Good Reading -- July 2016
Books
Grinding It Out: The Making of McDonald's -- I should have read this book a long time ago. It's short but exceptional. Ray Kroc had a fascinating life and a very clear, unique business philosophy -- always a good combination in a book.
In-N-Out Burger: A Behind the Counter Look at the Fast-Food Chain That Breaks All the Rules -- A different playbook from the same industry and era. The story itself is fascinating, the business lessons are timeless, and the food may be better -- a lot better in my opinion -- even if the book isn't quite as good as "Grinding It Out."
Both of these books reminded me of three other excellent business (auto)biographies pertaining to retail/consumer-oriented companies.
When Breath Becomes Air -- A literary neurosurgeon/neuroscientist received a diagnosis of terminal cancer in his mid-30s, and this book is the unfinished result. It is thought-provoking and powerful. Just be prepared to cry like a baby.
Being Mortal: Medicine and What Matters in the End -- I only read a portion of this book -- I had already read some of the essays that anchor the book, and the book didn't seem to cover much new ground; maybe I was tired from reading "When Breath Becomes Air" too -- but anything Atul Gawande writes is worth some time. An excerpt is here and a review is here. Gawande's recent graduation speech is here.
Facts and Figures
Just 29 companies in the S&P 500 Index -- 5.7% of the total -- used exclusively GAAP accounting to report their 2015 results, a decline from 25% in 2006 and 42% in 1996. (Source: Audit Analytics/WSJ)
Under GAAP, a survey of 380 companies in the S&P 500 reported a decline in combined net income of 11% between 2014 and 2015. Those same companies proclaimed a combined 6.6% increase in adjusted earnings in their press releases. (Source: The Analyst's Accounting Observer/WSJ)
By this calculation, which stretches an already useless concept to the extreme by using the 100-day standard deviation of daily returns, the British pound experienced a greater than "12-sigma move" on June 24th following the release of the Brexit result. 12 sigmas is...a lot. (Source: BAML)
The largest U.S. age cohort in 2010 was 45 to 49 years old. In 2015, the largest cohort was 20 to 24 years old. (Source: U.S. Census Bureau, CalculatedRisk)
The most common ages by year:
2010 -- 50, 49, 20, 19, 47
2015 -- 25, 26, 24, 23, 27
Quoted
Blackstone CEO Steve Schwarzman: "Let's just take energy first because it's in the news a lot. And talk about a crazy business where there's almost not one person who knows what they're doing, right? At $120, it was going to $140 a barrel. When you were at $80, it was going to stabilize at $60. And when you're in $60, you didn't quite know, but maybe it would be $50 to $70. And then when it went to $24, everybody is a bozo, right? And then it was going to stay there, sort of $25 to $35 or maybe $40 for the next year or two, and now it's $50." [Schwarzman] said that his favorite person to talk to when trying to make sense of the oil market was Exxon CEO REx Tillerson. "When the price's around $60, I asked Rex, 'What do you think?' He said, 'Well, it's going to be between $20 and $120, and we're set up for all of those environments. I think it'll go a little lower than higher, but what do I know? I've just been doing this my whole life.' And I thought, he's kidding, but he really wasn't." (Source)
Links
The Valeant Meltdown and Wall Street's Major Drug Problem -- Don't miss this Bethany McLean article, which will hopefully be turned into a book someday.
Global-Warming Alarmists, You're Doing it Wrong -- At the risk of touching the third-rail of polite discourse , I enjoyed this column by Megan McArdle. (There is even a somewhat stretched analogy to macroeconomic modeling for the business-only diehards in the audience.) I also enjoyed the long series McArdle references on Warren Meyer's blog, Like her I didn't agree with every word, but the data and perspective are still worthwhile.
Charlie Munger has talked often about climate change. Some of his thoughts are here and here and here. Bill Gates has too.
The Perilous Task of Forecasting -- Jason Zweig interviewing Phil Tetlock -- that's all you need to know.
Best Advice to Small-Business Owners -- Goldman Sachs recently held an event to honor a community college in NYC, and a few guests (including Warren Buffett, Lloyd Blankfein, and Michael Bloomberg, among others) offered some brief advice.
Is Middle America Due for a Huge Earthquake? -- If you liked "The Really Big One" about the potential destruction of much of the Pacific Northwest, here's the Midwestern equivalent. Or not.
Who Will Build the Next Great Car Company? -- A broad but still worthwhile overview of the automotive industry as it faces the prospect of self-driving technology.
After Fleeing the Nazis, a Legacy That Won't Run Dry -- A wonderful and amazing story on many levels. "The frugal young couple bumped in young Warren Buffett. Now they've left [$400 million] to Israeli water research."
Jason Zweig on Russ Roberts's "EconTalk" podcast -- An excellent guest on an excellent podcast.