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Kindle Notes & Highlights
by
Gautam Baid
Read between
August 16, 2023 - January 13, 2024
The best way to learn something is to try to do it, but the next best way to learn is from someone who has already done it.
Michael Eisner and Aaron Cohen’s book Working Together: Why Great Partnerships Succeed,
I think you learn economics better if you make Adam Smith your friend. That sounds funny, making friends among the eminent dead, but if you go through life making friends with the eminent dead who had the right ideas, I think it will work better in life and work better in education. It’s way better than just being given the basic concepts.
“The smallest bookstore still contains more ideas of worth than have been presented in the entire history of television.”
Focus on those investments for which the microeconomics are going to dominate the outcome.
Fifty years ago, the best investors were the ones with an informational edge. Today, the best investors are the ones with a behavioral edge.
what we perceive as interest is often distorted by society’s expectations and becomes what we think we should become, out of a fear based on beliefs.
Well.. Interesse moet ergens starten. Niemand start out of the blue met interesse voor investeren, wiskunde of taal. Bijjna altijd is er een inspirerend voorbeeld, verwachting (iedereen vindt dit boeiiiend) of verplichting (je krijgt nu dit vak)
It is a wonderful feeling to care for our parents. We have many ways to do this. Showing appreciation for little acts. Spending time together. Making small gestures of love and affection. This is all most parents want from us. It is what gives them great happiness.
At Berkshire, I regularly hand bats to many of the heaviest hitters in American business [emphasis added].”3 We all can learn a deep lesson here: to be a winner, work with winners.
Both Buffett and Munger often joke that they delegate at Berkshire almost to the point of abdication.
It is better to be an average guy on a star team than a star on an average team.
If you are the smartest person in the room, you are in the wrong room.
Never overpromise and underdeliver. Being unreliable will impair your career and friendships. If anything, underpromise and overdeliver.
We can only do so much to answer questions on our own. We are only exposed to the information we encounter, only live the experiences limited to our personal lives, and only think of the hypothesis that we can conceive of. As a result, it can be hard to know what reasons someone else could have for believing something different. The best cure for overconfidence in your beliefs is to constantly remind yourself that you have experienced less than a tiny fraction of a percent of what has happened in the world. This experience, however, ends up representing nearly 100 percent of how you believe
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“Start with the assumption that everyone is innocently out of touch and you’ll be more likely to explore what’s going on through multiple points of view, instead of cramming what’s going on into the framework of your own experiences. It’s hard to do. It’s uncomfortable when you do. But it’s the only way to get closer to figuring out why people behave like they do.”
According to Feynman, before you begin any task, you first must not know the answer. We must begin by being uncertain about the answer. Otherwise, how can we learn?
“The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling, ‘Swing, you bum!’ ignore them.”
“What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital [emphasis added].”
A key benefit of emotional intelligence is the intellectual honesty to view the world as it really is, not as one wants it to be, hopes it to be, or wishes it to be.
If you can’t find businesses within your circle of competence, don’t hurriedly step outside that circle because of the fear of missing out, which is often the case in a bull market. Instead, spend time studying industries and companies outside your circle before crossing the boundaries.
Last year we found a steel company on the Korean Stock Exchange that had no analyst coverage, no research, but was the most profitable steel company in the world.
professional investors and speculators were “largely concerned, not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public.”
“Our main business is not to see what lies dimly at a distance, but to do what lies clearly at hand.”
Dit geldt ook voor WSL: simplify, focus op wat moet gebeuren. Geen complexere projecten, maar meer projecten is de crux.
When you say no, you are saying no only to one option. When you say yes, you are saying no to every other option. So be careful to what and to whom you say yes.
To make good investing decisions, you need to actively look for reasons not to buy the stock in question.
I ask four inverted questions whenever I am looking at a stock. These questions break the mind-set of trying to find supportive bullish reasons and force me to actively seek out disconfirming evidence. 1. How can I lose money? versus How can I make money? If you focus on preventing the downside, the upside takes care of itself. 2. What is this stock not worth? versus What is this stock going to be worth? If you can identify the floor price or a cheap price for a stock, it’s far easier to make profitable decisions. 3. What can go wrong? versus What growth drivers are there? Rather than focusing
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A friend once asked me, “Why make all that money so you can save it?” to which I replied, “Why spend all that money so you need to earn it again?”
If money were the true measure of wealth, every rich person would be happy. But we know this is not true. Money can’t buy a loving family, good health, integrity, ethics, humility, kindness, respect, character, or a clear conscience. The most important things in life are priceless, and, in my view, those are the true measures of wealth.
