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The Digest #96
Digital Cash, Berkshire's Annual Meeting, Productivity Traps, Taleb on Vaccines, Peloton
"Probably the greatest harm done by vast wealth is the harm that we of moderate means do ourselves when we let the vices of envy and hatred enter deep into our own natures."
Money and Payments: The U.S. Dollar in the Age of Digital Transformation, Board of Governors of the Federal Reserve System, January 20, 2022. The Fed has released a white paper discussing potential plans to introduce a digital currency in the United States. Although the Fed is stating that no decisions have been made regarding how to proceed, the paper resulted in much attention and criticism, including my own comments written in a Twitter thread and the Wall Street Journal’s coverage on January 21. The Fed is currently accepting comments on the paper. (Federal Reserve)
Warren Buffett closes in on Cathie Wood as tech stocks tumble by Robin Wigglesworth, January 22, 2022. Cathie Wood’s Ark Innovation ETF is on the verge of being overtaken by Warren Buffett’s Berkshire Hathaway since the start of the pandemic. Ms. Wood made headlines last month when she projected a 30-40 percent compound annual return over the next five years. In contrast, Mr. Buffett has never projected the price of Berkshire stock. Markets gyrated wildly on Monday with Ark Innovation trading in a range of $64.98 to $73.57 and Berkshire Hathaway’s B class of common stock trading in a range of $296.08 to $304.73. (Financial Times)
Wildfire Risk in California Drives Insurers to Pull Policies for Pricey Homes by Leslie Scism, January 19, 2022. Insurers are reevaluating the risk of wildfires in California and other western states. Changing climate patters have made regions more prone to fires than historical data might suggest. One statistic that struck me was that California homes in the $10 million range carry insurance premiums in the $20,000 to $40,000 range. While this is a big dollar amount in absolute terms, it is only 0.20-0.40% of property value in a region with poorly defined future risk profiles. (WSJ)
How ‘Treat Yourself’ Became a Capitalist Command by Ester Bloom, November 19, 2015. Every Saturday, the Wall Street Journal publishes a section called “Off Duty” which is meant to highlight recreational pursuits for wealthy individuals. I couldn’t resist making a sarcastic comment on Twitter regarding how the marketing term “self-care” is brilliant because it frames luxury spending in terms of health and wellness. A reader responded with this interesting article which provides some history behind the self-care industry and how it evolved in recent decades. (The Atlantic)
The Huge Tax Bills That Came Out of Nowhere at Vanguard by Jason Zweig, January 21, 2022. Mutual funds have often surprised shareholders with unexpected distributions toward year-end. For this reason, many investors prefer to hold mutual funds with a history of distributions in tax-deferred retirement accounts. Vanguard has a long-standing reputation for tax-efficiency when it comes to fund distributions but unfortunately this was not the case recently with its target-date retirement funds. Due to large investors shifting to a lower-fee version of the fund, small investors were left holding the bag with large distribution of realized gains at yearend. (WSJ)
The High Cost of an Easy Job by Nick Maggiulli, January 18, 2022. It is important to strive to live a life of purpose and accomplishment: “Why do work when you can not work, right? Why build something when you could not build it? The choice seems obvious, doesn’t it? But the easy choices come with hard consequences…later. They show up where you might not expect them. With regret. With nostalgia. With sadness. The easy way out always has hidden costs. The question is: are you willing to pay them?” (Of Dollars and Data)
The Time Trap of Productivity by Lawrence Yeo, January 2022. Time is definitely our most precious asset, but over scheduling has downsides: “By scheduling your day down to the last minute, you introduce an anxiety from managing your real-time progress to an imagined vision. Each glance at the clock fires off a thought about whether your day is going like it’s supposed to, or if you’re falling behind. This is a mind that always views the present through the lens of past and future, and can never be anchored in the now.” (More to That)
If You Only Read a Few Books in 2022, Read These by Ryan Holiday, January 20, 2022. Some interesting reading ideas: “Books are an investment in yourself—investments that come in many forms: novels, nonfiction, how-to, poetry, classics, biographies. They help you think more clearly, be kinder, see the bigger picture, and improve at the things that matter to you. Books are a tradition that stretches back thousands of years and stretches forward to today, where people are still publishing distillations of countless hours of hard thinking on hard topics. Why wouldn’t you avail yourself of this wisdom?” (RyanHoliday.net)
Podcasts and Videos
