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Good Reading -- December 2017
Philip C. Ordway
Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies -- I was really excited for a book about scaling and power laws written by an eminent physicist (from the Santa Fe Institute, no less). I did like it, and there are some fascinating parts, but I also had some issues with specific parts and the broader scope. As the subtitle would suggest, I think the author would have done well to narrow his scope; he seemed to stretch a little bit in the sections on economies and companies, to name two.
Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger -- My effort to reread the investing classics was mostly successful this year, and it reinforced the that the vast majority of what we need to know is contained in a relative handful of books/articles. This is one of them. (I had previously read the second edition a few times. This year I upgraded to third edition -- there is an added speech from 2007 and a special update on "The Psychology of Human Misjudgment." Both are fantastic.)
“Argentina is the strangest country in the world. We are capitalist in our rhetoric but communist in our practices. How else can you explain why a pro-market government would tell airlines how much they can charge for tickets?”
“It seems a bit crazy that in a country that’s suffering from inflation you’ve got a company that wants to lower prices and isn’t allowed to.”
“If they let these low-cost carriers in it will be raining cadavers.”
Source: Argentina Wants Cheap Flights -- But Not Too Cheap (see below)
Hidden peril awaits China's banks as property binge fuels mortgage fraud frenzy -- The details are unverified (and maybe unable to be verified). But have a look at the anecdotes of "yin-yang" contracts -- three purchase agreements with three different prices for one property, with one each for the seller, the bank, and the taxman. I think there is enough evidence of widespread fraud and rapid price appreciation that someday -- eventually, at one point, just maybe -- this could be a problem.
How Well Do You Compare? -- Great news! Michael Mauboussin is still publishing his work after moving to a new firm.
Argentina Wants Cheap Flights -- But Not Too Cheap -- This is bonkers. Come for the artificial price caps and sanctioned monopolies, stay for the central bank that abandoned a plan to go to digital bank statements when the truckers' union threatened to stop hauling cash to ATMs. The last straw is the head of the pilots' union who claims that low-cost airlines won't invest in proper maintenance: "If they let these low-costs carriers in it will be raining cadavers." (To name just two low-cost carriers, Southwest is at 50 years and Ryanair is at 33 years without a passenger fatality. But facts lose to psychology and politics here.)
The Unlikely Strategy Behind Buffett's Investment in Encyclopedias -- Some interesting historical tidbits in this article.
End of an Era: M&T's Bob Wilmers... -- A nice obituary for legendary bank CEO Bob Wilmers. Be sure to read some of his old shareholder letters -- they are a great education on banking and business in general. It's no wonder he was revered by so many or so successful at work. (Of the top 100 banks in 1983, only 23 remain independent today, and MTB has had the top-performing stock of them all. Wilmers became CEO in 1983, and over the past 30 years MTB has a compounded annual return of more than 16% as compared to 10.6% for the S&P 500.)
Buffett on Bitcoin: "It will come to a bad ending" -- I'm not as dismissive as some, but either way the hype/derision train rolls on.
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