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The Digest #70
Grantham, Berkowitz, Marks, Isaacson, and Tulips
“I try to think of my shareholders as my partners. I try to think of the information I would want them to send me if they were running the place, and I was the shareholder. What would I want to know? This is what I tell them. In my first draft, I address it to my sisters who don’t know a lot about finance. “Dear sisters”- I explain to them what they would want to know in their position.”
— Warren Buffett describing how he writes letters to shareholders
Berkshire Hathaway’s 2020 annual report and Warren Buffett’s letter to shareholders will be posted on the company’s website at approximately 8:00 a.m. eastern time tomorrow.
Jeremy Grantham - A Historic Market Bubble, February 23, 2021. “My favorite example from 2000 with lunchtime greasy spoons that we went into in Downtown Boston, and they all had quite a few television sets and they were all playing replays of the Celtics and the Pats. For a few months there in late '99, early 2000, they'd closed the sports ones and trends for them to CNBC. And we'd have talking heads talking about the latest pet.com's. That was terrific, that gave you just a month or two to plan accordingly, plan evasive action. And I would say we have passed the acceleration test brilliantly, and I would say we have passed the crazy behavior test brilliantly. And a lot of the craziest behavior actually taken place this year in January, February.” Note: This is Grantham’s second appearance on the Invest Like the Best podcast. His previous appearance, entitled An Uncertain Crisis, was posted on July 9, 2020. (Invest Like the Best)
Bruce Berkowitz: From Morningstar Manager of the Decade to 15 Years of Underperformance, February 17, 2021. This is an interesting account of the track record of Bruce Berkowitz, Founder and Chief Investment Officer of Fairholme Capital Management. Berkowitz was one of the most successful investors of the 2000s and was widely followed by investors who admired his time tested principles for investing. However, over the past decade, Berkowitz made concentrated bets that have not worked out, mostly notably in the case of Sears. It’s easy to play Monday morning quarterback and examine another investor’s history with the benefit of hindsight, but I think that this article tries to present a fair assessment, overall, and can help us understand and learn from the factors that led to this dramatic fall from grace. (Canuck Investment Analyst)
What Gene Editing Can Do for Humankind by Walter Isaacson, February 19, 2021. This essay is an excerpt from Isaacson’s latest book, The Code Breaker, which is scheduled for release on March 9. Rapid advances in the ability of scientists to alter the human genome has brought about varied reactions. The prospect of being able to edit the DNA of an embryo to prevent hereditary diseases such as sickle cell anemia holds the promise of alleviating major sources of human suffering. At the same time, the prospect of “designer babies” has all sorts of potentially negative ramifications ranging from a reduction of diversity in the gene pool to a further spiking of inequality as the wealthy give their offspring a genetic edge not available to others. The American creed of “all people are created equal” might be forever changed. It seems best to keep an open mind regarding this technology. I am planning to read Isaacson’s new book later this year. (WSJ)
The Rewind - You Can't Predict. You Can Prepare by Howard Marks, February 24, 2021. Howard Marks looks back on a memo originally published on November 20, 2001. The title of this memo was inspired by a TV commercial tagline from that time: “It's almost a Yogi Berra type statement that makes no apparent sense on first reading, but then it turns out to be quite wise.” This podcast includes Marks giving his current thoughts about what he wrote two decades ago. This is followed by a narrator who reads the original memo. (Oaktree Capital)
The Activists Who Embrace Nuclear Power by Rebecca Tuhus-Dubrow, February 19, 2021. In 1953, President Eisenhower delivered his Atoms for Peace speech at the United Nations. Acknowledging the grave dangers of nuclear weapons, the President hoped that “this greatest of destructive forces can be developed into a great boon, for the benefit of all mankind.” Nuclear energy has many benefits, including not emitting carbon dioxide, and requiring only a small amount of land to generate vast amounts of power, unlike windmills and solar panels. However, nuclear power carries the risk of environmental catastrophe with the most devastating example being the meltdown at Chernobyl in 1986. This long article does a good job of describing the pros and cons of nuclear power as a tool for mitigating the risk of climate change. (The New Yorker)
Your Environment Shapes Your Decisions This Farnam Street article published in 2013 describes the highly dysfunctional environment of many modern offices: “From the moment you arrive until the moment you leave, you make an inch of progress on twenty things rather than ten feet of progress on one thing.” Technology has existed to facilitate remote work for more than a decade but the pandemic is what forced home and office life to merge for millions of workers. The distractions and patterns of work in the modern office have been replaced by an entirely new set of distractions but the core message of this article still resonates: environment matters. Molding your work environment, whether in your home or an office, to allow for focus and minimize context switching remains a prerequisite for real productivity. (Farnam Street)
100 (Short) Rules for a Better Life by Ryan Holiday, February 23, 2021. In this article, Holiday shares many of his rules for improving your life. Most of the rules are links to longer articles so if you are not familiar with Holiday’s work, this is a good place to start. I particularly liked don’t watch television news, take walks, cut toxic people out of your life, don’t take the money, and animals make life better. (RyanHoliday.com)
Fry's Electronics suddenly went out of business by Jordan Valinsky, February 24, 2021. Fry’s Electronics was a small, privately held chain of stores based in the Silicon Valley that aimed to be a “one stop shop for hi-tech professionals”. In other words, it was a Mecca for nerds. The Campbell location of Fry’s was located on Hamilton Road, a short distance from the first home I owned and down the street from the office I worked in from 1997 to 1999. It is the store I went to when I built my first Windows computer in 1995 and purchased the books to learn programming. I have not been in a Fry’s location in well over a decade and often wondered how they were able to stay in business given their small scale and online competition. They held out for a long time but apparently could not survive the pandemic. (CNN)
Daily Journal Annual Meeting
If you missed the Daily Journal annual meeting on Wednesday, Yahoo! Finance has posted the full meeting and interview on YouTube. A transcript has been posted (h/t to Value Investing World for the link).
Warren Buffett has said that Charlie Munger has the best “thirty second mind” of anyone he knows: “Charlie can’t encounter a problem without thinking of an answer. He has the best thirty-second mind I’ve ever seen. I’ll call him up, and within thirty seconds, he’ll grasp it. He just sees things immediately.”
It is often much better to think for twenty-five seconds and speak for five seconds rather than to think for five seconds and speak for twenty-five seconds. At 97, Charlie Munger’s thirty second mind was very evident on Wednesday.
Amsterdam’s Flower Market
I visited Amsterdam in July 2014. Like most tourists, I eventually made my way to the flower market and purchased some tulip bulbs to bring home. Fortunately, tulip prices remain well below the peak level reached in the 17th century.
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