[The Weekend Bulletin] #159: Growth vs Growth, Sam Zell's investing drive, Buffett's repeated lessons, ...
... Decision Making and Portfolio Performance, 33 impactful quotes, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Investing Wisdom
Famed buisnessman and legendary investor Sam Zell passed away last week. A few week prior, he appeared on a podcast where he talked about his journey, what drives him, and what he values most in his life.
"What drives me is, can I do it? Can I achieve the intended? Can I do so legally and with pride, that I can sit here today and describe a transaction to you and feel very comfortable that I tested my limits, found out could I do it, and then by doing it, I've gained great satisfaction. I certainly have made more money than I could ever spend.
The money was never really the driver, other than the money creates freedom. Money creates an environment where you can do what you want to do, maybe without asking permission.
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As a sport or as a hobby, I ride motorcycles. And when you ride a motorcycle and you feel the wind come through your helmet, you realize that you’re in total control of what you’re doing. There’s a sense of freedom that’s irreplaceable. In the same manner, having the resources to not start every conversation with can I afford it, whether I want to do it, are two very different things. There’s nothing more important to me than freedom.
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I view money as a way of eliminating a step to achieve my objectives, but not be constrained by limitations. In the same manner, when it comes to liquidity equals value, that’s something that I coined for my own benefit, to remind me of the fact that I’m constrained only by the exterior events that occur around me. To the extent that I have a liquidity, I can make choices. And if I can make those choices, and, so without the constraints of liquidity, that is, I don’t to start by saying, well, where am I going to get the money? But I’m going to start by saying, how do I spend the money? What do I think is important? I think those are criteria that define what I call freedom."
In light of the recently concluded pilgrimage in Omaha, here are two posts that look at some lessons from the Oracle:
'Growth is not the same as Growth', claims this article. While value is represented by many variables, the definition of value is constant. Growth, on the other hand, has more than one definitions. And depending on how you define 'growth', your portfolio constituents and performance will differ meaningfully. The practitioner's growth definition is what Warren Buffett was referring to when he said that all investing is value investing
[#156 carried two articles on the relation between growth and value].
Mental Models & Behavioral Biases
Two posts that look at the impact of decision making on portfolio performance:
This post looks at the impact of active portfolio management over a ten year period. It takes the holdings of all active funds and creates a buy-and-hold portfolio to compare performance. The study throws out two lessons.
[Pair this with the article on the 'Do Nothing' portfolio that we read in #156.]
This short note contests that conducting a post-mortem on decisions that haven't worked out is the incorrect way of reviewing.
Personal Development
Following up from #158's 30 passages from books and articles, here is a collection of 33 impactful quotes that will get you going.
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 #84:
This thread provides a simple yet powerful framework to identify compounders. An insider condenses his experience of working for a company that went 30x in ten years (wasn't a tech company) in to seven simple lessons.Â
Lesson 4 in the above talks about the second act, which is elaborated here.
The act of investing is an interesting combination of the past and the future. We look to the past to understand a business, while we dream up a future to value it. Below are some frameworks for each of these activities:
Stock Screening Frameworks (multiple-links; worth bookmarking)Â
Productivity systems may not be your thing. You may not even think much of goal setting. However, there is something that you just cannot ignore. Love them or hate them, but you cannot escape the challenges the life throws at you. Here are 6 principles for navigating life's challenges. Loved the concept of 'rugged flexibility':
"To be rugged is to be tough, determined, and durable. To be flexible is to adapt and bend easily without breaking. Put them together and the result is a gritty endurance, an anti-fragility that not only withstands change but can thrive in its midst. The principles and practices below can help you develop rugged flexibility."
Readworthy Passage
Let's read together a random, but read-worthy, passage from a randomly picked book.
Long-term success in any of these probabilistic exercises shares some common features. I summarize four of them:
Focus. Professional gamblers do not play a multitude of games—they don’t stroll into a casino and play a little blackjack, a little craps, spend a little time on the slot machine. They focus on a specific game and learn the ins and outs. Similarly, most investors must define a circle of competence—areas of rela- tive expertise. Seeking a competitive edge across a spectrum of industries and companies is a challenge, to say the least. Most great investors stick to their circle of competence.
Lots of situations. Players of probabilistic games must examine lots of situations because the market price is usually pretty accurate. Investors, too, must evaluate lots of situations and gather lots of information. For example, the very successful president and CEO of Geico’s capital operations, Lou Simpson, tries to read five to eight hours a day and trades very infrequently.
Limited opportunities. As Thorp notes in Beat the Dealer, even when you know what you’re doing and play under ideal circumstances, the odds still favor you less than 10 percent of the time. And rarely does anyone play under ideal circumstances. The message for investors is that even when you are competent, favorable situations — where you have a clear-cut variant perception vis-à -vis the market — don’t appear very often.
Ante. In the casino, you must bet every time to play. Ideally, you can bet a small amount when the odds are poor and a large sum when the odds are favorable, but you must ante to play the game. In investing, on the other hand, you need not participate when you perceive the expected value as unattractive, and you can bet aggressively when a situation appears attractive (within the constraints of an investment policy, naturally). In this way, investing is much more favorable than other games of probability.
Constantly thinking in expected-value terms requires discipline and is somewhat unnatural. But the leading thinkers and practitioners from some- what varied fields have converged on the same formula: focus not on the frequency of correctness but on the magnitude of correctness.
- From More Than You Know by Michael Mauboussin
Quotable Quotes
"Committed decisions show up in two places: your calendar and your bank account. No matter what you say you value, or even think your priorities are, you have only to look at last year's calendar and bank account to see the decisions you have made about what you truly value.
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See how you have reserved your time. Look at your expenditures. Those are the trails to the decisions you have made."
- Carole Hildebrand (On Time)
"Life is a mysterious balance of paradoxes. The struggles and joys, the darkness and light, the death and rebirth – these are the essential components of our paths. Without the pain, pleasure would be bland. Without the darkness, we wouldn’t be able to appreciate the light. Without death, there would be no new life. This is the cycle of life."
- Sean Delaney
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[May 27, 2023]