Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.
Some nice stuff we are reading, watching, and observing at the start of this weekend…
- At times it’s scary to think how time is flying. And then there are posts like these that tell you that you may not learn some of the most important lessons till it’s too late in life, like these three…
1. Time passes much more quickly than you realize.
2. If you don’t take care of your body early then it won’t take care of you later. Your world becomes smaller each day as you lose mobility, continence and sight.
3. People are far more important than any other thing in your life. No hobby, interest, book, work is going to be as important to you as the people you spend time with as you get older.
- Does anyone know anything any more? The ease with which one can look up facts on a phone at any time is one of the wonders of the modern age. But are we becoming too reliant on it? A new study indicates, at least, that there might be a snowball effect to such reliance. The more we depend on Google for information recall, it suggests, the more we will do so in the future. In short, Google may be rewiring our minds, and the debate we are now having about the effect of constant internet access on memory and creativity has precedents thousands of years old.
- Wrapping your head around the global economy – predicting recessions, bubbles, GDP growth and the like – is nearly impossible. There are too many moving parts. But that doesn’t mean we should give up trying to understand it. It just means we should keep things broad and simple. Like one of these five simple rules of capitalism…
People resist change; economies resist stability. A good rule of thumb from history is that the longer a boom or bust lasts, the stronger the forces are building up against it. There’s a reason for this: Booms cause people to discount room for error, while busts cause people to stockpile it. But people don’t think like that. We have short memories and poor imaginations, so the most common economic forecast of what will happen next is extrapolating whatever happened last. Bear markets breed pessimists, bull breed markets optimists. Consumer confidence peaked in 2000 and bottomed in 2009. Long-term government budget projections were staggeringly optimistic in 2000, and equally depressed in 2010. People forecast in straight lines, but markets push back against things attempting to stay the same, instead preferring cycles, waves, and new paradigms.
- Aswath Damodaran’s wrote this in his book Investment Fables…
Investing is full of stories that sound good when they are told but don’t hold up under close scrutiny. Consider a few: Buy stock in good companies and the returns will surely follow. Buy after bad news. Buy after good news. Stocks always win in the long term. Follow the insiders. Buy stocks with big dividends. Buy stocks that have gone down the most. Go with stocks that have gone up the most.
Now he has written a post on narrative and numbers, and how the number cruncher in him has learned to tell stories…
When I taught my first valuation class in 1986 at New York University, I taught it with numbers, with barely a mention of stories. It was only with the passage of time that I realized that my valuations were becoming number-crunching exercises, with little holding them together other than historical data and equations. Worse, I had no faith in my own valuations, recognizing how easily I could move my final value by changing a number here and a number there. It was then that I realized that I needed a story to connect the numbers and that I was not comfortable with story telling, and that realization led me to start working on my narrative skills. While I am still a novice at it, I think that I have become a little better at story telling than I used to be…
- If there is anything fundamental about what Charlie Munger has learned about business it is this –
The difference between a good business and a bad business it is that good businesses throw up one easy decision after another. The bad businesses throw up painful decisions time after time.
Why do some businesses create easy decisions? The answer lies in microeconomics: if there is no significant “barrier to entry” which creates what Harvard Business School Professor Michael Porter calls a “sustainable competitive advantage” (a “moat” in Berkshire parlance), competition will cause return on investment for that business to drop to opportunity cost and there will be no economic profit for the producer. The analogy they use at Berkshire is that the business itself is the equivalent of the “castle” and the value of that castle will be determined by the strength of the “moat.”
The need for a business to have a “moat” is so strong that Munger has made it one of the four essential filters he uses in deciding whether to invest in a given business. Read this post on Munger’s moat filter. It’s long, but it contains almost all of Munger’s thoughts on this subject.
- If you are struggling with reading 12 books a year, you may like some of the ideas that may help you read 200 books a year…
…some quick calculations…
200 books * 50,000 words / book = 10 million words
10 million words / 400 wpm = 25,000 minutes
25,000 minutes / 60 = 417 hours
That’s all there is to it. To read 200 books, simply spend 417 hours a year reading.
Now that’s just around 70 minutes per day. Sounds easier now?
- Morgan Housel shares a wonderful chat with Daniel Kahneman, the psychologist who won the Nobel Prize in economics, where the latter shares insights on persistence, empathy, education changing thinking, and where the world is going…
People in their 30s know where the world is going because they’re going to do it. I’m in my 80s so I have no idea.
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