The Weekend Bulletin (#40) [Less is more!]
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Hola!!
A quick word before we get to business.
You would have noticed that over the last few weeks, the length of the articles has shrunk. While it was partly due to work pressures, it was also because of an increasing trend towards compactness.
Many years back, the internet brought on a wave of blogging. Over the years, many people have argued that a lot of blogs are better than many books. Among the many reasons, the one most cited is that books can often get repetitive with the author making the same point in many different ways. Blogs cut through the clutter and get straight to the point. The other advantage that blogs have is spaced repetition, making it easier to remember concepts over when something is read in a single burst.
This is not to say that reading books is a waste of time; there are topics that need to be dealt with in details. However, for everyday wisdom, often a blog post suffices.
Over time, twitter threads have provided a formidable competition to blog posts. Why read a whole blog post when you can understand the concept in a series of 280 character tweets?
More recently, a new format is giving all of these formats a run for their money - screenshot essays (SSE). Why bother with so many tweets when you can compress all the knowledge into a single screen of your phone? While at time straining for the eye, it's definitely an interesting concept - for you get the idea filtered of all the excesses like introductions, examples, repetition etc.
[some interesting screen shot essays: here, here, and here]
Each of these formats has some advantage over others. Typically, the more depth you need, the better books will serve. On the other hand, the more breadth you need, the faster it will be to learn from blogs, tweets, and SSEs. In a world of information abundance, often LESS IS MORE.
The reason for this long-winded narrative was to bring forth the point that sharing shorter reads is not a sign of laziness at my part. At best, it is a sign of being pressed for time, at worst, it is trying to be fashionable 😉
With that out of the way, let's get on with business now....
Section 1: Investing Wisdom
This is a crash course on understanding moat-based investing. While moats in investing may have been conceptualized by Warren Buffet, they were definitely popularized by Pat Dorsey. In this 22 page interview (treat this as a primer to his little book), he goes on to explain the different types of moats, how growth is not a moat, and how some moats can be mirage. For instance:
"A brand has to change consumer behavior, that's the key point. We can think of Sony as having a great brand, but really, the Sony brand name doesn't influence your decision to pay more for a DVD player because the DVD player at this point is truly a commodity product. That wasn't the case 20 years ago, but it's certainly the case today. A brand has to change consumer behavior and it typically does that by doing one of two things. One is it could reduce your search cost, so when you want to go out and buy Heinz Ketchup you say, “Oh, Heinz, I like that. I'm going to buy that,” because it gives you a consistent experience and you don't have to sit there sorting through the ketchup shelf all the time, which is not really worth your time.
The other advantage a brand can give is typically when you're selling what's called a Veblen good where basically demand increases with the increase in price and so it increases your willingness to pay. That would be an example with an LVMH or a Tiffany or a Coca-Cola, one could imagine. You pay more for Coke relative to President's Choice cola or an off-brand cola, but the key nugget here is in both cases, whether it's decreasing your search costs or increasing your willingness to pay, it changes your behavior. If the brand doesn't change your behavior, frankly, it doesn't add a lot of value to the company as a moat."
P.S.: I hope this makes up for the shorter reads of the last few weeks 😉
One of the best investment use-cases of Jacobi's famous maxim (thanks to Charlie Munger) - invert, always invert - is a Reverse DCF. While investors often boast of using a reverse DCF to understand what's baked in the price, not many understand the nuances behind this simplicity. This twitter thread explains how to use a reverse DCF to find out the implied reinvestment rate, or ROIC, or the discount rate. It also explains how to find an appropriate investment multiple for a business using a DCF. Grab a coffee and a notepad before you read this one.
Section 2: Mental Models & Behavioral Biases
Peter Bevelin's book 'Seeking Wisdom' is a bible of mental models and behavioral biases. Its simply the best book on understanding biases and improving decision making. While the book is dense, and a little hard to get through in one go, it's well worth the effort. And while I encourage you to read the book if you haven't, here are the ideas from the book distilled in to a summary. (At 35 pages, this summary exemplifies the amount of knowledge that the book contains!)
If you are looking for more worldly wisdom, then I encourage you to check out this new project by Vishal Khandelwal. He is hand-writing a new book about 'wisdom from Krishna to Taleb, Socrates to Munger, Vivekanand to Steve Jobs, and Kabir to Naval Ravikant, as it applies to our lives today'. While the book will be out in December 2020, you can get a sneak-peek into 10 ideas from the book in exchange for your email address.
Section 3: Personal Development
Last weekend's story on chef René demonstrated something that you will observe in most great leaders - an ability of convert to constraints in to opportunities. This attitude of finding a way to get what you want without waiting for the conditions to be perfect or otherwise blaming circumstances is called 'High Agency'. While some are born with it, some develop it later in life. One way or other, it is a prerequisite for making a profound impact in one's life and work. Here is all you need to know about High Agency.
Section 4: Trivia
Would you be surprised if I told you that what web browser you use can predict your job performance and your commitment to your work? I would have told you that this will be a fun exercise - just leave a comment about the browser you use (Firefox/Chrome or Safari/Internet Explorer) and I'll tell you next weekend what that says about your job performance - but I know you won't leave a comment. So I am just going to ask you to wait until next weekend to figure out for yourself 😉.
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That's it for this weekend folks. I hope you enjoyed this issue; let me know your thoughts/feedback by commenting below.
Have a blessed week ahead!!
- Tejas Gutka
[Aug 22, 2020]
P.S.
If you would like to contribute to a future issue of The Weekend Bulletin, please email a link to the article along with a short summary/note on why you like the article to: share2TWB[at]gmail[dot]com.