What I Have Been Reading – July 2020

The Move From Book Value To Cash Return On Invested Capital

In the 1930s and 1940s, the discount-to-hard-book-value strategy was dominant. After World War II and into the 1950s, the second major strategy that dominated finance was the dividend model. By the 1960s investors exchanged stocks paying high dividends for companies expected to grow earnings. By the 1980s a fourth strategy took over. Investors began to favor cash-flow models over earnings models. Today it appears that a fifth strategy is emerging: cash return on invested capital.

Robert Hagstrom

Buffett’s Performance

From 1965 to 2002, Berkshire underperformed the S&P 500 in only four of those 38 years (roughly 10% of the time) and outperformed the S&P 500 by double digits in over half of the others (53% of the time). But in the 17 years since then from 2003 to 2019, Berkshire has underperformed the S&P 500 in eight years (47% of the time) and has outperformed by double digits on only four occasions (24% of the time).





“I brought [Michael Jordan] a deal three years ago for $100 million,” Falk said. “And all he had to do was, other than giving his name and likeness, make one two-hour appearance to announce the deal and he turned it down. And God bless him. He’s been so successful, it gives him an opportunity to do whatever the hell he wants or not to do things he doesn’t want. And I really admire that. He’s very, very selective in the things that he wants to be involved in.”

Sporting News



Working From Home And Innovation

Innovation typically arises from the chance encounter of two people who normally don’t talk to each other like the annoying colleague who passes by your desk and wants to ask a question that just popped in his head. Or a conversation about seemingly irrelevant things like this article between colleagues that creates a spark of insight that leads to innovation. In a sense, what I am trying to do here with these posts is not only to take a step back and encourage people to take a broader view of the world, but to help people think outside the box and become more innovative. In an environment where everybody is working from home, these chance encounters and blue-sky conversation simply don’t happen anymore and innovation and productivity stalls

Klement On Investing




The college decision is often as much about the parents as it is about their kids. Tisha Duncan, a professor and college adviser, told Alia Wong for a piece in The Atlantic, “Instead of students announcing, ‘I got into college!,’ the parents are announcing, ‘We got into college!’” It’s easy to project our own desires onto our kids—to try to see our own potential come alive through them.

The Atlantic



London’s economic meltdown

Central London is usually first out of the traps after of a recession. But the conversations I’m having suggest this time it will be one of the last regions to recover — and that’s important because it is the engine of the whole UK economy.

  • 50,000 West End jobs at risk

  • 88% of people are uncomfortable using public transport

  • 96% drop in foreign bookings to the UK for July

  • 11 London branches of Pret shut down

  • Just 7,000 out of 120,000 back at work in Canary Wharf




Minimize money worries.

Money has the potential to buy happiness. But if we spend recklessly and end up financially stressed, our efforts will likely backfire. Indeed, it seems that—if we pay ahead of time—we often enjoy experiences more, because we aren’t thinking about the cost. This notion also applies to retirement: Those with predictable income that covers much of their living costs, whether it’s from a pension, Social Security, immediate annuities or elsewhere, appear to have happier retirements.

Humble Dollar



Decline Of Burglary

Cash has long been a favorite burglary target, and people are less and less likely to have lots of it in the house. As the victim of a stereo burglary when I was a teenager in the late 1970s, I also have the sense (and it’s supported by property-loss statistics from the Federal Bureau of Investigation) that today’s electronics devices make for less attractive burglary targets than those of past decades because they quickly become out-of-date.




Amazon and Rebirth

Amazon’s second largest business was decimated when Apple digitized the music industry. CD sales had been important to Amazon, but they were dwarfed by book sales. Jeff [Bezos] took the lessons from iPod/iTunes and applied them to Kindle.

Steve Kessel was running Amazon’s media business in 2004 (books/music/DVD’s). Books alone generated more than 50% of Amazon’s cash flow. Jeff fired Steve from his job and reassigned him to build Kindle. Steve’s new mission: destroy his old business.




Social Media

At that conference, I talked about the role of social media in breaking down what social scientists call “pluralistic ignorance”—the belief that one is alone in one’s views when in reality everyone has been collectively silenced. That, I said, was why social media had fomented so much rebellion: people who were previously isolated in their dissent found and drew strength from one another.

Technology Review



New Age Of Real Estate

You can borrow at two-and-change percent to buy a house as you flee the city for the suburbs, now that your current or future job probably doesn’t care where you do it from. RIP Manhattan apartment prices. Basically money is free and you can buy a McMansion on the internet right now. Almost nothing down, almost zero cost, if your credit isn’t bad.

Houses for between one and two million dollars in my town are being snapped up over the phone on the day they list. Bidding wars are common and in some cases the buyers haven’t even visited the property

The reformed broker



Working from home will not become the norm

Working from home fosters silo thinking and tribalism. If we can connect to our co-workers and team members only through email, Zoom, and the telephone, it requires an active effort to engage with them. The result is that we tend to interact more closely with the people we tended to interact closely with before the pandemic (e.g. our immediate superiors and team members and the people we get along with really well). But we tend to interact less with people that we had less contact with before.

In a world of employees working from home a team slowly disintegrates into different groups and in the worst-case scenario, tribalism and office politics starts to kick in as colleagues are perceived less as team members and more as competitors.

Remote work has been pushed time and again for the last 20 years or so. Some people believe it hasn’t worked because the technology wasn’t developed enough, and video calls were too cumbersome. But I think, remote work hasn’t worked because humans are social animals. And we need physical contact with other human beings to build trust and cooperate with them.


If you’re okay with killing time, it’s not scarce enough.

Time is scarce, life is short, and as the grains of sand slip through the hourglass, so does the precious gift of time. Once gone, it disappears forever. We all know these things. And yet, at work and at home, we’re so lost in a trance of distraction that killing time has become a chronic disease.

Much of modern leisure is slothful. It’s spent in a state of passive, shoulders-slumped consumption where we inhale processed foods that make us fat, TV shows that numb instead of inspire, and ad-vertisements that create anxieties that only shopping can relieve. The lethargy of modern leisure says that movement is tyranny, as if humans are batteries to be recharged by the electricity of mindless entertainment. That desire to kill time stems from deep-seated nihilism.