe Rogan Experience (podcast) (LINK)

Geoffrey Miller is an evolutionary psychologist, serving as an associate professor of psychology at the University of New Mexico and known for his expertise in sexual selection in human evolution.

Book of the day: Gandhi: The Years That Changed the World, 1914-1948

Howard Marks on investing and making conservative assumptions

From his talk at Wharton:

There's only one intelligent form of investing, and that's to figure out what something is worth and try to buy it for less. Distressed debt investing is not different in that regard. We have to do the same thing. Simply put, you look at a company, you look at the business, you figure out what it could make in a normal environment, and you figure out what that company would be worth—generally to a strategic buyer once its problems are largely resolved and once the capitalization has been restructured. Then you think about how that value will be divided up among the various classes of claimants, and you figure out what a piece of a claim is worth and you see if you can buy it for less. 

If you can make those judgments on the basis of conservative assumptions and still end up with good room for profit, then that's a source for margin for error. I think that the margin for error comes primarily from being able to use conservative assumptions, and then still be looking at a generous rate of return. 

Now, I must say, it's not true that the more conservative the better. Because you can get to the point where you can make assumptions that are so conservative that you'll never lose money, but it will give you a target buying price that is so low that you'll never buy anything. So you have to gut it out and be willing to include some optimism, or else you may never get to buy anything. 

Links

"Well, generally, you can say that stocks are valued in two different ways. One, they’re valued much the way wheat is valued, in terms of its perceived practical utility to the user of the wheat. And there’s a second way that stocks are valued, which is the way Rembrandts are valued. And to some extent, Rembrandts are valued high, because in the past, they’ve gone up in price. And once you get a lot of Rembrandt element into the stock market, and you fuel the stock market with massive retirement system purchases, you can get stocks selling at very high prices by past historical standards. And that can go on for a long, long time.  That’s what makes life so interesting. It isn’t at all clear how it’s going to work out. It isn’t even clear what the level of interest rates is going to be. And nobody in this room ever expects to see 3 percent interest rates continue for a long time again. But that could happen. That would have an enormous effect on the price of equities. You live in a world where you can’t really predict these macroeconomic changes." --Charlie Munger, 2000 Berkshire Hathaway Annual Meeting

CNBC's full interview with JP Morgan's Jamie Dimon (LINK)

The Company Implosion Pageant ($) (LINK)

We’re late in the cycle and VCs are making some crazy bets. Who will fail hardest?

Winner Takes it All: How Markets Favor the Few at the Expense of the Many (LINK)

An hour-long conversation between Fred Wilson and Chris Dixon (a16z podcast) (LINK)

Remember when a glass of wine a day was good for you? Here's why that changed. [H/T Peter Attia] (LINK)

Robots are now hopping around on the surface of an asteroid (LINK)

Discovery of Galileo’s long-lost letter shows he edited his heretical ideas to fool the Inquisition (LINK)

Links

"The number one thing that has made us successful by far is obsessive-compulsive focus on the customer, as opposed to obsession over the competitor." --Jeff Bezos (Source)

All Transcripts From The Tim Ferriss Show (LINK)

Wall Street and the “Vampire Squid”: A Brief History - by Jason Zweig (LINK)

Ray Dalio On The Economy (video) (LINK)

Related book: Big Debt Crises - by Ray Dalio (free PDF HERE)

Bruce Flatt of Brookfield on owning the backbone of the global economy ($) [H/T Linc] (LINK)

3 Investments That May Have Hit Their Peak (LINK)

A Chinese Company Reshaping the World Leaves a Troubled Trail [H/T @WallStCynic] (LINK)

‘Whatever It Takes’ - by Frank K. Martin (LINK)

Amazon and Apple at a Trillion $: A Follow-up on Uncertainty and Catalysts! - by Aswath Damodaran (LINK)

Scott Galloway | Full Video | 2018 Code Commerce (LINK)

Peter Thiel on Trump, Gawker, and Leaving Silicon Valley (video) (LINK)

Yuval Noah Harari in conversation with Terrence McNally at Live Talks Los Angeles (video) (LINK)

Related book: 21 Lessons for the 21st Century

Radiolab Podcast: Infective Heredity (LINK)

Today, a fast moving, sidestepping, gene-swapping free-for-all that would’ve made Darwin’s head spin. 

