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The Digest #78
Corporate Taxes, Greenlight Capital, Feedback Loops, Probability, Kahneman, Grant
“Everyone who wants to know what will happen ought to examine what has happened: everything in this world in any epoch has their replicas in antiquity.”
The Corporate Tax Burden: Facts and Fiction by Aswath Damodaran, April 20, 2021. This article is an excellent data-driven overview of corporate tax rates in the United States and around the world: “The Biden Administration's $ 2 trillion infrastructure plan, announced with fanfare a few weeks ago, has opened up a debate about not only what comprises infrastructure, but also about how to pay for it. Not surprisingly. it is corporate taxes that are the primary vehicle for delivering the revenues needed for the plan, with an increase in the federal corporate tax rate from 21% to 28% being the central proposal. I will leave the debate on what comprises infrastructure to others, and focus entirely on the corporate tax question in this post.” (Musings on Markets)
Greenlight Capital’s Q1 2021 Letter, April 15, 2021. David Einhorn’s Greenlight Capital letter is full of interesting observations on topics including the massive stimulus spending over the past year, the Federal Reserve’s monetary policy and prospects for inflation, recent action in GameStop and other meme stocks, and the crazy $100+ million valuation of Hometown International, a company that owns a single deli in New Jersey with sales of less than $14,000 in 2020. “The pastrami must be amazing.” (Greenlight Capital Letter posted on valuewalk.com)
Podcast Subscriptions vs. the App Store by Ben Thompson, April 21, 2021. Earlier this week, Apple announced support for podcast subscriptions, a feature that will allow listeners to pay for content. Apple will take a 30% commission from the first year of a subscription and 15% thereafter. In this article, Ben Thompson provides an overview of Apple’s new program focusing on the economics of podcast subscriptions and contrasting this model with Apple’s App Store. (Stratechery)
A Failure of Texas-Size Proportions by Katherine Blunt and Russell Gold, April 16, 2021. A February cold snap crippled Texas with long blackouts that affected two-thirds of its residents and resulted in at least 111 deaths due to causes including hypothermia and carbon monoxide poisoning. The Texas electricity market has been deregulated for nearly two decades and has mostly seemed to achieve its objectives. However, failure to winterize equipment caused catastrophic fragility. Now the state government is pondering how to fix the grid. Berkshire Hathaway has proposed a $8.3 billion plan but seeks a 9.3% rate of return on the investment. However, critics have characterized a guaranteed rate of return as “anathema” to free market principles. This article provides a good overview of the situation. (WSJ)
long feedback loops by ava, April 16, 2021. This article will resonate with anyone who has experienced the addictive nature of social media. Platforms such as Twitter and Facebook provide very short feedback loops. You can post a random thought on these platforms and instantly get feedback especially if you have a large number of followers. Sometimes, short feedback loops are helpful for acquisition of basic skills and knowledge, but proficiency in any field requires deep work and longer feedback loops. For people addicted to the dopamine rush of instant feedback, adapting to activities with longer feedback loops can be a challenge. (bookbear express via Substack)
The Self Educating Child by Mr. Money Mustache, April 18, 2021. The pandemic has been a traumatic experience for children thrust into remote learning and isolated from friends. Although it doesn’t seem to be common, some kids have been able to actually accelerate their pace of learning by leveraging the limitless information available online. One such example appears to be the son of Mr. Money Mustache (MMM), a well-known personal finance blogger who generally lives a self-sufficient lifestyle. After a year of learning online, MMM’s son will not return to high school and may never pursue a college degree. I’m skeptical that this approach will work for most kids but I’m including the article in this week’s newsletter because it has a list of useful online resources for readers with children. (Mr. Money Mustache)
Markov Chains by 10-K Diver, April 17, 2021. This is a great Twitter thread on probability. It is not uncommon for the intuitive answer to a question involving probability to be dead wrong. Rather than trust our intuition, it is better to think through problems in a systematic way, as the author describes. It seems like Twitter threads are replacing blogs for many writers. 10-K Diver has a website linking to a many worthwhile Twitter threads. Since joining Twitter in April 2020, 10-K Diver has attracted over 123,000 followers. (Twitter)
Daniel Kahneman: A Remarkable Life, Fast and Slow, April 15, 2021. Scott Barry Kaufman interviews Daniel Kahneman and covers topics ranging from Kahneman’s childhood experiences in Nazi-occupied France, his early work in the Israeli Army, his collaboration with Amos Tversky, and his landmark contributions in the fields of psychology and economics. Kahneman is most well-known for Prospect Theory which was discussed at length in his 2011 book, Thinking, Fast and Slow. For more on Daniel Kahneman, I suggest reading my review of The Undoing Project by Michael Lewis. (The Psychology Podcast)
Conversation with William Green, April 19, 2021. “William Green talks to Guy Spier about his new book, Richer, Wiser, Happier. He shares the long journey he has been on, before finally reaching the confidence and courage to publish his own book, which is full of insights from extraordinary people on how to think better, invest better and live more wisely. Mr. Green believes in compounding goodwill and does not hold back from sharing with the listeners' wonderful ways to become a mensch and live a much happier life.” (The Education of a Value Investor)
The History of Berkshire Hathaway and Warren Buffett with Adam Mead, April 1, 2021. “There have been hundreds of books written about Warren Buffett and Berkshire Hathaway. So it rare for a book come out that does something that none of the others have. But a new book coming out in April does exactly that by offering the first full chronological history of Berkshire Hathaway, from the period prior to Buffett all the way to the current day. In this episode, we talk to Adam Mead, the author of The Complete Financial History of Berkshire Hathaway: A Chronological Analysis of Warren Buffett and Charlie Munger's Conglomerate Masterpiece.” (Excess Returns)
The importance of emotional control to find good investment ideas, March 9, 2021. “In this presentation, Jeff Gramm joins his expertise as a professor at Columbia Business School, a student of Joel Greenblatt and manager of the Bandera Partners Hedge Fund, and combines everything in a master class where he teaches Value and how to manage emotions, or how to find ideas of investment.” For more on Jeff Gramm’s book, Dear Chairman, I suggest reading my review from 2016. (Zonavalue TV)
Financial Bubbles of Historic Proportions, February 26, 2021. “The balance sheet of the Federal Reserve continues to surge at an unprecedented rate, up 83% y/y to a historic level, $7.59 trillion at the latest count. According to our Wealth Track podcast guest, financial historian, and long-time market observer James Grant, interest rates, the “central pricing mechanism for financial markets” have been pushed to artificially low levels by the Fed’s policies which have created numerous market bubbles. He cites Bitcoin as one of the most extreme examples.” (Consuelo Mack Wealth Track) h/t wallstreetonparade.com.
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