"That's one thing we've never talked about here, but I spend more time looking at balance sheets than I do income statements... There are things that are harder to hide or play games with on the balance sheet."
("Wall Street tends to do the opposite") - Buffett

I'm currently reading Part 6 of Security Analysis, where Graham thoroughly goes over how important it is to look at the book value of a business because:

• It tells you how much capital is invested in it - how many dollars you're paying per $ of capital investment

• Shows you the capital structure - (complicated? share trend, securities outstanding and seniority (costs), etc)

• Estimate of liquidation value (margin of safety?)

• % of assets that are intangible, especially goodwill.

• Write downs? Did they do this once to fuel future earnings?

And so on.
Graham already says in 1940 that people stopped looking at balance sheets to focus on income accounts. Management can lie everywhere, but it's way easier to do so in income statements. Just assume a new method for inventory or d&a, recognize sales that haven't occurred, capitalize expenses instead of including them in g&a, and you self-manufacture high margins.

The accounting department can become a great profit center.

Balance sheets show you a business's history. They show buried mistakes. How long have receivables been outstanding? Are they really current assets? Did they overbook sales? Are they recording bargains on m&a or always paying in excess of book value? how much in leases till end of contract? is net ppe stable (capex cancels out depreciation)?

Sure, new economy companies live on intangibles, outsource manufacturing/production, and ROICs are as fat as they've ever been. But is growth coming at the expense of dilution? What is that growth worth if a dominant position is likely to be lost?

Sometimes, instead of just looking at headline numbers, you can look at the balance sheet and find out that a business might be trading at:

Mkt cap of $40M and EV of $50M ($10M net debt).
But the business has $25M in highly-likely-to-collect-receivables. Maybe total current assets of $50M with total liabilities of $25M. How much does the price you're paying for the business change after just one glance?

It’s true that there are not as many companies trading below liquidation value as there were 70 years ago. The more businesses I research, the more I think a margin of safety is mainly derived from a deep balance sheet analysis rather than some vaguely guessed continuation of the earnings trend.

Ignoring the balance sheet is the result of decades of focusing on business quality and leaving the price question aside. Book values don’t mean much in the digital economy, and most coverage is fully focused thereon. Old economy industries and business models were left behind by the media. Those that actually require CapEx to grow or hiring more people to increase their customer base.

Antique investment principles still apply, and there’s no reason why these businesses wouldn’t do well in the future. On average, I’m inclined to suspect that this is where purchases with a margin of safety can be found.

Just some thoughts. Hope they triggered more.

Best, Giuliano
giulianomana@0to1stockmarket.com

We all just hear people say how GDP growth will continue, how the rate of growth might even go vertical, and all these things.

And I just wonder, how is that even possible?

I’ll use VERY rough numbers.

Say that:

- There are $2tn in circulation. (The Physical Anchor)

- M2 is $20tn. (The Ledger)

- US GDP is $30tn. (The Output). 1.5x M2.

- US debt markets worth $50tn. (The Promises). 1.6x GDP

- S&P’s market cap is $60tn. (The Expectations). 2x GDP and 3x M2.

- US real estate market is worth $80tn. (The Collateral).

$2tn in circulation is holding up all of that economic activity and theoretical wealth.

How can one envision a world where theoretical wealth’s growth continues to outpace the actual money that’s out there?

That’s why busts hurt so much, and they’ll hurt increasingly more as the gap between “reality” and “theoretical” broadens.

The reason why people say GDP will grow indefinitely is that “new, better products will come along. Productivity will be enhanced. Etc”

Sure, but what if future technology and businesses, by the nature of competition, have lower profit margins than nowadays? How does this translate into market returns?

And what if you create a better solution for a $100bn market but you end up destroying the previous $500bn inefficient one?

Will the $400bn just go somewhere else? I don’t think so. I would think $400bn in theoretical wealth vanishes. And how do you start filling all these gaps? If it happens at one level, it’s likely happening at many levels.

How do you keep economic growth when you have such destruction?

People will quote Schumpeter and say it’s what has happened all throughout history, but I don’t know if that’s so right.

There’s such a gap between theoretical wealth and real wealth that the only way you continue to patch things is by either maintaining the gap or increasing it.

And how do you even increase it when you are this stretched?

Of Market Returns

Market returns have systematically outpaced economic growth for 2 reasons:

• Multiple expansion: Expectations / a more favorable view of the future.

• Margin expansion: SP&500 profit growth has outpaced GDP growth.

To think about this pragmatically, what happens if a company comes along and displaces the iPhone?

Apple is worth $4tn and generates $110bn in profit at a 27% margin. What if the contender’s technology is so efficient that the end-product can be sold at $100-$200? And what’s more, what if the competitive ground goes actually crazy and profit margins are not as high as Apple’s?

In this scenario, what if the TAM not only gets compressed, but also much less profit gets derived therefrom. At what multiple of earnings could that trade? The company might end up being worth $500bn or $1tn.

In history, new technology made complicated, expensive things more accessible and cheaper to everyone. And let’s imagine that accessibility will continue to expand, as there’s still room for penetration in total population. But what happens in the meantime? What happens while new-company profits catch up with Apple’s? I suspect current theoretical wealth either temporarily or permanently vanish.

And regarding the second bullet point, how far can profit margins even go? How can EPS continue growing at 8-12% (?) while actual output grows at 2%?

Personal Commentary

I don’t really know how to tackle this. I know I’m missing a lot, however. If you’ve some idea that could help think about it, I’d be more than happy to hear it.

Feel free to reach out: giulianomana@0to1stockmarket.com

The Great Gatsby

Peak literature.