David Quammen tells us about a shocking way that life can evolve - infective heredity. To figure it all out we go back to the earliest versions of life, and we revisit an earlier version of Radiolab. After reckoning with a scientific icon, we find ourselves in a tangle of genes that sheds new light on peppered moths, drug-resistant bugs, and a key moment in the evolution of life when mammals went a little viral. 

Related book: The Tangled Tree: A Radical New History of Life - by David Quammen

Jeff Bezos At The Economic Club Of Washington (9/13/18)

Link to video

Links

"It is necessary to caution the analyst against overconfidence in the practical utility of his findings. It is always good to know the truth, but it may not always be wise to act upon it, particularly in Wall Street. And it must always be remembered that the truth that the analyst uncovers is first of all not the whole truth and, secondly, not the immutable truth. The result of his study is only a more nearly correct version of the past. His information may have lost its relevance by the time he acquires it, or in any event by the time the market place is finally ready to respond to it." --Benjamin Graham and David Dodd (Security Analysis: Sixth Edition)

Marks Investor Series featuring Howard Marks, W’67, Co-Chairman, Oaktree Capital (video) (LINK)

Oaktree’s Howard Marks says Brexit makes UK too risky to invest in (LINK)

Fool Me Three Times And I Give Up - by Morgan Housel (LINK)

Knowledge vs. Skill - by Ben Carlson (LINK)

The Holy Active Empire - by Jamie Catherwood (LINK)

Apple and Amazon at a Trillion $: Looking Back and Looking Forward! - by Aswath Damodaran (LINK)

How to Make a Killing in Gene Therapy [H/T Ian] (LINK)

Creative Prompts - by Fred Wilson (LINK)

Habits vs. Workflows - by Cal Newport (LINK)

a16z Podcast: Tesla and the Nature of Disruption (LINK)

Crazy/Genius Podcast (from last week): Can Science Cure Aging? (LINK)

Crazy/Genius Podcast: Will We Ever Stop Eating Animal Meat? (LINK)

Long Now Seminars (podcast version) -- Julia Galef: Soldiers and Scouts: Why our minds weren’t built for truth, and how we can change that (LINK)

Sam Harris speaks with Yuval Noah Harari about his new book 21 Lessons for the 21st Century (podcast) (LINK)

What Ecstasy Does to Octopuses - by Ed Yong (LINK)

Despite their wacky brains, these intelligent animals seem to respond to the drug in a very similar way to humans.

A 558-Million-Year-Old Mystery Has Been Solved - by Ed Yong (LINK)

Scientists have finally confirmed that a weird ribbed oval called Dickinsonia is an animal.

Links

I'm back in Charlotte after a great couple of weeks traveling. As often happens, I brought way more to read with me than I actually had time to read, but I did catch up on some podcasts, started a couple of new things, and was able to get through Bethany McLean's latest book, Saudi America, which I thought was especially good, well-balanced, and timely. It pairs well with Jeremy Grantham's "The Race of Our Lives Revisited," as well as the shale section in the first part of Peter Zeihan's book The Absent Superpower.

One of the Grant's podcasts also mentioned two books on cycles—one by Jim Grant himself, The Trouble With Prosperity, as well as Economics and the Public Welfare by Benjamin Anderson, which Amazon tells me I bought in 2012 and yet wasn't kind enough to also let me know where I seem to have placed it. And those books both reminded me that we are only a couple of weeks away from the book many of us have been eagerly awaiting: Mastering the Market Cycle by Howard Marks.