Nassim Taleb: How to Look at the Risks of Covid Vaccines, January 2, 2022. Nassim Taleb’s precautionary principle has been cited by individuals skeptical of the COVID-19 vaccines, but Taleb himself has come out strongly in favor of widespread vaccination efforts. This video is a brief explanation of why Taleb has taken his current position on vaccines and how the precautionary principle applies in this case. His emphasis is on considering the risks of the vaccine alongside the risks of contracting and spreading COVID. I found his argument compelling. (YouTube)
How Paul Graham Went From Painter to YCombinator Founder, January 21, 2022. “Paul Graham is the co-founder of Y-Combinator, which is arguably the world’s most successful startup studio. His artistic background, combined with his technical genius, has helped him become one of the most successful writers and entrepreneurs in Silicon Valley. So how does this proudly self-proclaimed ‘nerd’ who stopped watching TV at the age of 13 continue to find success while circumventing convention?” (David Perell/YouTube)
Peloton: Reinventing the Wheel, January 18, 2022. This is an interesting discussion regarding Peloton’s business model in light of the recent pummeling of its stock price. “Peloton was founded over 10 years ago with the idea of making the best in-person spin classes available at home. By delivering eye-catching hardware and compelling content, it has since become the largest interactive fitness platform in the world with over 6 million members. Peloton's rise has not been without challenges, however, and the business's economic model is under debate as we speak.” (Business Breakdowns)
Early Bird: The Power of Investing Young, 2nd Edition by Maya Peterson and Soren Peterson. In 2018, I reviewed the first edition of Early Bird written by Maya Peterson who was just fifteen years old at the time. The first edition was a great introduction to investing for young people. In the second edition, Soren Peterson contributes content including a new interview with Ian Cassel, a well-known investor in the micro-cap field, and the author of The Intelligent Fanatics Project. Young people have a major advantage when it comes to investing because they have much more time for compounding to work its magic. Financial literacy is abysmal in the United States, and it is great to see young people like Maya and Soren take it upon themselves to educate their peers. Maya is also the author of Lighthouse: Women Leading the Way in Finance, which I reviewed in 2020. For more background, I recommend this interview published by 7Investing: The Power of Investing Young with Maya and Soren Peterson.
The Emperor of All Maladies: A Biography of Cancer by Siddhartha Mukherjee. Mukherjee has a rare talent for documenting history and complex medical topics while also telling the very human stories about lives impacted by cancer. As a practicing cancer physician, Mukherjee explains how our understanding of cancer has evolved over time, the advances in surgery, chemotherapy, radiology, and immunotherapies, and generally equips us to be better informed patients in the event of a diagnosis. Understanding the tradeoffs involved in various forms of treatment, the prospect of a cure or long-term remission, and when a situation can best be dealt with in a palliative manner are topics best approached before a crisis.
Berkshire Hathaway Announces In-Person Annual Meeting After two years of virtual meetings due to the pandemic. Berkshire Hathaway has announced that this year’s meeting will occur in person on April 30. The meeting will also be available via webcast. Berkshire’s annual report along with Warren Buffett’s letter to shareholders will be posted to the company’s website on February 26. (Berkshire Hathaway)
James Clear’s 30 Days to Better Habits This is a free online course that I recently signed up for which includes suggestions for developing better habits. I have mentioned James Clear’s book, Atomic Habits, several times and wrote a review of the book last year. So far, this email course has presented some of the best ideas from the book as well as supplementary information. “30 Days to Better Habits and Atomic Habits are complementary. While you should expect many of the core ideas to be the same, the course is full of many new examples and applications that you can’t find in the book. When combined, the book and the course deliver a powerful, 1-2 punch.” (JamesClear.com)
The Bear Cave Newsletter by Edwin Dorsey. This newsletter is meant for short-sellers and has free and paid content. I’m not a short seller, but I find the free Sunday newsletter interesting because the author often compiles lists of resignations from public companies, as disclosed in SEC filings. Resignations for mysterious reasons or after short tenures, especially in the CFO position, can signal serious problems, so it is interesting information to follow. When you read that someone resigned to “pursue other opportunities”, chances are that there is more to the story. (The Bear Cave)
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