The Intelligent Investor

This is the second time I study this. Masterful work and overview of the investment field. Sound ideas to approach it.

Silent Spring

Environmental consequences of our abuse of fertilizers and why our mistreating the earth is hurting ecosystems. (1970s)

The Grapes of Wrath

There’s an idea in the preface I’ll forever remember: ‘I’m assailed by my own ignorance. No one knows how ill-suited and lazy my mind really is aside from me. I constantly combat this’. (Steinbeck - Nobel laureate). At times, this book cuts deep.

Lessons from the Titans

How little gains in efficiency, better operations, and getting the broad picture right can lead to huge success. You don’t need to create the iPhone to do well in business. Similar to The Outsiders.

The Screwtape Letters

A very clever way to write about how to live well and not drift toward hell. Can’t remember many details though.

Built From Scratch

Best business biography I’ve ever read. All of the ideas I might’ve read about, these guys applied to build a $300bn company. An astounding number of insights as to how to sensibly run an organization.

The Art of Power

Amazing individual and politician. Potential role model in so many ways. Extremely cultivated and likeable person, deep thinker across the board, and a doer.

The Life and Selected Writings of Jefferson

I needed to dive deeper into his ideas. His writings give a sense of how much he cared and thought about matters related to the soul. Jefferson reminded me of Oppenheimer.

A Man for All Markets

Brilliant individual, but I didn’t like the writing. Some ideas I can’t get out of my mind: (1) Tweaking a problem slightly can turn it from impossible to possible; (2) Education is software for the brain; (3) “If I don’t have an edge, I don’t play.”

The Snowball

This lets you see other sides of Warren. An extremely calm, erudite appearance hides a high-energy, highly ambitious and tough-to-deal-with individual.

The Power Law

An account of Silicon Valley’s history. A number of insights on how different VC firms and investors have approached it, and how founders view of VC firms has changed over time. I don’t remember much detail.

The Days of the Revolution

History book covering what led to the independence in Argentina. I didn’t like it at all.

Made in America

Sam Walton was among the best past-century entrepreneurs. Extremely hard working and thoughtful person. An interesting idea: when everyone was saying that Walmart was destroying local stores, he reframed it as saying that Walmart was winning because it was actually saving money for consumers. ‘Those stores were destined to perish’.

Buffett Letters (2002)

I read slightly over a decade of Buffett’s letters. Astonishingly instructive in investing and accounting matters.

The Paradox of Choice

Why options for everything have tended to increase and why that paralyzes us. Unnecessary book, nothing new and it’s already old.

The Double Helix

The process of discovering the Double Helix in DNA. Watson describes the journey; 2-yr long rollercoaster of emotions. Reminds me of what Feynman spoke about.

American Prometheus

The Manhattan project, WWII, occurred less than 100 years ago. What a group of coordinated geniuses can accomplish. How fragile things really are.

Magicians of the Gods

What if history has been misinterpreted? What if things started earlier? Are we missing out on important insights just because of complacency and human bias?

Slaughterhouse-Five

Never connected with Vonnegut.

Norwegian Wood

This hurt. A young girl’s boyfriend commits suicide. She’s a deep thinker and feels pain so within her she can’t escape it. Tries to fall in love and it unleashes a chain of sorrow she can’t bear.

Animal Farm

Quite clever. How politicians race against one another. How crowds are fooled. How vanity and mischief creep in at the top. Nowhere near 1984.

Lessons of History

This book pleasantly surprised me. I thought its thesis of ‘summarizing history and drawing lessons therefrom’ was impossible to execute well. They surprised me.

One thing that stuck: There’s a newcomer politician who argues in favor of going with a win-win deal with a rival nation. The old general goes on to say, ‘Son, you’ve learned nothing from history’.

White Nights

I think I read this for the third or fourth time. I don’t know, still can’t understand.

The Scientists

Starting with Copernicus (?), Gribbin goes on to tell the story of how science progressed, how ideas were formed, and who were the thinkers. Thesis is amazing; execution was bad.

Ice Age

Great account of how interglacial cycles occur. Big idea in here: Identify the 3 factors that move the needle. In climate change throughout millennia, it was: eccentricity of the orbit, tilt of the axis, axial precession (?).

Leonardo Da Vinci (Isaacson)

Astounding individual. Peak curiosity and talent well cultivated. Depicts how far people can go. Breadth of interests and how to intersect them. How to use Drawing for thinking purposes.

Leonardo Da Vinci: The Complete Works

Works of art, some notes from his journals, and drawings.

Punctuated Equilibrium

Amazing thesis, disastrous execution. Thesis: Darwin was right, but wrong. Evolution is not linear nor gradual; it happens in a few concentrated periods of time.

The Gulag Archipelago

‘To stand up for the truth is nothing: for the truth you have to sit in jail.” An account of a survivor from the Russian Gulags in the 20th century. Deeply disturbing, though half of it was something like a trial, which got boring.

The General Theory of Employment, Interest, and Money

I’m more inclined to think Keynes was crazy in what he posited, yet his approach was extremely sensible and correct: ‘We’ve been stagnated, we don’t know how to get out of this mess [depression], we need new ideas’.

Anna Karenina

I was expecting a masterpiece, and I think that was my mistake. Has many bright moments, indeed extremely bright some, but nothing crazy. Last chapter hit the hardest: there was this guy who was a deep thinker and momentarily got the grasp of what everything meant. But every time he tried to rationalize it or think it through, he lost that grasp. It takes courage.

Richer, Wiser, Happier

Good to get a sense of how great investors think and act. But Munger, Buffett, and Graham have influenced them all, so after reading these, there’s not much new.

