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.
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Competitive advantage
I think one of the things Buffett has been coy about is not letting people know how easy it is to calculate.
So if you think about the global automobile industry, it is so big that people can be viable with two percent market share, that people buy cars every seven to ten years so they don’t tend to be captive.
So a lot of market share changes hands, typically about one percent will change hands a year. Well to get to two percent, which is a viable level of entry, at one percent a year is a two-year moat, and that’s not going to stop anybody.
At the other extreme you’ve got Coca-Cola. In order to have the economies of scale necessary to distribute heavy product like soft drinks you typically have to have something like 25% local market share. That’s a situation where there’s tremendous consumer loyalty.
If you look at it in contested environments, two tenths of a share changes hands every year, so to get to 25% it’s going to take you at a fifth of a percent every year. It’s going to take you 125 years. That’s an enormous moat.
https://acquirersmultiple.com/2022/01/bruce-greenwald-moats-are-not-that-hard-to-calculate/
The science of getting you to overeat
The military has long been in a peculiar bind when it comes to food: how to get soldiers to eat more rations when they are in the field. They know that over time, soldiers would gradually find their meals-ready-to-eat so boring that they would toss them away, half-eaten, and not get all the calories they needed. But what was causing this M.R.E.-fatigue was a mystery. “So I started asking soldiers how frequently they would like to eat this or that, trying to figure out which products they would find boring,” Moskowitz said. The answers he got were inconsistent. “They liked flavorful foods like turkey tetrazzini, but only at first; they quickly grew tired of them. On the other hand, mundane foods like white bread would never get them too excited, but they could eat lots and lots of it without feeling they’d had enough.”
This contradiction is known as “sensory-specific satiety.” In lay terms, it is the tendency for big, distinct flavors to overwhelm the brain, which responds by depressing your desire to have more. Sensory-specific satiety also became a guiding principle for the processed-food industry. The biggest hits — be they Coca-Cola or Doritos — owe their success to complex formulas that pique the taste buds enough to be alluring but don’t have a distinct, overriding single flavor that tells the brain to stop eating.
https://www.nytimes.com/2013/02/24/magazine/the-extraordinary-science-of-junk-food.html
AI X-Ray radiologist
An artificial intelligence tool that reads chest X-rays without oversight from a radiologist got regulatory clearance in the European Union last week — a first for a fully autonomous medical imaging AI. It’s a big milestone for AI and likely to be contentious, as radiologists have spent the last few years pushing back on efforts to fully automate parts of their job.
The tool, called ChestLink, scans chest X-rays and automatically sends patient reports on those that it sees as totally healthy, with no abnormalities. Any images that the tool flags as having a potential problem are sent to a radiologist for review. Most X-rays in primary care don’t have any problems, so automating the process for those scans could cut down on radiologists’ workloads, the Oxipit said in informational materials.
The tech now has a CE mark certification in the EU, which signals that a device meets safety standards. The certification is similar to Food and Drug Administration (FDA) clearance in the United States, but they have slightly different metrics: a CE mark is less difficult to obtain, is quicker, and doesn’t require as much evaluation as an FDA clearance. The FDA looks to see if a device is safe and effective and tends to ask for more information from device makers.
https://www.theverge.com/2022/4/5/23011291/imaging-ai-autonomous-chest-xray-eu-fda
The 3-second silence rule for negotiations
According to a study published in the Journal of Applied Psychology, sitting silently for at least three seconds during a difficult moment in a negotiation, confrontation, or even conversation makes both people more deliberative -- and leads to better outcomes.
As the researchers write: ... extended silence increases value creation by interrupting default, fixed-pie thinking and fostering a more deliberative mindset. Instructing negotiators to use silence is more effective for value creation than instructing them to problem-solve.
While you might think sitting silently might come across as an attempt at intimidation, it doesn't. Instead, people assume you're thinking. You're reflecting. You aren't just reacting. You aren't just trying to get your way.
You're trying to find a way that works for both of you.
If you decide you have enough, then you do
To feel sufficient, to be satisfied with what we have: Chisoku in Japanese.
Of course, by some measures, there’s never enough. We can always come up with a reason why more is better, or better is better, or new is better or different is better.
Enough becomes a choice, not a measure of science.
The essence of choice is that it belongs to each of us. And if you decide you have enough, then you do.
And with that choice comes a remarkable sort of freedom. The freedom to be still, to become aware and to stop hiding from the living that’s yet to be done.
https://seths.blog/2022/04/and-maybe-its-enough/
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