***

"Machines are there to help people, not replace them. Humans should never wait for machines. Machines wait for people. And so in this way, I find myself so far outside of the world of technology. I see so much 'technology over everything' kind of thinking where those people are like, it’s all there....I don’t even think there’s such a thing as, truly, the technology industry, right? It’s a weird construct. It’s like, technology is a...it’s not an industry. It’s not even a strategy. It’s sort of a tactic. It’s like a tool that you use to give people more skills." --Tobi Lütke

Tobi Lütke, founder and CEO of Shopify, talks with Shane Parrish on The Knowledge Project Podcast (LINK) [In addition to the quote above, this conversation also has some great insights on culture and on creating the right environment at a company.]

Predicting the Future with Bayes’s Theorem (LINK)

You Can Time The Market, Just Not All The Time - by Jason Zweig (LINK)

Howard Marks has made a few market calls in his day, but warns that it’s harder than it looks

How Jim Chanos Uses Cynicism, Chutzpah — and a Secret Twitter Account — to Take on Markets (and Elon Musk) (LINK)

Grant’s Interest Rate Observer's piece on municipal bonds, featuring Chris Pavese of Broyhill Asset Management (LINK)

Amazon Data Leaks and Bribes Have Consequences (LINK)

How to keep up progress on global health - by Bill Gates (LINK)

For Real Vision subscribers, Michael Mauboussin had a video released discussing "The Five Behavioral Mistakes Investors Make" (LINK), and the final episode of The Jim Grant Series also aired, which was an interview with Dan Rasmussen (LINK) [If you're not a subscriber and would to join or take a free trial, you can sign up HERE.]

Ben Thompson's article from last week, as well as his latest:

The iPhone Franchise (LINK)

The European Union Versus the Internet (LINK)

And Ed Yong has continued his productive ways, writing about the latest and/or more interesting science stories of the day...

Bacteria in a Dinosaur Bone Reignite a Heated Debate (LINK)

The Genes That Never Go Out of Style (LINK)

The Three Major Cartels Behind the Downfall of Africa’s Elephants (LINK)

Wiping Out the Brain’s Retired Cells Prevents a Hallmark of Alzheimer's (LINK)

Seneca quote on endurance

"Fortune lashes and mangles us: well, let us endure it: it is not cruelty, it is a struggle, in which the oftener we engage the braver we shall become. The strongest part of the body is that which is exercised by the most frequent use: we must entrust ourselves to fortune to be hardened by her against herself: by degrees she will make us a match for herself. Familiarity with danger leads us to despise it. Thus the bodies of sailors are hardened by endurance of the sea, and the hands of farmers by work; the arms of soldiers are powerful to hurl darts, the legs of runners are active: that part of each man which he exercises is the strongest: so by endurance the mind becomes able to despise the power of misfortunes." --Seneca ("Of Providence")

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Related quotes:

"There were two vices much blacker and more serious than the rest: lack of persistence and lack of self-control....Endure and Renounce." --Epictetus

"By endurance we conquer." --Shackleton Family Motto (“Fortitudine Vincimus”)

More from Charlie Munger on opportunity cost...

From the 2006 Berkshire Hathaway Annual Meeting: 

In the real world, you have to find something that you can understand that’s the best you have available. And once you’ve found the best thing, then you measure everything against that because it’s your opportunity cost. That’s the way small sums of money should be invested. And the trick, of course, is getting enough expertise that your opportunity cost — meaning your default option, which is still pretty good — is very high.... Most people aren’t going to find thousands of things that are equally good; they’re going to find a few things where one or two of them are way better than anything else they know. And the right way to think about investing is to act thinking about your best opportunity cost. 

Reviewing the comments from Buffett and Munger on opportunity costs over the years has made me make a slight change to my investment process. Now, multiple times a week I go over the key aspects and thesis (about a paragraph or two in length) for each of the things I am actually invested in. This serves two key purposes:

1. Opportunity Cost: Like the quote from Munger above, it allows me to always have my opportunity cost at the top of my mind when looking at new ideas, thus helping to improve the idea-filtering process.
2. Disconfirming Evidence: By constantly reviewing my reasons for owning something, I hope to be able to more quickly identify evidence that may opposed to those reasons, thus increasing my ability to recognize mistakes faster as well as using the practice of searching for disconfirming evidence as a way to train myself to be more objective. 

