The Digest #159

Montaigne on Lying, Berkshire's Q2 results, Equity risk premiums, Taking useful notes, Abandoning books, How Threads was built, BYD challenges Tesla, Katalin Karikó's inspiring life, and more ...

Montaigne on Lying

“In truth, lying is an accursed vice. We are men, and hold together, only by our word. If we recognized the horror and the gravity of lying, we would persecute it with fire more justly than other crimes. I find that people ordinarily fool around chastising harmless faults in children very inappropriately, and torment them for thoughtless actions that leave neither imprint nor consequences. Only lying, and a little below it obstinacy, seem to me to be the actions whose birth and progress one should combat insistently. They grow with the child.”

— Michel de Montaigne

The latest Areopagus newsletter includes an extended discussion about Michel de Montaigne. Among other interesting facts and quotations, I learned that one can visit Montaigne’s estate and see his well-preserved library.

From Areopagus:

“You will often hear Montaigne described as a philosopher, but perhaps this does him — and philosophers — an injustice. In some sense he was a philosopher, insomuch as he embodied the spirit of doubt and skepticism which, whether in Socrates or in the scientific method, has been vital to all serious learning and wisdom, and which as explored by Montaigne was foundational for the Enlightenment. To me, however, Michel de Montaigne cannot truly be described as anything other than... Michel de Montaigne.”

I wrote briefly about Montaigne’s essays in a list of book recommendations several years ago. I’m somewhat embarrassed to admit that I have still not completed my reading of his full collection of essays. However, I have often gone back to re-read selected essays that particularly resonate. Of Liars is one of my favorites and was the basis of an article I wrote last year which includes this excerpt:

“It is not unreasonably said that anyone who does not feel sufficiently strong in memory should not meddle with lying.

I know very well that the grammarians make this distinction between telling a lie and lying: that telling a lie means saying something false but which we have taken for true; and that lying … implies going against our conscience, and thus applies only to those who say what is contrary to what they know: those of whom I am speaking. 

Now liars either invent everything out of whole cloth, or else disguise and alter something fundamentally true.

When they disguise and change a story, if you put them back onto it often enough they find it hard not to get tangled up. For since the thing as it has become lodged first in the memory and has imprinted itself there by way of consciousness and knowledge, it is difficult for it not to present itself to the imagination, dislodging the falsehood, which cannot have so firm and secure a foothold. Likewise, the circumstances that were learned first, slipping into the mind every moment, tend to weaken the memory of the false or corrupted parts that have been added. 

In what liars invent completely, inasmuch as there is no contrary impression which clashes with the falsehood, they seem to have the less reason to fear making a mistake. Nevertheless even this, since it is an empty thing without a grip, is prone to escape any but a very strong memory.” 

[Emphasis Added]

If you think about it, this is the heart of George Costanza’s advice to Jerry Seinfeld on how he should attempt to defeat a lie detector test. Of course, Montaigne did not write about lying to give us a road map for lying but to help us identify and avoid liars, especially those who are capable of inventing “everything out of whole cloth.”

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Berkshire Hathaway’s Second Quarter Results

Investors were enthusiastic about Berkshire Hathaway’s second quarter results and responded by sending shares to record highs early this week. While the ever-emotional Mr. Market is hardly exuberant about the stock, his typical curmudgeonly attitude toward Berkshire seems to have eased. The flip side of an advancing stock price is that Warren Buffett is probably less inclined to repurchase shares. At least Berkshire’s pile of treasury bills now yields ~5.5% which boosts investment income.

• Berkshire Hathaway's Q2 2023 Results, August 6, 2023. My summary of Berkshire Hathaway’s results with a focus on GEICO, BNSF, HomeServices, Clayton Homes, Apple, and repurchase activity. (The Rational Walk)

• After Earnings, Is Berkshire Hathaway Stock a Buy, a Sell, or Fairly Valued? by Greggory Warren, August 7, 2023. For several years in the 2010s, Warren Buffett included Morningstar analyst Greggory Warren in the panel of journalists and analysts invited to ask questions at Berkshire Hathaway annual meetings. Greggory Warren has been covering Berkshire for over a decade and I found his article following the first quarter report interesting. Morningstar’s fair value estimate for Berkshire stock is $370 per Class B share. (Morningstar)

  • Why own Berkshire Hathaway?, January 13, 2020. Greggory Warren gives a talk about Berkshire Hathaway in November 2019. (Good Investing Talks)

• Some Thoughts on Berkshire Hathaway's Q2 2023 Performance by

  Kingswell
  , August 7, 2023. “Berkshire Hathaway’s insurance float keeps getting bigger and bigger, reaching $166 billion in Q2. The asynchronous nature of insurance — a company receives premiums from customers, but doesn’t pay out anything until claims come due — creates what is known as ‘float’. This collect-now, pay-later model leaves insurers holding large sums of money that can be invested to create a new avenue of profitability.”

