Good Reading -- December 2016
Good Reading -- December 2016 Philip C. Ordway Best wishes for the holidays and a prosperous 2017. -- Phil
Books Here is a subjective list of the 11 best books I read this year. Some were just released and some are old, but I hope you find something interesting.
Shoe Dog: A Memoir by the Creator of Nike -- Easily one of best business biographies I've ever read. It might even make my top 100 favorite books of any kind. It's only been a month since I read it the first time and I already want to read it again.
The Rise and Fall of American Growth -- This is a very important debate. Even if you don't agree with the author's conclusions, the history -- and the surprisingly good writing and charts -- are worth the investment. Related links:
Foreign Affairs: a review of the book by Tyler Cowen and an article by Larry Summers about the "age of secular stagnation"
Are We Doomed to Slow Growth? by Adam Davidson
Paul Krugman's review of the book
Greg Ip discusses the book along with Thomas Piketty's book in the context of today's economy
America's Best Days May Be Behind It -- an essay in the NYT by Eduardo Porter
America's Best Days are Not Behind It -- A review and essay by Bill Gates
Sapiens: A Brief History of Humankind -- This book is incredible, and I will definitely have to read it twice to even begin to soak it all up.
Dear Chairman -- I really liked the history and perspective of this book. Even if you're not an investor, let alone an activist, this is worthwhile for anyone interested in business.
All I Want to Know Is Where I'm Going to Die So I'll Never Go There: Buffett and Munger -- A Study in Simplicity and Uncommon, Common Sense -- A little odd but packed with tons of wisdom in the form of Buffett/Munger soundbites.
Grinding It Out: The Making of McDonald's -- There are a lot of similarities between this book and Shoe Dog.
Sol Price: Retail Revolutionary and Social Innovator -- There are a lot of similarities between this book and Grinding It Out.
Pre-Suasion: A Revolutionary Way to Influence and Persuade -- This isn't nearly as good as Influence but that means there is still plenty of room for it to be really, really good.
When Breathe Becomes Air -- This is a very powerful book. Have tissues nearby.
Skyfaring: A Journey with a Pilot -- This is (almost) everything you've ever wanted to know about commercial aviation wrapped up in a surprisingly compelling book. The author is an American who flies the 747 out of Heathrow for BA. He's also a former management consultant who could well have a third distinct career ahead of him as a writer or poet.
I read Cockpit Confidential at the same time -- it was more prosaic but still pretty good.
The Undoing Project: A Friendship That Changed Our Minds -- This book is quite a bit different from the other Michael Lewis books I've read. He's still a talented writer, and I still really like the subject(s), but this wasn't quite as good as I was hoping. The first chapter is Moneyball redux featuring Daryl Morley of the Houston Rockets. Then Lewis launches into a conventional but well written biography of Tversky and Kahneman. Don't give up on it -- I thought the last 150 pages were the best and well worth the price of admission. And I would still recommend that everyone go straight to the source: Thinking, Fast and Slow is the best book on the subject and one of the best books I've ever read.
Reviews in the WSJ, NYT, and The New Yorker (written by Thaler and Sunstein).
Quoted
Amos Tversky, as quoted in The Undoing Project:
"The difference between being very smart and very foolish is often very small."
"The secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours."
"It is sometimes easier to make the world a better place than to prove you have made the world a better place."
"People predict by making up stories People predict very little and explain everything People live under uncertainty whether they like it or not People believe they can tell the future if they work hard enough People accept any explanation as long as it fits the facts The handwriting was on the wall, it was just the ink that was invisible People often work hard to obtain information they already have And avoid new knowledge Man is a deterministic device thrown into a probabilistic Universe In this match, surprises are expected Everything that has already happened must have been inevitable"
Facts and Figures
A few surprising numbers (that may or may not be loosely related):
The share of the U.S. workforce engaged in science and engineering jobs is at an all-time high of >4% and R&D spending as a share of GDP is also near an all-time high. (Source: NSEF/WSJ)
U.S. patent grants are at an all-time high, having more than doubled in the past decade. (Source: USPTO)
None of the top 20 most-prescribed drugs came to market in the past decade. (Source: WSJ)
Total factor productivity has dropped from well over 3% in the 1950s to roughly 0.5% today. (Source: Robert Gordon, Northwestern University)
Links
Chipotle Eats Itself -- This is one of the best (and longest) business profiles I've read in a while.
The Economy's Hidden Problem: We're Out of Big Ideas -- The productivity/growth/technology debate rages on, and I thought this article by Greg Ip was pretty good. It cites provocative figures (see above) and the usual optimists but strangely not the most prominent pessimist, Prof. Gordon (see above).
The Magic in the Warehouse -- I'm a big Costco fan and this Fortune writer apparently shares my enthusiasm, but either way this article isl a fascinating snapshot of the company.
Surprise! Warren Buffett turns out to be more prescient about stocks than politics -- Carol Loomis has a look back at the 17 years since Buffett made his famous 1999 prediction about stock prices.
Dallas Stares Down Texas-Size Bankruptcy Threat -- It is amazing that this story isn't getting more attention, especially given the looming pension crisis we have at almost every level in this country. This problem is probably associated with states/cities in the Northeast or Midwest, but it is truly a national problem. And the details of this case -- a good microcosm if you ask me -- are stunning.
Dallas has had the fastest economic growth of the country's 13 larges cities, yet the pension fund for cops and firefighters is facing imminent collapse. Why? Starting in 1993, lawmakers went berserk -- they added individual savings accounts with guaranteed 8.5% interest per year.
Then they compounded their mistake. In an effort to make it look "cost neutral" they fixed the contributions at a mere 36% of payroll. So long as the payroll grew by 5% a year forever (spoiler: it did not) and so long as the investment book returned at least 9% a year forever (spoiler: it did not), everything was dandy.
Things got even worse when the trustees went chasing those all-important 9% returns. High-cost and risky investments in Hawaiian villas, Uruguayan timberland and Australian farmland did not exactly pan out. But trustees/administrators still got multiple boondoggles per year in the name of "due diligence."
The mayor of Dallas now says that "it is horribly ironic [to be] walking into the fan blades of municipal bankruptcy." The police and fire pension needs $1.1 billion -- equal to the Dallas general fund's entire annual budget -- and even that wouldn't get it anywhere close to fully funded. No matter the ultimate resolution, it will not be simple or painless. In the meantime, the annual report makes for interesting reading.
Update: the board moved to freeze withdrawals in an attempt to stop the run on the bank. Seems like the end of the beginning to me.