For those looking to grow a money management business, it can also help in one's marketing efforts. While many people may want to conclude that just finding great ideas will lead to a successful business, or that being able to tell every bit of minutiae about a given holding can display one's skill—the truth is that more often than not, being able to clearly articulate the key points in a thesis is what will get someone's initial attention. From there, the level of detail one goes into will vary by potential investor, but showing some clarity helps the marketing which helps drive one's business. And as Ben Franklin said, "Drive thy business or it will drive thee."

Thinking of what can go wrong

The quote from Warren Buffett below, from the 2000 Berkshire annual meeting, goes well with THIS Seth Klarman quote and, especially, the 'What can go wrong?' section in THIS post.

"When we look at businesses, we try to think of what can go wrong with them. We try to look [for] businesses that are good businesses now, and we think about what can go wrong with them. If we can think of very much that can go wrong with them, we just forget it. We are not in the business of assuming a lot of risk in businesses. That doesn’t mean we don’t do it inadvertently and make mistakes, because we do. But we don’t intentionally, or willingly, voluntarily, go into situations where we perceive really significant risk that the business is going to change in a major way." --Warren Buffett

Warren Buffett on P/E ratios and the future looking different from the present

From the 2000 Berkshire Hathaway Annual Meeting:

One of the best buys we ever made was in 1976 when we bought a significant percentage — what became through repurchases — 50 percent of GEICO at a time when the company was losing a lot of money and was destined to lose a lot of money in the immediate future. 

And, you know, the fact they were losing money was not lost on us, but we thought we saw a future there that was significantly different than the current situation. 

So it would not bother us in the least to buy into a business that currently was losing money for some reason that we understood, and where we thought that the future was going to be significantly different. 

Similarly, if a business is making some money — there’s no P/E ratio that we have in mind as being a cutoff point at all. There are businesses — I mean, you could have some business making a sliver of money on which you would pay a very, very high P/E ratio. 

...There are all kinds of decisions that involve the future looking different, in some important way, than the present. Most of our decisions relate to things where we expect the future not to change much. 

But you get this — well, American Express was a good example. And when we bought it in 1964, a fellow named Tino DeAngelis had caused them incredible trouble. You know, it was one of those decisions that looked, for a time, as if it could break the company. 

So, we knew — if you’d been charging for what Tino had stolen from the company against the income account that year, or the legal costs that were going to be attached to it, you were looking at a significant loss. 

But the question was, what was American Express going to look like 10 or 20 years later? And we felt very good about that. 

So there are no arbitrary cutoff points. But there is that focus on, how much cash will this business deliver, you know, between now and Kingdom Come? Now as a practical matter, if you estimate it for 20 years or so, the terminal values get less important. 

So — but you do want to have, in your mind, a stream of cash that will be thrown off over, say, a 20-year period, that makes sense discounted at a proper interest rate, compared to what you’re paying today. And that’s what investment’s all about. 

Links

Thank you to everyone who responded to last week's post. Those responses and kind words were much more than I expected, and I really appreciate it. A stop in London has given me a little internet access, and a little time to catch up on some items of note from the past week. 

***

Warren Buffett's in depth interview with Andrew Ross Sorkin on the 2008 financial crisis (video) (LINK) ["Confidence comes back one at a time, but fear is instantaneous.... Fear just spreads like nothing you've ever seen.... That's the advantage I've got, frankly. It isn't I.Q. It's [that] I'm not going to get fearful about the United States over time."]

