The Digest #50
Bruce Greenwald, Twitter, Bitcoin, High Quality Sleep
Bruce Greenwald on "Value Investing: From Graham to Buffett and Beyond" Free virtual event on November 18, 2020 at 6:00 pm EST. After an introduction by Mario Gabelli, Columbia Business School Professor Bruce Greenwald will share his thoughts regarding a new edition of his book. “In the modern era, investors are increasingly caught up in so-called hot tips, can't-miss startups, excessive optimism, and short-term speculation. Value investing is the antithesis to these short-sighted approaches, and stresses what Ben Graham—the father of value investing—referred to as the 'margin of safety' when describing the gap between an equity's price and its value.” (Museum of American Finance)
Why You Shouldn’t Max Out Your 401(k) by Nick Maggiulli, October 27, 2020. There are obviously pros and cons when it comes to locking up money in retirement accounts. The conventional wisdom is that savers should always maximize retirement account contributions, even beyond the point where employer matches end. However, Maggiulli makes the case that the tax benefits might not be large enough to offset the illiquidity of tying up money in retirement accounts for decades. He does acknowledge that there are many behavioral reasons to tie up money so it will not be spent instead. In my opinion, most people are probably best served to put as much as possible into retirement accounts based on the behavioral factors alone. (Of Dollars and Data)
Aaron Edelheit: Twitter, the Sabbath, US Real Estate and Chick-fil-a August 25, 2020. In this podcast episode, Guy Spier interviews Aaron Edelheit regarding a number of topics but focuses on the power of Twitter as a world class content curation tool. Edelheit wrote an investment thesis for Twitter which is available from a link in the podcast. COVID-19 and the 2020 election have both increased Twitter’s power as a social network. Edelheit also discusses Chick-fil-a in the context of the company’s policy to remain closed on Sundays. Guy Spier is the investment manager of Aquamarine Fund and the author of The Education of a Value Investor, a book that I reviewed in 2014 shortly after it was published. (Cappuccino and Conversation)
How Netflix’s Reed Hastings Rewrote the Hollywood Script by Dawn Chmielewski, September 7, 2020. “Netflix currently functions, by any measure, at a world-class level. As the year of the pandemic upends entertainment companies—Disney’s crippled theme parks, Warner Bros.’ furloughed blockbusters, AMC’s shuttered theaters—Netflix is having a moment. A moment of prestige, with a record 160 Emmy Award nominations, eclipsing the long-dominant HBO, and more Oscar nods than any other media company. A moment of influence, adding almost as many customers in the first six months of the year as in all of 2019, extending its reach to nearly 200 million subscribers in 190 countries. And a moment of profits, with sales up 25% year over year, earnings more than doubled and its stock up 50 percent, as most of the market gyrates wildly just to scratch back to even.” (Forbes) h/t to Santangel’s Review
‘Cash Is Trash,’ So Let’s Bet $425 Million on Bitcoin by Jason Zweig, October 30, 2020. Microstrategy’s major bet on a digital currency has been viewed by some as validation of bitcoin as a store of value, but the move actually raises important capital allocation questions. Chief Executive Michael Saylor made a revealing comment: “We realized that cash is trash and we needed either to shrink the capital structure or move our cash into something that is going to float on the flood of liquidity and not sink under the flood of liquidity.” Shrinking the capital structure would mean returning cash to shareholders via dividends or repurchases. As Zweig notes, Microstrategy is no longer just a software company. The stock also represents a big bet on bitcoin. (WSJ)
Strength Training is Learning from Tail Events by Nassim Nicholas Taleb, November 6, 2016. Taleb shares his take on strength training as the best form of physical training. “I learned that what you do for training needs to be separate from what you do for pleasure. I enjoy hiking, walking, ocean swimming, riding my bicycle, that sort of things; but I have no illusion that these activities will make me stronger. They may be necessary, but for other reasons than the attainment of strength. I just consider walking necessary therapy, like sleeping.” (Medium)
Common Probability Errors to Avoid, November 3, 2020. “Gaining a better understanding of probability will give you a more accurate picture of the world and help you make better decisions. However, many people fall prey to the same handful of issues because aspects of probability go against what we think is intuitive. Even if you haven’t studied the topic since high-school, you likely use probability assessments every single day in your work and life.” This article reminded me of reading How to Lie With Statistics, a classic book that I reviewed last year. (Farnam Street)
Crispr Gene Editing Can Lead to Big Mistakes in Human Embryos by Amy Dockser Marcus, October 29, 2020. The concept of gene editing holds great promise for addressing terrible genetic disorders but it is not without risk. The major concern is that mistakes in gene editing have the potential not only to impact a particular human being but to be passed on to future generations as well: “In September, an international commission sponsored by the U.S. National Academy of Medicine, U.S. National Academy of Sciences and the U.K.’s Royal Society issued a report stating that the gene-editing technology isn’t ready for such a use because scientists don’t understand how to make precise fixes without also introducing potentially dangerous changes.” (WSJ)
Sleep Is Your Superpower
I get about five to six hours of sleep, at best, on a typical night and wake up without an alarm most days. The more I read about sleep quality, the more convinced I am that lack of sleep is a significant health problem, not some sign of “efficiency”. This video provides a good introduction of this important topic. (Thanks to @chdwale for the link).
Appalachian Trail Scene
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