Unfinished Reads

• Elements of Chemistry Left it half-way through after I drifted outside of science.

• Faust I occasionally return to this, but I haven’t read any literature in a while.

• Call Me Ted Ted Turner autobio, started it this past week.

“If [Tom] Murph[y] should elect to run another business, don’t even bother to study its value - just buy its stock”

I’m coming to a very firm impression that all great investors say one thing and dismiss another that’s equally true or even truer. Warren articulated this idea of ‘you want a great business because, one day, a fool will run it. But if it’s a really good business, the fool won’t destroy it.’

To a large extent, the premise is sound. Now add to it his other idea, namely that ‘when a manager known for his reputation of brilliance tackles a company known for terrible economics, the latter prevails.’

The investment community had no option but to conclude that business > manager. This seems to me as an increasingly fragile thesis. Anecdotally, in Warren’s biography, Alice writes about how Coke’s moat almost vanished over a 5-year period. The exceptional, indestructible business was brought to its knees after a CEO change.

John Morgan and the Transferability of Skills

In the 90s, Winmark (resale stores franchise) was almost bankrupt. Morgan came in and changed the business model. The company used to focus on selling merchandise to franchisees and John turned it into a royalty business.

What remains on my mind, however, is not Morgan’s genius decisions. John had previously successfully founded and exited an equipment leasing operation. And when Winmark stabilized, he brought that capability to his new business. Morgan single-handedly built a leasing business unit within Winmark and quickly scaled it to $40-$50M in assets, and $10-$20M in sales.

Just because John Morgan was there, Winmark’s shareholders benefited in a two-fold manner: (i) they earned extra profit (otherwise nonexistent); (ii) they had a profitable, high-ROIC avenue for capital deployment. After his retirement, new management discontinued the leasing business, fully acknowledging it was John. Winmark now returns most cash flow.

The market tries to consider everything when pricing an asset, which includes people. Fundamental business skills are transferable. When a John Morgan takes over a company, you know he can add tens of millions in profit because of his toolkit, irrespective of the company’s industry. There’s a dumb-sounding but true term that captures this idea: Intellectual book value.

Brad Jacobs is an extreme version of this idea. He has consistently shown his ability as an operator and the market is thus able to sit back and trust. In 2024, Jacobs was able to raise $5bn on just a plan. Even though he had identified the target sector, he had no experience or operation in that industry. But the market knew that, no matter what, Brad was able to spot fragmented industries where his skills were applicable.

A dollar is not worth a dollar. Depending on who holds it, its intrinsic value can greatly exceed $1 or be close to zero. If a 40-year old Buffett owned a public company with only $100M in cash, funded with equity, the company’s value would certainly be well in excess of $100M. Capital allocation is a transferable skill, just like operating capabilities.

Trying to Understand Crazy

This is the very reason why Tesla shareholders approved a $1 trillion (!!!) compensation package for Elon, why Bezos was able to raise $6bn on an idea alone, why Larry Ellison committed $1bn to the Twitter acquisition out of just a text message from Elon, and why Apple paid $430M for NeXT (company with no viable product but with Steve Jobs).

If Sam Walton had resigned from Wal-Mart and set to start a new retailer, I’d bet on that going well. If a Lee Kuan Yew were to start a new nation from scratch, I’d bet on that. Top people’s capacity needs to be assessed and premiums should be considered accordingly. Almost always, these guys surprise you. What you think is possible falls way short of what’s possible.

Who expected Murphy’s run to end in the (by-then) 2nd largest deal in history, selling Cap Cities to Disney for $19bn?

Personal Commentary

I’ve been playing around this idea for almost a year now. Even though I feel that my grasp thereof has improved, there’s much that’s uncovered.

Been reading many books about business and investing but, for whatever reason, I can’t seem to find many valuable things to bring. It’s on my mind to record a podcast episode going through my notes on this last dozen or so books.

Always feel free to reach out at giulianomana@0to1stockmarket.com

Best, Giuliano

The Intelligent Investor

I read this back in 2022 and thought it was the best book about investing. After 3 years and everyone telling me I was wrong, I had to re-read it to check on my former self. What I found delighted me: Everyone else is wrong. Just read this and you’ll see why:

Lessons From the Titans

This was a book recommended by Sidecar Investor. It’s a great account of some exceptionally run, overlooked companies. It’s focus, alike The Outsiders, is on the operations side of these businesses. Ideas that stuck:

• The best HR teams are not about hiring superstars. They are about making average people (80% of org) perform a little better.

• Business processes are powerful and can single-handedly make you win.

• Good managers know when to grow the company’s asset base and when to stop doing so. After a point, returns might be higher when optimizing assets and trying to extract every dollar out of them.

• $1 generated in oil and gas is just as green as one generated by a SaaS.

• Culture is dictated top-down, and it’s destroyed when arrogance creeps in at the top.

• There are operational edges even in commoditized industries.

We discussed this book with Sidecar in a podcast episode:

Built from Scratch

This is an autobiography of the guys who built The Home Depot. It surprised me. One of the most remarkable business books I’ve come across. All ideas I might’ve read about, these guys applied. And not only that, they multi-dimensionally applied them, with example showing their understanding.

The thing I thought the most about while reading was that it gave me a feeling of reading Jeff Bezos. Bezos always mentioned Amazon focused on 3 things: (i) Lower prices; (ii) faster delivery; (iii) broader selection. I’d never had figured that the HD guys had pushed for this on an extreme level, 20 years earlier, with the exception of faster delivery.

