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The Digest #104
Berkshire's Voting Control, Car Dealerships, Intellectual Junk Food, Due Diligence, Supply chains, Invasions, Hagstrom on Investing
“Every command executed is always one of an immense number unexecuted. All the impossible commands inconsistent with the course of events remain unexecuted. Only the possible ones get linked up with a consecutive series of commands corresponding to a series of events, and are executed.
Our false conception that an event is caused by a command which precedes it is due to the fact that when the event has taken place, and out of thousands of others those few commands which were consistent with that event have been executed, we forget about the others that were not executed because they could not be.”
New Post on The Rational Walk
Berkshire’s Hathaway’s Future Depends on Voting Control, March 3, 2022. As long as Warren Buffett is on the scene, talk of breaking up Berkshire Hathaway is idle chatter. Mr. Buffett not only has nearly universal respect in the business community, but he has long had effective control of the company due to his personal ownership and the loyalty of longtime shareholders. But what will happen after Mr. Buffett, who turns 92 this year, is no longer on the scene? Much will depend on voting control governed by Berkshire’s dual-class share structure. This article examines who controls Berkshire today and how control is likely to evolve over time. (The Rational Walk)
Car Dealerships Don’t Want Your Cash—They Want to Give You a Loan by Ben Eisen, March 1, 2022. I chuckled as I read this article. In late 2007, I negotiated a price for a 2008 Ford Mustang GT over email with a local dealership. When I arrived to sign the papers, the salesperson was shocked that I did not plan to use their financing. The “sales manager” came out with a hard sell on financing. I walked out of the dealership and nearly reached the sidewalk before the salesperson caught up to me and gave in. Shady tactics are nothing new at dealerships, but in today’s overheated car market, buyers are finding that salespeople are likely to just let them walk away.2 (WSJ)
On Attention, Addiction and Algorithms by Thomas J. Bevan, February 27, 2022. This article is on the long side, but that is kind of the point. The author argues that attention spans have declined precipitously in recent years. We have trained our minds to demand instant gratification. Social media apps offer the equivalent of intellectual junk food with infinite scrolling and content targeted to our interests with sophisticated algorithms. Few have the ability to focus in this environment and, as a result, reading within a “flow state” is increasingly rare. (The Commonplace)
Cultivating the State of Flow, February 21, 2019. I wrote this article three years ago and it covers many of the same topics as Mr. Bevan’s article. I find this quote from Marcus Aurelius instructive: “You are living as if destined to live forever; your own frailty never occurs to you; you don’t notice how much time has already passed, but squander it as though you had a full and overflowing supply — though all the while that very day which you are devoting to somebody or something may be your last.” People squander unbelievable amounts of time online, especially on “social media”. I am no exception, but at least I am aware of the pitfalls and attempt to minimize the ill effects. (The Rational Walk)
Take it Easy: David Nasaw on the Work Habits of Andrew Carnegie, February 28, 2022. “The successful man of business was not a wage slave, paid by the hour or the day or the task, and he should not behave as if he were. Manually laboring drudges might work long hours without sacrificing productivity, but businessman could not. Their work required imagination, thought, calculation. Your always-busy man accomplishes little, the great doer is he who has plenty of leisure. Moral: Don’t worry yourself over work, hold yourself in reserve, and sure as fate, ‘it will all come right in the wash.” (The Octavian Report)
￼Due Diligence – Get On The Ground by Ian Cassel, February 23, 2022. Everyone has access to the same information today, so it is necessary to go the extra mile to gain a competitive edge. “We often feel the urge “to do something”. We love to come to quick conclusions by analyzing what is on the surface (satellite imagery). But reality is much more nuanced. Sometimes what is easily seen is meant to distract us. 100% of investors can see what is on the surface. 5% are willing to dig below the surface to find the truth.” (Microcap Club)
Car Parts, Chips, Sunflower Oil: War in Ukraine Threatens New Shortages by Alistair MacDonald and William Boston, February 27, 2022. Global supply chains are incredibly complex. Recent events demonstrate that it is not enough to merely know the locations of your suppliers. Your suppliers might themselves rely on materials from locations exposed to war and other turmoil. It seems obvious that the supply chain managers of today’s businesses must understand their supply chains all the way down the value chain to the raw materials. (WSJ)
A History Of Invasions, Wars & Markets by Jamie Catherwood, February 27, 2022. This is an excellent historical look at a very timely subject. Although the nature of war has changed dramatically over the years, there is still much we can learn regarding the history of economic and social impact of past conflicts. (Investor Amnesia)
Now You Get It by Morgan Housel, February 23, 2022. “If I say to you, ‘How would you feel if the market fell 30%?’ you imagine a world where everything is the same as it is today, but stock prices are 30% cheaper. And in that world, it feels like an opportunity. But what actually makes the market fall 30% is a pandemic that might kill you, or a recession where you might lose your job, or a terrorist attack that might just be beginning, or inflation with no end in sight. And in that world – a world that can’t be known until it happens – things feel different.” (Collaborative Fund)
The Speed of Information by Trung Phan, February 26, 2022. I find the author’s characterization of Twitter during the Russia-Ukraine war to be very accurate, although he has a more positive take on it than I do. I find the unreliability of the information, the misguided jokes and “hot takes”, and emergence of geopolitical “experts” a bit too much. So I have logged of Twitter as a result, perhaps permanently. “Twitter is already optimized as a dopamine drip machine. Now, it’s covering the largest land invasion on the European continent since the end of World War II. Then layer on the drama of a David vs. a nuclear-armed Goliath battle (Zelensky + Ukraine vs. Putin + Russia). Finally, throw in confusion as to what information is real and it has truly become “insane”. (SatPost)
Robert Hagstrom: Investing - The Last Liberal Art, February 22, 2022. I read Robert Hagstrom’s book, The Last Liberal Art soon after it was originally released in 2000 and it might have been my first exposure to the concept of investing as a multidisciplinary endeavor. This is an interesting and wide ranging discussion. “Robert Hagstrom is a distinguished author and investor with 35+ years of experience in the equity market. Our conversation centers around his gem "The Last Liberal Art", explaining how disciplines such as biology, philosophy, and psychology can help us improve as investors. We also gain new reading inspiration as well as advice for younger listeners.” (Investing by the Books)
Warren Buffett's 2021 Letter to Berkshire Hathaway Shareholders: Highlights & Our Thoughts, March 3, 2022. Geoff Gannon and Andrew Kuhn discuss Warren Buffett’s letter to shareholders, reading between the lines in a few interesting areas. They discuss whether Apple should be considered a permanent holding and the size of companies that could be acquisition targets in the future. (Focused Compounding)
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This quote is a brief excerpt from the Second Epilogue of War and Peace. The epilogue is a long essay in which Leo Tolstoy writes about the subjects of power and free will. He grapples with the forces that decide historical events. Tolstoy was writing from a nineteenth century viewpoint and the defining conflict of his time was the invasion of Russia by Napoleon’s forces in 1812. One wonders to what extent Tolstoy might modify his views regarding the ability of a specific individual to decide the course of human history based on the development of weapons of mass destruction, specifically nuclear weapons, that could end humanity. While the leader of a nation ordering a nuclear strike cannot do so without the consent of a few people below him in the chain of command, far fewer people are needed to execute a command for a nuclear strike compared to the thousands of commands needed to lead a nineteenth century army on the battlefields of Tolstoy’s era.