• Berkshire’s Q2 2023 Results by Christopher Bloomstran, August 5, 2023. A thread on Berkshire’s results concluding with: “All in strong insurance, little to do on cap allocation outside growth capex. Modest share repos. Net equity sales. Weak industrial and housing volumes. Growing dry powder. You get the sense Berkshire is waiting around for something to happen. It always does. Great quarter, guys.” (Twitter)

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Articles

How I Take Notes by

Ted Gioia

, August 7, 2023. This is a great article on the art of note taking and similar conceptually to Mortimer Adler’s method that I wrote about in Digest #157 two weeks ago. “I often took notes that, at the time, seemed totally useless, but they later proved extremely useful. Sometimes 10 or 20 years elapsed before I could benefit from them. So I’ve learned never to assume that a book I’ve read can’t have future value for me. And that’s why I’m skeptical when others tell me that note-taking is irrelevant in their situation. Can they really know this?” (The Honest Broker)

How to Do Great Work by Paul Graham, July 2023. “If you collected lists of techniques for doing great work in a lot of different fields, what would the intersection look like? I decided to find out by making it. Partly my goal was to create a guide that could be used by someone working in any field. But I was also curious about the shape of the intersection. And one thing this exercise shows is that it does have a definite shape; it's not just a point labelled ‘work hard.’” (PaulGraham.com)

• Founders #314 Paul Graham (How To Do Great Work), July 31, 2023. 59 minutes. Paul Graham’s essay is definitely worth reading in full. I suggest reading the essay and then listening to David Senra’s comments in this podcast. (Founders Podcast)

The Price of Risk: With Equity Risk Premiums, Caveat Emptor! by

Aswath Damodaran

, August 5, 2023. This is a useful primer on the concept of risk premiums. “The risk premium that you demand has different names in different markets. In the corporate bond market, it is a default spread, an augmentation to the interest rate that you demand on a bond with more default risk. In the real estate market, it is embedded in a capitalization rate, an expected return used by real estate investors to convert the income on a real estate property into a value for that property. In the equity market, it is the equity risk premium, the price of risk for investing in equities as a class.” (Musings on Markets)

How to Read: Lots of Inputs and a Strong Filter by Morgan Housel, August 3, 2023. When should you stop reading a book that is failing to resonate? This is a complicated question because some books require time to gain momentum. I rarely fail to finish a book, but the cost is that I slog through books that never seem to become worthwhile. In contrast, Morgan Housel recommends having a stronger filter. I’m not sure that I agree with the idea of abandoning any book this quickly: “You’re not a failure if you quit a book after three pages anymore than if you reject the proposition of a 10-hour date with someone you just met who annoys you. Lots of fish in the sea.” (Collaborative Fund)

Move fast and beat Musk: The inside story of how Meta built Threads by Naomi Nix and Will Oremus, July 29, 2023. This is an account of how Mark Zuckerberg saw an opening after Elon Musk acquired Twitter and set up a team to create a competing product. I find Threads severely lacking one month after its launch. There’s a balance between rolling out a product quickly and having all of the features users desire. Threads has a long way to go before it has capabilities equal to Twitter. I’m slowly coming to the same conclusion as

Doomberg

about Twitter. Any day that I refrain from looking at Twitter is far better than any day when I log in. (Washington Post)

The Power of Small Invisible Gestures by Ian Cassel, August 8, 2023. What seem like small trivial gestures can often convey great meaning in business and in personal life. Costco’s $1.50 hot dog combo deal sends a clear message that management is focused on providing great value to customers. Small acts of kindness like asking a friend of colleague what you can do for them can go a long way. “It’s these small invisible gestures and acts of kindness that matter. The things you do for others that don’t make their way onto twitter (X) or instagram on anyones highlight reels. They may seem insignificant to most people but not to the people that matter.” (Microcap Club)

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Podcasts

The Chinese EV Maker That's Selling More Cars Than Tesla, August 3, 2023. 49 minutes. “In the US, Tesla remains far and away the dominant maker of electric vehicles. But on a global scale, the situation is much more competitive. Over the last few years, Chinese EV makers have massively ramped up their export capacity and one in particular — BYD — sells more total vehicles (both pure EV and hybrid) than Tesla does.” (Odd Lots)

• Berkshire Hathaway’s investment in BYD attracted a great deal of attention in the late 2000s and I followed the company closely for many years. As I browsed the archive of my website today, I found an article which quoted Warren Buffett predicting that all cars will be electric in twenty years. The article was published in late 2009. Maybe Warren Buffett has a slightly better understanding of technology than commonly assumed.

Forging the mRNA Revolution — Katalin Karikó, August 1, 2023. 2 hours, 4 minutes. “My father was a butcher. My mother, she worked at home and then later she was a bookkeeper. We had a simple life. We didn't have running water; we had to run to the street to get drinking water which we carried home. And we did not have refrigerators; we put everything in the well to cool it down. But everybody in the neighbourhood was like that. We didn't have a television set, in at least the first ten years in my life. It was a little adobe house with a reed roof.” (The Jolly Swagman Podcast) h/t Value Investing World

• A Shot to Save the World, March 4, 2022. Katalin Karikó was one of the scientists profiled by Gregory Zuckerman in his book, A Shot to Save the World: The Inside Story of the Life-or-Death Race for a COVID-19 Vaccine. I reviewed the book shortly after it was published last year. (The Rational Walk)

Buffett: The Making of an American Capitalist, May 29, 2021. 1 hour, 13 minutes. David Senra discusses my favorite biography of Warren Buffett. Roger Lowenstein’s book was published in 1995 shortly after I graduated from college. I read the book soon after it was published and immediately started reading everything I could find about Berkshire Hathaway including the shareholder letters. Few books have the power to alter the trajectory of one’s life. This was one of them. (Founders Podcast)

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