Customer obsession, Bezos’ overarching principle, was also Home Depot’s. And I’ve never seen it practiced to the extent HD did.

The Power Law

This book gives a historical account of the VC industry. Excellent read. Things that might’ve stuck the most, though I need to think it further through:

1. Difference between VCs. There’s a spectrum of investment stage and how to deal with risks depending thereon, VC involvement, invest on product or people, and how much dd different investors need to invest.

2. How much ‘luck’ there is to it.

3. Why where you reside matters.

4. How the business of business is connecting people.

Richer, Wiser, Happier

This book is good in that it covers a wide array of investors, many of whose approach differ in nature. It has, in addition, a philosophical angle to it, for the author borrows quotes from everywhere; fascinating. The great problem it has, in my opinion, is that investors have been so influenced by Buffett, Munger, and Graham, that you rarely find new ideas after reading them.

Another thought was triggered after reading the chapter on Greenblatt. I came across an interview of Feynman that was life-changing to me last year. He spoke about the fun he experienced while thinking; something I had seen in Darwin, Cicero, and others, but that I hadn’t fully grasped. The best investors share the same trait as these guys, as theoretical physicists. They enjoy just thinking.

Personal Commentary

This was a quick recap. There’s a lot more to each of these reads, naturally. But I just wanted to see what was top of mind with regards to each book. Hope you found it useful.

Best, Giuliano

Go to the Source

The misrepresentation of ideas is widespread and something I’ve repeatedly encountered. Most people read “recent” literature, ignoring its origin. I believe this is something to avoid if one were to aim for sound thinking. Once ideas are out there, ‘new work’ is typically an interpretation about these, with some new thoughts.

Problematically, new work brings along the writer’s biases. Even if a good thinker, able to faithfully reproduce the original content, no replicating mechanism is perfect. Furthermore, new work built on top of it will accentuate discrepancies, and so on to infinity. People reading recent literature completely miss what the idea was originally about.

Theory and Logic

Isaac Newton, after Galileo, Keppler, and other giants, did a great service to humanity. He built a theory for how the world largely works; a theory being a framework that explains what causes what and why. In physics, you can test theories’ Truthfulness, or at least have more tools therefor. Nature tells you.

Before you successfully test and retest your theory, it’s just a hypothesis. The problem arose from people becoming so acquainted with the word “Theory” that they just throw it around as if it was nothing. Outside of physics, you just cannot tell; you can’t really test it. And more people agreeing on it, all of them based on illusionary interdependencies, will not make it True.

Quality is something that escapes the grasp of any given sense or ability, but it’s found at the intersection of them all. I’m inclined to believe that logic, mostly following some sort of mathematical path, cannot, in and of itself, catapult man into a sound economic framework. Despite me being attuned to Adam Smith’s way of expressing ideas, Truth might be found in a mix of both thinking methods. I’m not really sure what I mean by this, but it felt as if Keynes was continuously pursuing “if statements” until he cornered each variable. And I think that’s a deeply flawed system to explore economics. Logic alone will not suffice to truly understand.

Economics

An honest evaluation of the book’s intellectual merits forces me to observe the great impediments I face when trying to undertake this task objectively, namely: (i) I have almost 100 years of hindsight; (ii) outside of strict academia, most people I’ve heard speak about Keynes was in a negative fashion; (iii) he published it in 1936, after the Great Recession, yet with no recovery on sight.

I found the book interesting in two respects. Being Keynes an intelligent person, he sets the stage very well, addressing the state of economics and the problems it encountered (which validity I ignore, incidentally). In addition, he had a good grasp of how the different concepts interplay with one another, defining and proposing how this may be done so. Some of his premises are sound and, when assumptions are overlaid, Keynes explicitly declares that these are just assumptions; one has to be careful with their use and any conclusion derived therefrom.

Essentially, and hopefully I’m paraphrasing accurately, some of his conclusions were the following:

• He believed that maintaining a stable (~fixed) level of money-wages is the most advisable policy, though his view was not fully inflexible.

• Under some conditions, employment will change in the same proportion as the quantity of money; and when there is full employment, prices will then change in proportion to the quantity of money. Thus, policy would be to increase the money supply so long as there is not full employment.

• He emphasizes that the problem stemmed not, as was mostly believed, from a lack of consumption, but a low volume of investment. Keynes favored the government kickstarting the recovery by undertaking public investments (i.e infrastructure).

• In contemporary conditions, the growth of wealth was not aided, as commonly supposed, by the abstinence of the rich, but impeded by it.

• He strongly favored taxation for the redistribution of income, especially inheritance taxes, to reduce inequality.

• Against international Trade restrictions in general; in favor when needed to protect domestic employment.

• Increase “the volume of capital until it ceases to be scarce, so that the functionless investor will no longer receive a bonus; and at a scheme of direct taxation which allows the intelligence and determination and executive skill of the financier, the entrepreneur et hog genus omne (who are certainly so fond of their craft that their labour could be obtained much cheaper than at present), to be harnessed to the service of the community on reasonable terms of reward.”

• In favor of increasingly “socializing” investment, whereby the public authority would co-invest alongside the private sector.

• [In an example of an economy with 10M people, 9M of whom are employed], “the complaint against the present system is not that these 9M men ought to be employed on different tasks, but that tasks should be available for the remaining 1M men.”

Keynes thought that, should the policymaker implement the correct measures, the state of the economy would trend towards a more desirable place. When the convergence is manifesting itself into reality, Keynes pointed out that Classical Theory was to take over policymaking once again.