What does it matter how much a man has laid up in his safe, or in his warehouse, how large are his flocks and how fat his dividends, if he covets his neighbor’s property, and reckons, not his past gains, but his hopes of gains to come?
if you’re going to grind, you better damn well enjoy the process.”9
A contrarian isn’t one who always takes the opposite path just for the sake of it. That is simply a conformist of a different sort. A true contrarian is one who reasons independently, from the ground up, based on factual data, and resists pressure to conform.
Pressure from analysts can inadvertently incentivize companies to make as much money as possible off their present customers to report good quarterly numbers, instead of offering a fair price that creates enduring goodwill and a long-term win–win relationship for all stakeholders.
To make money in stocks, you need to have vision to see them, courage to buy them and patience to hold them. Patience is the rarest of the three.
Embracing deferred gratification is what leads to the single biggest edge for an investor. Human nature makes it difficult to utilize this edge. This difficulty is the very reason the edge exists, and because human nature will never change, this edge is a durable one for those who possess the right temperament to capitalize on it.
Fifty years ago, the average holding period for stocks on the New York Stock Exchange was seven years. Today it is barely four months.
Institutions with access to the best brains and talent deliver such mediocre performance because they suffer from an obsessive desire to avoid volatility.
Wealth, in fact, is what you don’t see. It’s the cars not purchased. The diamonds not bought. The renovations postponed, the clothes forgone and the first-class upgrade declined. It’s assets in the bank that haven’t yet been converted into the stuff you see.
The idea of kaizen is to make such small changes in your life that your brain doesn’t even realize that you are trying to change and therefore doesn’t get in the way. Kaizen is a neat mental hack that helps us bypass our brain’s fear response.
Greed and fear are always present in abundance in the market, and the most recent marginal opinion, not long-term intrinsic value, determines the present stock price. This sets a perfect stage for getting incredible bargains that no private business owner in a sane state of mind would ever offer.
Just imagine what would happen if you offered to buy a growing and highly profitable business at less than the amount of cash sitting on the books. You most likely would be thrown out the door. As an investor in the stock market, however, you may get opportunities to invest in such cash bargains during one’s lifetime.
“Of course, it’s per-share intrinsic value, not book value, that counts. Book value is an accounting term that measures the capital, including retained earnings, that has been put into a business. Intrinsic value is a present-value estimate of the cash that can be taken out of a business during its remaining life. At most companies, the two values are unrelated.”
(In general, be extra diligent with firms that have convoluted structures, such as a large number of subsidiaries and cross-holdings.)
Stellantis? Hoe zit het met cijfers van bedrijven waar Stellantis eigenaar van is? Hoe ziet de holding-structuur eruit?
This is why many investors like to invest in stocks of small-ticket consumer nondurables, which are purchased almost as a matter of habit and whose consumption cannot be indefinitely delayed. (For this very reason, within cyclical industries, consumable-oriented businesses enjoy higher valuations than capex-oriented ones, which have a long replacement cycle.)
When Rittenhouse Rankings analyzes a shareholder letter, we start reading with a red pencil or pen in hand and use it to underline clichés such as “employees are our greatest assets,” “our future is bright,” “advancing momentum,” and “we aim to create shareholder value.” This kind of meaningless jargon and platitudes diminishes our understanding of the business and our trust in the leadership.
Restructuring” is one of the more abused words we hear from CEOs who have made highly expensive blunders in the past and now want to get back on track only to make more such blunders in the future. “One-time” restructuring expenses often turn out to be perpetual. Sadly, investors never receive even a small apology from the CEOs and executives responsible for such costly mistakes.
A prudent investor never purchases ownership in a company without conducting the necessary due diligence. Learn about the company and its competitors (both listed and unlisted) from company websites, filings, and information on the Internet. Read the past ten years’ worth of annual reports, proxies, notes and schedules to the financial statements, and management discussion and analysis (check for changes in tone and industry outlook) and observe the recent trends in insider shareholding.
Management Analysis
Doen voor Stellantis
When we construct explanations that fit an outcome, we may act too quickly to draw sound conclusions, thinking events that have happened were predictable in advance.
During the research process, conduct an honest emotional self-check. Write down how you are feeling as well as the main reason you want to buy the stock in question. Are you buying just because of the large amount of research and effort you have put into the stock? Are you reluctant to accept differing opinions?
The way to test the quality of our decisions is to test the process by which we make them. There is a simple way to do this. It’s simple but not easy. Implementing it requires a great deal of humility and intellectual honesty. Carry a notebook and track all of your important decisions.
