[The Weekend Bulletin] #60: J. Greenblatt (value investing principles), C. Munger (tech and early failure), W. Buffet (leverage), I. Cassel + M. Housel (Investment Philosophy)...
...negative social proof, framing effect, business principles in real life, themes over goals, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Section 1: Investing Wisdom
Joel Greenblatt sits in the league of the greatest value investors, having compounded capital at a gross 50% CAGR for the two decades that he managed external funds at Gotham Capital. In a recent podcast, Joel talked about how he achieved this success early in his career, why he chose to close down his fund, and then re-open, his books, his investment club, and above all, his investment beliefs.
I am usually sceptical opening articles that deal with lessons from Charlie Munger, for they seldom have something new to say (better to read the source than someone's interpretation of it). This one, however, is different. Especially the section that deals with the lessons from Charlie's Angel (pun intended) investment.
A reflective piece on investment philosophy by microcap investor Ian Cassel. In it, he talks about some recent tweaks that he has made to his checklist for assessing investments, and also how holding a multibagger is an extremely painful and trying process.
Leverage has a negative connotation in the realm of investing, even as every aspect of our lives are driven by leverage. However, when it comes to finances, the general belief is that leverage causes more ruin than good. This twitter thread, though, claims that leverage is not all that bad. The thread looks at how the use a form of leverage helped Warren Buffett achieve the returns that he managed to achieve. The article linked at the end of the thread elaborates on some rules for effective use of leverage (although you'll have to endure a longish introduction before you get to the meat of the article).
I have said this earlier and I will reiterate: there is no better personal finance writer today than Morgan Housel. Whether it is long form articles, anecdotes, or just bullet point philosophies, he is a master of them all. In his recent, he lays out some under-appreciated universal truths about investing. Two minute read with life-long lessons.
Section 2: Mental Models & Behavioral Biases
Social proof amongst a business' users is a good network effect to assess the strength of its model. However, when it comes to investing, negative social proof can go a long way in making it a successful investment, claims this VC.
Most things in life are a matter of perspective. And that is a mental model worth learning, called the Framing Effect. 'By framing things in the right way, you can make smarter choices with your money that lead to better outcomes. It can help you avoid rash decisions, such as impulse buying and making emotional investment changes.'
Section 3: Personal Development
This slighted dated, long form article addresses an important question: How will you measure your life? Part of a speech delivered by Prof. Clayton Christensen (Disruptive Innovation fame) to the graduating class of 2010. In it, he talks about how we can take some of the business principles and apply them to real life. The talk answers three distinct questions:
How can I be sure that I will be happy in my career?
How can I be sure that my relationships will become an enduring source of happiness?
How can I be sure to stay out of jail?
Lastly, the professor also advices students to choose the right yardstick to measure their life. The talk, converted in to this article, was eventually converted in a book by the same title.
[P.S. Today marks the first death anniversary of this great thinker]
The following provides an interesting twist to the idea of ditching goals for habits. It proposes creating broad themes for select time frames rather than pointed goals in order to achieve your ideal life. An interesting perspective.
Section 4: Trivia
THIS IS HILARIOUS:
In a recent study of factors that motivated people about their job, researchers interviewed 181 participants from 18 different professions.
Based on the structured interviews and the answers the interviewees gave on the typical scale of 0 to 5 points they ranked the 18 different professions across different dimensions ranging from affective commitment (i.e. how much a person emotionally identifies with the value of the profession or the firm they work in), to intrinsic motivation, and whether they are in their jobs solely as a means of economic exchange (i.e. they are doing it for the money rather than anything else).
The below chart summarises the findings for 10 profession types across these three dimensions. Notice anything funny in the chart? (Note that economic exchange as a motive is inverted, i.e. lower values mean that these people are more inclined to look at their job as a payment for service and nothing else).
Quotable Quote
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That's it for this weekend folks.
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Have a wonderful week ahead!!
- Tejas Gutka
[Jan 23, 2021]