My critique is that, inasmuch as the latter never unfolds fully, intervention would be indefinite. After I mentioned this to a friend of mine, he proceeded to tell me an anecdote:

My Take

Upon my first impression, I thought he was delusional. Time has revealed to me that he was not. Insofar as one takes his ideas in the complete context he describes, and under the assumption that he was an honest, objective, intellectual, he might not have been wrong on some things.

It is the general belief, I presume, among the economists’ community, that it was Keynes’ ideas, accidentally, what got the US back on its feet. I believe WWII propelled the US government into the incurrence of massive capital expenditures, financed with money printing. The war forced the government to increase public spending, creating many new jobs, albeit temporary, in the process. By the nature and caprice of things, this might’ve kickstarted the economic machinery.

In the event that the foregoing were true, his ideas might thus be opportunistically right. In a recessionary economy, public spending could be the stepping stone leading to an economic recovery. However, Argentina has persistently undergone economic struggle and Keynesian ideas not only did not save them, but exacerbated Argentina’s issues.

The American peoples chose to continue transacting and saving in US dollars even after large amounts thereof were injected. In contrast, I believe that a large percentage of Argentinian peoples, upon encounter with newly issued currency, have historically exchanged it for goods or other stores of wealth. And further, I suspect that an increasing percentage of the economy has not even opted to transact in Argentine Pesos, preferring other forms of payment.

Largely, Argentina’s history is one of defaults and inflation. The population has grown averse to holding the country’s currency. And if the new currency is not used to undertake new ventures or, as soon as earned through labor, gets exchanged for another currency or asset, it merely generates further downward pressure on the Peso. In one way or another, these Pesos find their way back, in ever increasing amounts, to the hands of the employers who continue to operate in this currency. They remunerate workers at rising nominal rates, for real rates plummet after the basket of goods is counterbalanced with more currency, who in turn again get rid of the Pesos.

Hence it remains unclear. The correctness of some Kenyesian ideas might depend on the country’s context and folklore. Inasmuch as he lays down his assumptions and describes the required stage for him to be right, although omitting scenarios where there’s no demand for domestic currency, there is some truth and usefulness in his reasoning. Having said this, the world rarely satisfies the necessary conditions.

Crises and the Marginal Efficiency of Capital

The Marginal Efficiency of Capital (MEC) refers to the rate of return a businessman expects to get from investing an additional unit of capital; it’s conceptually similar to the IRR, but it applies more broadly to the economy, in contrast to the IRR which is utilized to evaluate individual projects.

A remarkable aspect about Keynes’ book is the clarity with which he saw the influence of psychological phenomena upon the economy. Theretofore, it was believed that a rise in the rate of interest, a byproduct of increasing demand for money, was the largest explanatory factor behind crises.

However, Keynes posits that the main element behind crises is “a sudden collapse in the marginal efficiency of capital.” Though the rate of interest embodies the cost of capital an investment might have, it does not, in and of itself, determine the expected return; if anything, it might only increase the hurdle rate. Expected returns are driven by businessmen expectations for the economy. Well substantiated or not, there are no True answers.

In The Lessons of History, by Will Durant and Ariel Durant, it is very well captured why revolutions destroy wealth, by and large. Inasmuch as most wealth exists in a theoretical fashion, without there being a possibility of materializing all existing wealth at once, a revolution, insofar as it compromises the confidence upon which the whole societal system is built, destroys wealth. Take a stab at public confidence and the world crumbles.

For the Investor

The book is, at times, a useful read for an investor. Keynes speaks about markets with unusual perspicacity and clarity, insomuch that, should the book be reduced to merely these observations, it’d be among the most illuminating writings. Specifically, Chapter 12 addresses how the stock market functions, why liquidity ended up being a harmful feature; how, despite the stock market being organized as a channel through which capital should be able to find the most profitable opportunities, incentives ended up perverting the system; the difference between investors and speculators. It further speaks to the way in which investors and businessmen actually operate, assessing the likelihood for scenarios and acting thereupon, and how much the market and some economic variables are driven by people’s psyche.

About the latter, there is something worth thinking about. Keynes speaks about the state of confidence of businessmen and investors as a major factor behind the schedule of the marginal efficiency of capital, which resembles an investment schedule. The system’s capital outlay, and thereby, businesses’ individually, runs on a flexible schedule which allocators have. And they think about future incremental deployments as having attached thereto a specific rate of return. In consequence, cycles of contractions and expansion follow, as a byproduct of this state of expectations. Oscillations are severely aggravated by speculators and the market liquidity they’ve been blessed with.

The following chart captures three variables, which could be seen as capital outlay (maybe investment), expenses/maintenance, and net investment, the difference between the former two; a model which, although I don’t fully comprehend it, I found extremely useful;.

Note: In millions

In a non-static economy, the aggregate volume of capital formed, or invested in long-lived assets (houses, buildings, manufacturing plants), varies immensely, greatly influenced by the state of expectation. Brighter periods, such as 1925-29, where vast amounts of capital is deployed, subsequently requires increasing magnitudes of expenses, diminishing future net capital formation unless increasing amounts of capital gets deployed.

By the nature of things, the higher you are, the more distance to the ground. An economy, even resilient in appearance, is underlied by deep fragility; for a single event can unleash a domino effect, affecting the state of expectations, which gets negatively reinforced by former years’ increased levels of investment.

This very well relates to an idea I heard from Mohnish Pabrai: Gestation Periods. Commercial real estate follows something like 5-10yr cycles. When there’s excess demand, investors deploy capital into new buildings. Given the size thereof, 5 years need to go by before this new supply hits the market. In year 2, given supply has not made it to market and excess demand persists, more buildings will be started. The same happens until the first batch of buildings hit the market, whereupon the gap between supply and demand narrows. However, buildings began in year 2/3/4/5 continue increasing supply for the coming 4 years. And until this capacity gets absorbed, which might take 5-10 years, the real estate commercial market will be oversupplied. In a different industry, where constructions may take one year, there’s not such prolonged cycles, for supply catches up more quickly.

