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Thursday, 29 April 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.


1. In defence of thinking
We’ve lost our familiarity with the concept of “thinking” as a concrete and isolatable activity; something that can be prioritized, and trained, and even cherished as a valuable pursuit in its own right. Today, we’re not nearly as comfortable with this most fundamental of activities. We talk a lot more about information — how we can get more of it, how we can spread it faster — than we do its processing. 

We cannot make sense of ourselves or the world around us without putting in the mental cycles necessary to wrestle this frenetic information into useful forms. Thinking — true, hard, energizing thinking — is not yet another healthy activity to add to a long list of such commitments. It’s better understood as a way of life; one that’s become even more radical in an increasingly shallow world.

2. How envy works
Envy is one of the great struggles plaguing humanity today, and it’s only getting worse. The conditions that allow envy to thrive are being accentuated by technological progress, yet our norms have not updated to accommodate this reality.

You will be envious of those that have reached your desired state, but are not too far removed from it. Those that are too far out will be sources of inspiration, not envy. Envy thrives in the distance between you and someone you once knew. 

The rival seems very relatable to you. You have similar interests, similar outlooks, but the outcomes appear to be wildly different.

3. The post-truth world
The term fake news became widely used during the 2016 US presidential election, when the internet was flooded with inaccurate information. 

Researchers usually talk about disinformation, which is purposefully false, and misinformation, which is unwittingly false (either because the publisher made a mistake or because the person sharing the content did). As false content spreads through social media networks, it can oscillate between the two, and it can manifest in various forms, including memes, tweets, or “imposter” content made to imitate real news stories. 

In 2016, Oxford Languages chose post-truth as its word of the year. The essential characteristic of our age, the accompanying press release stated, was the loss of a distinction between truth and feeling; we were entering an era in which “objective facts are less influential in shaping public opinion than appeals to emotion and personal belief.”

The beginning to a possible solution is to realize that, although the world is politically divided in many ways, the main division is not between rational, intelligent people and irrational, emotional ones. Fact, opinion, and emotion often go hand in hand—in politics, journalism, and any kind of social interaction.

4. The long-term shareholders Buffett cultivated are a huge part of Berkshire Hathaway’s success
An elite corps of about 40 companies are in Berkshire’s league in terms of attracting quality shareholders among stock-picking institutional investors. But Berkshire has the greatest proportion of individual owners, representing an estimated 40% of the Berkshire shares that Buffett doesn’t own.

Having a high density of quality shareholders has contributed to Berkshire’s success over the decades, as it has to the performance of dozens of other major companies.  They support management’s long-term view and contribute to the distinctive reputations, cultures, and moats that characterize great companies. Such a long-term culture trickles throughout the company in everything from acquisitions to operations. 

Since a company’s shareholders influence a company, managers should care about the shape of their shareholder base.  One dominated by short-term investors will induce managers to focus on quarterly targets rather than multi-year performance. One controlled by indexers will tend toward formulaic governance practices even if they do not fit a particular company.

Buffett explained in 1983 how he would achieve his goal: “If we consistently communicate our business and ownership philosophy — along with no other conflicting messages — and then let self-selection follow its course.” Buffett courted quality shareholders by providing an informal education, mainly through an acclaimed annual letter and legendary annual meeting.

5. Negativity is a character trait
You ever notice it’s the same people who spent eight years moping about deflation and disinflation who are now shrieking about inflation?

You ever notice it’s the same people who complained about being “pushed out on the risk curve” due to low interest rates on bonds who are now upset about higher interest rates on bonds?

You ever notice it’s the same noisemakers who’ve been seeing recessions over every horizon for a decade who are now complaining about too much economic growth?

You ever notice it’s the same folks who lamented the lack of growth who are now crying about how the acceleration of growth is unsustainable?

It’s the same people. They have no overarching point. There’s no comprehensive philosophy for how things should be. It’s just bitching and moaning, regardless of past, present or future circumstances. Everything’s wrong, everyone else is making all the wrong choices, with suspect motives, to keep me down and hurt my feelings. 


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