Prime Reading Notes

They say you should never judge a book by its cover. It’s a good rule of thumb about what not to do.

So how do you judge if a book is worth reading or not? I agree, it’s a difficult question to answer but if you find a book, which starts with a foreword from Warren Buffett, there is no question about whether to read it or not. Don Keough’s The 10 Commandments of Business Failure is one such book.

The problem with Taleb is not that he’s an a**hole. He as an a**hole. The problem with Taleb is that he is right.

Those are not my words. It’s from one of the blurbs for Taleb’s book Skin in The Game. And among many other surprising things about the book, one is that all the blurbs that appear on the jacket aren’t from other famous authors. Taleb took the testimonials from ordinary readers and printed it on the back of the book. Not because other famous authors weren’t willing to offer their testimonials — many of them would be honoured to do that — but it’s because Taleb doesn’t care.

Those who have read his books agree on one thing — Taleb is idiosyncratic and he is a genius.

Have you ever wondered where did the idea of “40-hour work with 2-day weekend” begin? Many believe that it was Henry Ford who started this practice of 5-day work week. Ford is considered one of the greatest capitalists of the last century.

In an apocryphal account, a journalist asked Ford the secret behind his massive success.

“Two words,” replied Ford, “Good decisions.”

“And how did you come to make good decisions?” the journalist asked.

“One word. Experience.” Ford quipped.

“Well, then it begs the next question. How did you gain the experience?”

“Two words again. Bad decisions.” Ford smiled.

This is the third leg of the “Four Dimensions of Investing” series. It’s recommended that you read the first two parts before reading this.

Philip Fisher’s investment classic Common Stocks and Uncommon Profits ranks pretty close to Benjamin Graham’s The Intelligent Investor and for many years, it has been part of the curriculum in the investment class at the Stanford Graduate School of Business.

In most fields, studying the patterns of success is a standard way to learn. So when people come to financial markets they try the same approach. All new investors get busy investigating how the wealthy investors made their money in the stock market. They want to know the secret behind the winning strategies. But investing is a world of counterintuitive ways.

This is the second part of our “Philip Fisher’s Four Dimensions of Investing” series. I strongly recommend that you read the first part before reading this. If you have already read the first part, it would still help a lot if you could refresh it before moving further with this post.

Fisher is best known as the author of Common Stocks and Uncommon Profits, that has remained in print ever since it was first published in 1958. That’s a proof of timelessness of the book and the lessons it contains.

For every value investor in this world, his or her investment philosophy has invariably been shaped by few giants in this field. Warren Buffett and Benjamin Graham are the obvious names. Philip Fisher is probably the next name that appears in every value investor’s list.

Fisher is relatively less known to the general public and was rarely interviewed. Still, he is widely respected and admired in the value investing circles all over the world. Fisher is also known for his scuttlebutt approach, which simply means seeking information from competitors, customers, and suppliers, all of whom have a vested interest in the company. He wasn’t among those who made decisions just by reading annual reports.

Howard Marks, co-chairman of Oaktree Capital Management, recently published his latest memo titled ‘The Illusion of Knowledge’, where he not only questioned the value of macro forecasts, but also explained why creating profitable forecasts is so difficult. He makes it clear that forecasting mostly provides the illusion of knowledge, and argues that investors are better off accepting reality — that the macro future is largely unknowable  — and focusing on what they can know.

I have compiled some notes and highlights on the memo.