Some Wisdom

There is an element in Keynes’ General Theory, typically overlooked, which attests to his, I hope, candidness. Keynes comments about how, all throughout his life, he was taught something, which he longly held as truthful, and even himself taught to others. Time revealed to him how wrong he had been. Upon such epiphany, Keynes saw the need of thinking. Further, the purpose of his book, presumably, was to push for new ideas, very much required at the time, for there was no light. I strongly appreciate this feature, inasmuch as it stretches the limits of societal ideas.

“We cannot solve our problems with the same thinking we used when we created them” Einstein

Thinking differently from the crowds is not only difficult given the broad area the latter has covered throughout history, but the many psychological impediments make it an excruciating task. Masses are seen as safety; everything lying beyond the reach thereof commonly entails risk, and a peculiar way of “stupidity”.

“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally”

Physics Envy

It’s still unclear to me how more complex mathematics first crept into economics, but I don’t think any Truth is to be found there. It just doesn’t feel right. What I found interesting in Keynes’ work is that he explicitly and quite eloquently attacks the pseudo-mathematical approach taken in his field.

“Too large a proportion of recent ‘mathematical’ economics are merely concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols.”

False Humility

This is more of a personal observation. Throughout the book, Keynes sometimes notes that he does not hold the absolute Truth on the matter, that there are assumptions and things to consider in reality. I almost never got the feeling that these lines were written sincerely. Additionally, the writing is good, but seems structured in a way so that not everyone would understand it. Both things make me suspect his intentions. I never felt that with Adam Smith or Charles Darwin, whom I consider were faithfully pursuing Truth.

Final Remarks

I am hesitant to recommend Keynes’ book. As I hope to have given the sense in this writing, I learned much, but it always takes time to unlearn what needs to be unlearned. The deeper it gets ingrained, the harder it is. Chapter 12, despite what I felt were plainly wrong conclusions, is an enlightening read. Buffett’s recommendations never miss.

Feel free to reach out if I can help you with anything:

Giulianomana@0to1stockmarket.com

Numbers at a glance:

The Outsiders and Richard Zeckhauser

Reading Zeckhauser’s essay and Thorndike’s book was quite revealing, as I had formerly held the belief that jockeys didn’t matter as much as the horse. After coming across Hermann’s announcement, my mind went back to the book, for Richard reminds me of these operators. The Hermann’s case, however, remains before the fact and proof; that’s where risk lies. Absent the latter, ironically, no profit would there be to be made.

I wonder what I would’ve felt and done after hearing about Murphy’s acquisition of the ABC Network back in 1986. The deal went for $3.5 billion, while, in all likelihood, Capital Cities’ market cap was between $1.5-$2.5bn. “Will this acquisition turn out good?” Risk lives in the absence of determinant answers. My thinking propels me to twist the question slightly, “Is he capable of pulling out this operation?” And where does the answer come from if not from one’s judgment of the operator?

The Need for Analysis

I presume it would be very common to dive into the acquiree’s characteristics and economics to “assess” whether or not the acquisition will be profitable. It seems like a very sensible thing to do. Notwithstanding this, what if it is Tom Murphy, or Mark Leonard, or Buffett, who are at the helm? If you understand their true capacity, the only item that could stand in the way of you achieving exceptional results is yourself. For, let’s say you “reach the conclusion” that Murphy was wrong, then what? Would you have sold, assuming you had done a correct job at partnering with him, understood his superiority as an operator, and knew he had more information than you about both businesses?

The magnitude of the ABC acquisition could’ve driven many investors away given its size and the fact of it posing many new risks, not theretofore exhibited. This goes without saying. And the aim of this write-up is elsewhere.

Let Them Work

Long-enduring, exceptional returns, go hand in hand with identifying extraordinary operators and partnering with them. Both elements turn sound investing into an exquisitely laborious task. Despite not yet having come across much evidence in favor of the following, my suspicion is twofold: (i) that the first condition might be analyzed by the mind, but partnering relies on Trust, which resides in another department; (ii) human nature makes investors struggle with the second condition more than anything else, being one of the most return-destroying elements, even in presence of brilliance.

An investor’s job might be to understand the water and its currents just to validate the nature of its flow. But you are not the fish; swimming is delegated and you must learn to live with that. If one’s job is well done, the fish will not die by weather nor any factor inherent to the environment. If the job is greatly done, the fish will live for a long time, yielding offspring and spreading its genetic material throughout the ocean.

More Background on HireQuest

HireQuest went public in 2019 by acquiring a then-public company called Command Center. At the time, HireQuest had 98 locations, while Command owned 67. A successful integration followed and, thereafter, HireQuest reinvested most of its cash flow in acquiring staffing businesses, some of them being sizeable (i.e Snelling with 47 locations). In late 2022, Hermanns announced the acquisition of MRI Network, which offers permanent placements and had ~230 branches, almost the same size as HireQuest’s network. The success of MRI’s integration is undeterminable yet.

All of this was funded with cash generated by operations; the balance sheet remains extremely strong, with almost no financial debt, and shareholders have not been diluted in order to pursue any of these transactions.

Why Issue Equity?

