A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Investing Wisdom
The importance of a long investment horizon cannot be emphasized enough. Here is a real life example of how one lady made over $7mn by investing only $180. Compounding works wonders when you give it enough time.
Culture is often quoted as one of the competitive advantages that help businesses not only survive but strive over time. But culture is a soft skill and difficult to quantify. This article attempts to list some common traits observed in well cultured companies.
Culture determines how people feel about a business. A good culture can foster a sense of belonging amongst employees, usually leading to extraordinary efforts and performance ('culture eats strategy for lunch'). Here are three short stories shared by the leaders of Porsche, Cintas, and Helzberg Diamonds (now a Berkshire company) highlighting how culture can instigate a sense of belonging and higher purpose.
Mental Models & Behavioral Biases
Picking up from Daniel Kahneman's 'Thinking Fast and Slow', this article showcases the strengths and weaknesses of our thinking systems, highlights the pitfalls of using only one or the wrong one, and explains why a combination of the two works best for us. A good simplification of the key ideas from the book.
Personal Development
Vicarious learning - learning from the experiences of the others - is one of the fastest ways to learn. This list of 40 life lessons by a 30 year old can help you do that. Loved the brevity; each lesson could very well be turned into an essay of its own.
Blast From The Past
Revisiting articles from a past issue for the benefits of refreshing memory and spaced repetition, as well as for a fresh perspective. Below are articles from #78:
In the latest quarterly letter to investors, Mark Tollymore of Tollymore Investment Partners looks at a recent mistake that he made in allocating capital, and recounts a number of red flags that had emerged over time. This letter is an essential reading for two reasons:
We are all victims: Even the best in business are not spared from errors of judgement. Don’t fear them, for they will stop you from making good ones as well. However, be quick to identify such errors (by learning from last mistakes of self and others) and, more importantly, reacting to them.
Boiling frog syndrome: slow changes are hard to notice. That is how Mark notes that there were so many red flags but he couldn’t still react. Each red flag is small in and of itself, and therefore easy to argue against. Collectively, however, they make for big errors in judgement.
Readworthy Passage
Let's read together a random, but read-worthy, passage from a randomly picked book.
The S&P 500 hit new all-time highs in early 2000 and subsequently crashed by more than 50 percent over the following two years or so. New highs were once again breached in late-2007, which was then followed by another 50 percent-plus decline. Looking back on this decade, many investors assumed there was a clear relationship between all-time highs in the stock market and the risk of a future crash. It seems every time the market shoots to new highs it subse- quently gets cut in half.
Nothing in the markets is ever quite that easy. Of course, stocks can fall from all-time highs, but hitting an all-time high isn’t nec- essarily the trigger that causes them to fall. Since 1950, there have been over 1,100 all-time highs reached on the S&P 500. That’s good enough for almost 7 percent of all trading days or roughly one out of every 15 days that the market is open. Here is the breakdown by decade that shows how often the S&P 500 hits a new high level:
You can see that there were some droughts during certain decades. It took almost eight years to reach a new all-time high from early 1973 to late 1980. It was another seven years or so from March of 2000 to May of 2007. It took another five and a half years to reach the 2007 high, which occurred in early 2013.
This makes perfect sense when you think about it because stocks are up three out of every four years. Most of the time, stocks are rising. Therefore, it’s perfectly normal for new highs to be breached on a regular basis. Of course, stocks don’t have to keep going higher once they hit a new all-time high level. But it also doesn’t mean that they have to immediately crash as investors have conditioned themselves to expect. A new high is not necessarily a sell signal just like it’s not necessarily a buy signal. They’re simply a part of a market that goes up over time, even if it incurs spectacular crashes at times.
- From A WEALTH OF COMMON SENSE by Ben Carlson
Quotable Quotes
“We will all experience one pain or the other—the pain of discipline or the pain of regret—but the difference is that the pain of discipline weighs only ounces while the pain of regret weighs tons.”
“Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you’re a lion or a gazelle. When the sun comes up, you’d better be running.”