When You Lose 99.9%, You’ve Lost More Than Money - by Jason Zweig ($) (LINK)

Bruce J. Flatt "Durable Principles for Real Asset Investing" | Talks at Google (LINK)

Can Mark Zuckerberg Fix Facebook Before It Breaks Democracy? - by Evan Osnos (LINK)

“Skin in the Game” - Nassim Nicholas Taleb Speech At RPI's Media & War Conference (video) (LINK)

Elon Musk talks with Joe Rogan (Video, Podcast)

Risk, Uncertainty and Ignorance in Investing and Business – Lessons from Richard Zeckhauser - by Tren Griffin (LINK)

The Decision Matrix: How to Prioritize What Matters (LINK)

Ben Thompson chats with Shane Parrish (podcast) (LINK)

Ray Dalio's Template For Understanding BIG DEBT CRISES [H/T Bill] (Sign Up for Free PDF, or Buy the Book)

How Self-Driving Cars Could Ruin the American City (podcast) (LINK)

Trailblazers with Walter Isaacson -- Batteries: The Power of Portable Power (podcast) (LINK)

Trillion Dollar Toppers: Market Triggers, Value Drivers and Pricing Catalysts! - by Aswath Damodaran (LINK)

13D Research: Big box stores were never economic development (LINK)

How 3D printers are preparing students for life after high school - By Bill Gates (LINK)

Steven Johnson on the a16z Podcast discussing his new book Farsighted: How We Make the Decisions That Matter the Most (LINK)

Doris Kearns Goodwin on The Tim Ferriss Show: The Life Lessons and Success Habits of Four Presidents (podcast) (LINK)

Sam Harris speaks with Jonathan Haidt about his new book The Coddling of the American Mind (podcast) (LINK)

Robert Lustig, M.D., M.S.L.: fructose, processed food, NAFLD, and changing the food system (podcast) (LINK)

Kobe Bryant: Mamba Mentality and The Mind of a Champion (podcast) (LINK)

oGoLead Leadership Podcast: Tom Brady, New England Patriots Quarterback (Part 1, Part 2)

Ed Yong has also been busy writing about the latest and/or more interesting science stories of the day...

What Was Lost in Brazil’s Devastating Museum Fire (LINK)

A Once-Captive Dolphin Has Introduced Her Friends to a Silly Trend (LINK)

This Tiny Songbird Rolls Its Head to Break Its Victim’s Neck (LINK)

Humans Are Destroying Animals’ Ancestral Knowledge (LINK)

Wait, So How Much of the Ocean Is Actually Fished? (LINK)

An Ancient Crosshatch May Be the Earliest Drawing Ever Found (LINK)

The mystery of learning...

From The Master Algorithm by Pedro Domingos:

If you’re a parent, the entire mystery of learning unfolds before your eyes in the first three years of your child’s life. A newborn baby can’t talk, walk, recognize objects, or even understand that an object continues to exist when the baby isn’t looking at it. But month after month, in steps large and small, by trial and error, great conceptual leaps, the child figures out how the world works, how people behave, how to communicate. By a child’s third birthday all this learning has coalesced into a stable self, a stream of consciousness that will continue throughout life. Older children and adults can time-travel–aka remember things past, but only so far back. If we could revisit ourselves as infants and toddlers and see the world again through those newborn eyes, much of what puzzles us about learning–even about existence itself–would suddenly seem obvious. But as it is, the greatest mystery in the universe is not how it begins or ends, or what infinitesimal threads it’s woven from. It’s what goes on in the small child’s mind–how a pound of gray jelly can grow into the seat of consciousness.

The best businesses during inflation...

From the 2015 Berkshire Hathaway Annual Meeting: 

WARREN BUFFETT: Well, the best businesses during inflation are usually the best — they’re the businesses that you buy once and then you don’t have to keep making capital investments subsequently.  

So...you do not face the problem of continuous reinvestment involving greater and greater dollars because of inflation.  

That’s one reason real estate, in general, is good during inflation. If you built your own house 55 years ago like Charlie did, or bought one 55 years ago like I did, it’s a one-time outlay and...you get an inflationary expansion in replacement capital without having to replace [it] yourself.  

And if you’ve got something that’s useful to someone else, it tends to be priced in terms of replacement value over time, and so you really get the inflationary kick.  

Now, if you’re in a business such as the utility business or the railroad business, it just keeps eating up more and more money, and your depreciation charges are inadequate and you’re kidding yourself as to your real economic profits.  