My main concern when I heard Hermann’s announcement was his intention of paying in HQI shares for the transaction. It would’ve been more understandable in 2023, when management’s efforts to acquire TBI began. But they could’ve changed their mind, or even wait, but Hermanns hasn’t. This brings me back to an aforementioned point, aided by another factor.

Richard Hermanns is HireQuest’s largest shareholder (38.2%). If I’m right about his capacity as an operator, why would he be willing to dilute himself at a “less convenient valuation than 2023’s”?

Value is destroyed when one gives more than they receive. Therefore, being incentives so aligned between shareholders and Richard, I’m led to presume that, even by paying in HQI shares, Hermanns expects the acquisition to be highly accretive and this to be a great opportunity to consummate it.

Notes

• When HireQuest acquires a company-owned location, they convert it into a franchise, selling it to its prospective franchisee. These branches have, in the past, been sold at a wide range of prices ($150k-$6.4M). Assuming $100,000-$500,000 per branch, HireQuest could receive $40M-$200M in total proceeds from the conversion of People Ready locations.

• Since HireQuest made public their intention to acquire TrueBlue’s shares at a price of $7.5 per share, on May 13, TrueBlue’s share price rose from ~$4 per share to $6.68 per share.

• “if TBI would prefer to remain an independent, publicly traded company, then HQI would be willing to acquire just the PeopleReady, Inc. subsidiary from TBI and would be willing to pay up to $150 million in cash subject to additional diligence”

Personal Remarks

I remain unconvinced that frequent posting will do any good at the moment, but writing this was real fun.

When I started writing in late 2022, I had promised myself I’d try to keep everything free. While learning about the investing world, I came across the fact that there’s little high-quality research and thoughts that one can freely access. Therefore, it was my intention to supply both things to people who, like myself, were trying to learn.

I finished my Master’s last year, returned to Argentina, and things are starting to more or less work themselves out. Consequently, earlier this year, I removed paid subscriptions, returning to a fully free model.

A couple of months have passed, so I thought I could now share the equity research that I did last year. I covered four companies, all of which’ write-ups differ in nature and structure. Hope you find them helpful:

Burford Capital:

Burford Capital Equity Report

2.13MB ∙ PDF file

Download

Download

HireQuest:

Hirequest Equity Report

1.63MB ∙ PDF file

Download

Download

Winmark:

Winmark Corporation Equity Report

588KB ∙ PDF file

Download

Download

Irsa:

Irsa Equity Report

795KB ∙ PDF file

Download

Download

Disclaimer: This is not financial advice. None of these reports should supplant your own due diligence and thinking.

Onward

I do not think I’ll continue to make use of this space to publish most of my writing. Insofar as any write-ups might relate to investing, I will. However, over the past 1.3 years, my mind has drifted to other places, most of which are completely unrelated to the heart of this newsletter and thereby outside of the scope of why you might’ve subscribed thereto.

Recording ideas and solidifying knowledge is crucial to me, but I believe that either a temporarily private approach therefor, or a new space altogether, are the better route. It is my true desire to turn all of these things that I’m learning into something. For it remains obscure how, I’ll try to eschew publishing until these clouds fade.

Thank you for reading and I hope you find the reports useful.
Importantly, none include valuations or any models.

All the best,

Giuliano

From others’ experiences, I borrowed the hypothesis, albeit not to its fullest extent, that the person who runs a business is more important than the business itself. Capable leaders bring an intangible asset to the equation that cannot even be sensed. It’s not only about the compounding of little decisions made every day but also macro picture ones, which drastically change the endeavor’s long-term direction in unpredictable ways, but on average highly skewed to favorableness.

Able people – I’m thinking about Lee Kuan Yew – can turn a nothing-place into a majestic metropolis. His genius was in picking the correct system for fixing huge societal issues, combined with pragmatism, problem-solving skills, and highly acute judgment. When complemented with LKY’s great sense of moral responsibility, for it largely appears to me that no exceptional, large-scale, achievement can be made without good, honest, stewardship, you get to one of the most impressive nation-builders in history.

People like Lee Kuan Yew are truly one of a kind. Whenever you feel like you are in the presence of another, you are most likely wrong. However, good results do not manifestly require an individual of this sort. Maybe top decile already works pretty well, with each upper percentile exponentially increasing the odds of success and the magnitude thereof.

Now, let’s presume you find a Lee Kuan Yew (extraordinary talent and high integrity) and have the opportunity to invest alongside him. Does it even matter what kind of business he is building? Is it okay to invest even if one ignores absolutely everything about the enterprise itself? What percentage allocation would you be comfortable with?

I was listening to a conference where Munger was speaking, and he said something like “the weaker the thinker, the more due diligence they need.” Highly hesitant to accept it at first, was he speaking about this? My question then is, how much can (and should) one bet based purely on their capacity to judge people, an incredibly biased skill?

Naturally, things work in degrees, not absolutes. Intellectual frameworks, mostly business ones mattering in this case, seem to help compensate for a lack of granular understanding; how things should tend to play out under a certain fact pattern. Yet, still, how far should you go based on a presumably conceptual grasp of the thing?

Depth of Knowledge

Knowledge seems to me built as a thread with finite extension, maybe resembling stacking grains of sand. Knowing a sentence that conveys a certain message does not imply one understands what’s within that message. What can happen, the transcendental status of statements, and their wide spectrum of covered area always escape one’s mind. Depth of knowledge entails knowing how the tree has grown until this cup, its configuration, and why branching created the concept being transmitted. Moreover, it entails understanding this infinite nature of things’ intention.

