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The Digest #106
Berkshire's Directors, Book Reviews, Tax Irrationality, Rethinking Globalization, Technology and War
“Read books are far less valuable than unread ones. The library should contain as much of what you don’t know as your financial means, mortgage rates and the currently tight real-estate market allows you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menacingly. Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary.”
— Nassim Nicholas Taleb, The Black Swan
The Rational Walk
Berkshire’s Directors Have Skin in the Game, March 12, 2022. There has been quite a bit of Berkshire news lately. The media seems to be focused on Warren Buffett’s recent purchase of Occidental Petroleum common stock. There are a number of good summaries, including CNBC’s latest Warren Buffett Watch newsletter and I do not have any insights to offer on Occidental or oil in general. However, I did have some thoughts on Berkshire’s proxy statement, released last night, and wrote this article on the unusually high level of director ownership at Berkshire. In particular, I focused on Greg Abel’s interest in Berkshire Hathaway Energy, worth in excess of half a billion dollars, whereas his direct ownership of Berkshire Hathaway stock is quite minimal. The article includes a table showing all director holdings.
Book Reviews. Many books have been reviewed on The Rational Walk since 2009 but until now, they have been difficult to locate. This list of reviews by category makes it easier to access this collection. I am planning to work on recategorizing other types of content as well using a similar approach. My two favorite reviews are for Robert Caro’s The Power Broker: Robert Moses and the Fall of New York and Viktor Frankl’s Man’s Search for Meaning. I read Viktor Frankl’s book immediately after reading William Shirer’s The Rise and Fall of the Third Reich. I read both of them two years ago around the 75th anniversary of the end of World War II. Of course, I had no idea that the largest European war since WWII would erupt less than two years later in Ukraine.
The Irrational Tax Trap, July 7, 2020. I’m not alone in having a history of making tax inspired decisions that turn out poorly. Even with marginal tax rates at current levels, it is almost always a mistake to let taxes be the predominant factor in an investment decision. But I find it extremely difficult to take actions that will generate income in my taxable portfolio. There’s a difference between realizing the validity of an argument at an intellectual level and having the emotional fortitude to act on it.
Economic Blacklist of Russia Marks New Blow for Globalization by Josh Zumbrun, March 10, 2022. A good article on a topic I’ve been thinking about a great deal lately. To what extent does the United States, and the free world generally, wish to intertwine its supply chains with countries sharing few, if any, of our values? Today, the pariah is obviously Russia due to their overt hostilities against Ukraine. But we seem willing to tolerate dependencies with equally authoritarian regimes, such as China, so long as they are not currently crossing red lines. It should be unnecessary to say that implementing the same sanctions the free world has imposed on Russia would be orders of magnitude more painful if applied to China in the event of an invasion of Taiwan. We need to rethink dependencies before a crisis emerges. (WSJ)
The End of the Affair? Kevin Rudd on China's Relationship with Russia by Jonathan Tepperman, March 11, 2022. Kevin Rudd served as Prime Minister of Australia from 2007 to 2010, and briefly in 2013. In this interview, Rudd expresses his views on the evolving relationship between China and Russia. With Russia almost completely isolated from the west due to heavy sanctions, its relationship with China has dramatically increased in strategic importance. (The Octavian Report)
Tech and War by Ben Thompson, March 7, 2022. We constantly read about sanctions against Russia involving actions taken by governments, and there’s no doubt that such state sponsored sanctions have the biggest bite. However, this article makes interesting observations about private sanctions, that is, sanctions that private companies have taken of their own volition. The article goes on to explore many other interesting aspects of the technology industry as it relates to the war. (Stratechery)
Russian Oil = Confederate Cotton by Roger Lowenstein, March 10, 2022. “Vladimir Putin is making the same miscalculation that doomed Jefferson Davis's Confederacy a century and a half ago. The West can learn from it.” (Intrinsic Value by Roger Lowenstein)
Life of the Party by Nick Maggiulli, March 8, 2022. “But in reality I’m still human. I still have my own struggles. This isn’t Instagram. This is my blog. I’m not here to show you how “great” my life is. I’m here to help you improve yours. Maybe that means making better decisions with your money. Or maybe it means admitting that you binge drink to cope with social anxiety. I don’t know.” (Of Dollars and Data)
Earnestness by Paul Graham, December 2020. “The highest compliment we can pay to founders is to describe them as "earnest." This is not by itself a guarantee of success. You could be earnest but incapable. But when founders are both formidable (another of our words) and earnest, they're as close to unstoppable as you get.” (PaulGraham.com)
The Art And Science Of Valuation With Professor Aswath Damodaran, March 6, 2022. 10-K Diver interviews Aswath Damodaran in this interesting episode of Money Concepts. “Professor Aswath Damodaran is possibly the world’s foremost authority on valuing companies. He’s also one of my heroes. He not only understands his subject really well; he also helps millions of people around the world (students, business managers, investors, etc.) understand and appreciate its intricacies.” (Money Concepts)
Reporter Called out Jon, So We Called Him Up, March 10, 2022. Jon Stewart interviewed Spencer Jakab, author of The Revolution That Wasn’t, which I reviewed in December. I found the discussion fascinating because Jon Stewart is clearly an intelligent man, but he just cannot seem to wrap his head around the fact that one need not invest or speculate actively in order to participate in the stock market. Spencer Jakab repeatedly mentioned the availability of index funds, but this just seemed to fall on deaf ears. Stewart feels that the Fed has rigged the economy with low rates and has given people nowhere to seek returns other than stocks, and that the game is rigged against ordinary people. But he just can’t seem to realize that ordinary people do not have to “play the game” to invest in stocks! Jack Bogle’s index fund innovation over forty years ago provides another option. The interview of Spencer Jakab starts around eleven minutes into the podcast. (The Problem with Jon Stewart)
The Life Force Revolution, March 7, 2022. “William Green speaks with Tony Robbins, the world’s leading life and business strategist. A legendary expert on peak performance, Tony has coached billionaire investors like Paul Tudor Jones, famous entrepreneurs like Salesforce founder Marc Benioff, and athletes like Serena Williams. He has also written #1 bestsellers like Money: Master the Game, Unshakeable, and Life Force, a new book that explains how to transform your health, energy, and happiness.” (Richer, Wiser, Happier)
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