So, any business with heavy capital investment tends to be a poor business to be in in inflation and often it’s a poor business to be in generally.

And the business where you buy something once — a brand is a wonderful thing to own during inflation.

You know, See’s Candy built their brand many years ago. Now, we’ve had to nourish it as we’ve gone along, but the value of that brand increases during inflation, just as the value of, really, any strongly branded goods.

But as Munger points out, extremely high inflation is not something one should hope for:

CHARLIE MUNGER: Well, yeah, but if the inflation ever goes completely out of control, you have no idea how it’s going to end up.  

If it weren’t for the Weimar inflation, we might never have had Adolf Hitler. It was the twosome of the great German inflation followed by the Great Depression that brought us Hitler. And think of the price that the world paid for that one.  

We don’t want inflation because it’s good for See’s Candy. (Laughter) 

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Related previous post: Warren Buffett’s Comments on Inflation

Chris Hadfield on getting ready to do his job, and getting better at life

The quote below is from Hadfield's May 2015 appearance on The James Altucher Show. While he was referring to the difficult job of being an astronaut and training for all of the things that can happen in space, this advice is applicable to gaining expertise in many fields:

So how do you get ready for that? What it all boils down to is an insatiable, permanent necessity for personal competence—to always become better. Because even if you completely master some part of it, some subtle thing is going to change.... All you can do is continually try and improve your understanding of how things work. 

...I think if you're not studying something at all times to improve your ability to do things, then I kind of ask: Why not? What's the other thing that you're doing that is more important than getting better at life?

..........

Related book: An Astronaut's Guide to Life on Earth: What Going to Space Taught Me About Ingenuity, Determination, and Being Prepared for Anything

Excerpt from the book:

Over the years, I’ve realized that in any new situation, whether it involves an elevator or a rocket ship, you will almost certainly be viewed in one of three ways. As a minus one: actively harmful, someone who creates problems. Or as a zero: your impact is neutral and doesn’t tip the balance one way or the other. Or you’ll be seen as a plus one: someone who actively adds value. Everyone wants to be a plus one, of course. But proclaiming your plus-oneness at the outset almost guarantees you'll be perceived as a minus one, regardless of the skills you bring to the table or how you actually perform. This might seem self-evident, but it can't be, because so many people do it. 

...When you have some skills but don't fully understand your environment, there is no way you can be a plus one. At best, you can be a zero. But a zero isn't a bad thing to be. You're competent enough not to create problems or make more work for everyone else. And you have to be competent, and prove to others that you are, before you can be extraordinary. There are no shortcuts, unfortunately. 

Even later, when you do understand the environment and can make an outstanding contribution, there's considerable wisdom in practicing humility. If you really are a plus one, people will notice—and they're even more likely to give you credit for it if you're not trying to rub their noses in your greatness.

[H/T Tamas]

Not making a decision while tired

I've been updating a short checklist that I created to use as the last thing I look at before making an investment in something. These kinds of checklists are best kept short, and mine currently consists of 12 items. There is one question I've added that may seem obvious, but that I decided is best to physically make myself confirm before investing:

• Are you tired?

This was inspired by re-reading a Charlie Munger comment:

"We didn’t know, when we started out, this modern psychological evidence to the effect that you shouldn’t make a lot of important decisions when you’re tired and that making a lot of difficult decisions is tiring....  I cannot remember an important decision that Warren has made when he was tired."

Obvious? Probably. But its simplicity doesn't make it any less important.

Charlie Munger on ignorance removal

From the 2014 Berkshire Hathaway Annual Meeting:

There’s no question about the fact that [See's Candies] main contribution to Berkshire was ignorance removal. And it’s not the only big contributor to ignorance removal.  

If it weren’t for the fact we were so good at removing our ignorance, step by step, Berkshire would be practically nothing today.  

What we knew originally wasn’t enough. We were pretty damn stupid when we bought See’s. We were just barely smart enough to buy it. 

And if there’s any secret to Berkshire, it’s the fact that we’re pretty good at ignorance removal. 

And then later in that meeting, he mentions another useful habit to cultivate:

I spoke earlier about the desirability of removing your ignorance piece by piece, and there’s another trick, which is scrambling out of your mistakes. And we’ve been quite good at both, and it’s enormously useful. 

Imagine Berkshire, a textile mill sure to go broke because power costs in New England were about twice as high as they were in TVA country, a sure-to-fail department store, and a trading stamp sure to be forced out of business by change in mode. Out of that comes Berkshire Hathaway. Talk about scrambling out of mistakes, I think of what we might have done if we’d had a better start. (Laughter) 

An Update and The Future of this Blog

Thank you all so much for your interest in Value Investing World. As a couple of astute readers of this blog have guessed, my day job is about to change. The fund I co-manage at Boyles is being closed, as more than one of you have figured out through the ownership filings we’ve been required to make as we’ve sold some of the micro-cap stocks we held in our portfolio.

I’m still in the process of figuring out exactly what I’ll be doing next, but my hope is to keep the blog going in the same fashion and format. Depending on what I end up doing for work, maybe the blog will contain more notes on companies and ideas, and possibly fewer posts overall; but I think the most likely outcome will be to have no change whatsoever. And if you have any thoughts or suggestions, feel free to email me at ValueInvestingWorld@gmail.com. Note: During the next couple of weeks, my internet access will be limited. I have scheduled some quotes and other items in advance, but the links compilation posts will be few and far between during that time, and I will be especially slow responding to emails.

As regular readers will know, I’m a big fan of the philosophy of stoicism and the importance it places on focusing on the things one can control—and being fairly indifferent to the things outside of one’s control. I’m also a believer in Charlie Munger’s advice that “the best way to get what you want is to deserve what you want.” So I’ve tried to focus my process and education on 1) becoming a better investor; and 2) being a more multi-disciplinary thinker. Both of those are attainable through my own efforts. This blog and many of you whom I’ve met through the blog (either in person or digitally) have helped me progress in those areas. Thank you, again!

While I don’t know exactly how the next few months will unfold, I’ll end this post with the words from Marcus Aurelius that have been a guide not only for me, but also for many others throughout history: “The impediment to action advances action. What stands in the way becomes the way.”

Links

"It just stands to reason that you copy, very much, the people that you do look up to, and particularly if you do it at an early enough age. So I think, if you can influence the...role models of a 5-year-old or an 8-year-old or a 10-year-old...it’s going to have a huge impact. And of course, everybody, virtually, starts out with their initial models being their parents. So they are the ones that are going to have a huge effect on them. And if that parent turns out to be a great model, I think it’s going to be a huge plus for the child. I think that it beats a whole lot of other things in life to have the right models around.... Even as I’ve gotten older, I’ve picked up a few more. And it influences your behavior. I’m convinced of that.... And it’s not complicated. Nothing could be more simple than to try and figure out what you find admirable and then decide...that the person you really would like to admire is yourself. And the only way you’re going to do it is take on the qualities of other people you admire." --Warren Buffett

"There is no reason, also, to look only for living models. The eminent dead are, in the nature of things, some of the best models around. And, if a model is all you want, you’re really better off not limiting yourself to the living. Some of the very best models have been dead for a long time." --Charlie Munger

Warren Buffett's interview on Bloomberg last week (video) (LINK)

John Malone: 'I told Warren Buffett not to invest in Bill Gates before Microsoft went public' [H/T Linc] (LINK)

A Conversation with Paul Graham - Moderated by Geoff Ralston (video) (LINK)

The Next Financial Crisis Lurks Underground - by Bethany McLean (LINK)

Related book: Saudi America: The Truth About Fracking and How It's Changing the World

How the Chinese business elite think of America... (via John Hempton) (LINK)

The Absolute Return Letter, September 2018: Private Credit Demystified (LINK)

Tesla, software and disruption - by Benedict Evans (LINK)

All Things Sales! 16 Mini-Lessons for Startup Founders (LINK)

“Cheesy Dad” Readings and Reflections - by Chris Pavese (LINK)