Deep Thinkers

Thinking feels to me as digging a hole. The mind works by sequential focus. Every time something arises and remains on, our subconscious spins the topic around. It finds unanswered questions, dead ends, presumed linkages, potential corollaries. What I tend to see in deep thinkers is that they seem to have been locked in a cage for years, navigating mental territory, yet mostly with some sort of semantic root in land transited. They’ve considered so many possibilities that what remains is like a group of ideas that have survived on the ring for a long, long, time.

The Common Denominator

Years of questioning, reasoning, and trying to understand is the only feasible approach. Other avenues lack the rigor that’s needed to tackle complex and profound ideas. These are people who have paid the dues and only rarely step outside their solidly grounded body of knowledge, which might even consist just of questions. The two individuals with whom I’ve felt this the strongest with are Fyodor Dostoevsky and Charlie Munger, both certainly differing at their core. And a lately recurrent thought is that the music I get the least tired of listening to, even after 100s-1000s of listens, may be the deepest. The fact that the mind doesn’t get tired of those might mean it's always uncovering new gems.

Personal Commentary

I’ve been lately much more inclined to thinking but without writing. It’s unclear to me whether this is the correct approach or not, but as to what the mind wants to do, I try to give room for. I believe it works as some form of intuition.

As a final and sidenote, I can’t stop thinking about physics and biology. Isaac Newton visits my thinking flow really often. I’ve been finding many of the books and ideas I’d like to pursue over the coming months; most from the 1500s-1800s. Couldn’t be more excited.

In this article, I’ll explore a concept that has transcended all fields and disciplines. I cannot, as of now, do an exhaustive analysis because of how little depth of knowledge I have in these different verticals. However, I believe it vividly captures the power of escaping one’s field and looking for ideas elsewhere. Many of them, with a twist, can be deeply helpful in understanding phenomena beyond what made them rise.

The first time this idea hit me from an unexpected place was in physics, specifically in thermodynamics. The second law of thermodynamics is about the increase of entropy within a closed system. If you leave it isolated, with no interference, the system will tend towards the state of maximum entropy and minimum energy. In a bowl, balls would sink to the middle. This acts as an attractor state.

Evolutionarily Stable Strategies

In the 50s-60s, biologists were studying how animals compete within an ecosystem. When one encounters a problem somewhere, it’s plausible that a similar thing happened elsewhere. If you find out how it’s been dealt with in this elsewhere, you might find some valuable tool for analyzing the situation you are interested in.

Essentially, evolutionarily stable strategies is an idea biologists took from game theory. It’s about thinking of species, or individuals, as players, and trying figure out what’s the soundest strategy each participant should utilize to maximize their chances to reproduce. Let’s imagine a population of one species, where individuals can adopt 1 of 2 strategies:

1. Hawk. Hawks are aggressive. Individuals adopting this strategy will always fight until death or a serious injury when they encounter another individual.

2. Doves. Doves are easy-going. Individuals adopting this strategy will always do a contest stare with individuals they meet. They never fight.

To make things interesting and exploit the potential for thinking ground this model offers, we assign payoffs to encounters between 2 individuals.

• Win: +50

• Serious injury: -100

• Long stare: -10

The purpose of this exercise is not to infer whether doves or hawks will win. We know for certain that hawks will always win encounters. An evolutionarily stable strategy is the strategy, or set thereof, that, if the majority of the population adopts, there will be no better alternative. It’s impermeable. That’s what we are interested in. Now let’s suppose two scenarios:

After a quick glance, you would think doves will dominate. But that’s wrong. If a population is full of doves, becoming a hawk turns suddenly profitable. Every time a hawk meets another individual, they’ll win because doves won’t fight. The average payoff for a hawk would be +50, reproducing the most.

Now you think hawks will dominate. But if a population is full of hawks, then becoming a dove turns profitable. Although the average payoff for a dove in a population full of hawks will be -10, hawks’ average payoff will be almost -25. In this scenario, doves will reproduce the most and their share of the population will rise.

It appears as if the ecosystem will follow a pattern of ascension of one strategy to then be succeeded by its decline and full ascension of the other. But there is a fascinating kicker. Mathematically, there is an equilibrium where the population will settle. Every 12 individuals, 7 will be hawks, and 5 will be doves. If a strategy gets used more than that, the other one will become profitable and hence the system will regulate itself. When a population reaches an equilibrium, alternative strategies get penalized.

These “attractor states” is what I’ve seen everywhere. I’ll briefly go over some of these.

In microeconomics, this idea of how players think about their strategies, which are invariably affected by what other players’ options are, reached an interesting conclusion. Where a finite number of strategies can be determined, alongside the payoffs or costs they carry, you can mathematically arrive at the strategy that’s the most convenient for every player, considering other players’. Deviating from it gets penalized and hence you have no incentive to do so.

Where it gets interesting is when you observe systems where individual players choose the best strategy they presumably have, but end up being much worse off than if another set of populational choices were taken. This is classically known as The Prisoner’s Dilemma. Simply stated, when two criminals in this exercise are interrogated, the options they can choose is either to stay silent or defect, betraying the other. Given payoffs and costs, both prisoners’ best strategy is to betray the other, but they’d be much better off if they could cooperate and stay silent.

This is not in and of itself that novel. The exciting part is when Dawkins brings this idea to nature. One would think that in ecosystems where this marvelous agent regulates everything, the attractor state would be the optimal state, yet that’s not what happens. Our hypothetical population would end up settling in 7/12 hawks, yielding an average populational payoff of +6.25. However, if the population was full of doves, the average populational payoff would be much higher, at +15.

In a free market economy, any given good will have a set of suppliers and people who demand it; sellers and buyers. The attractor state is where, on weighted average, these two sets of people agree. Goods will presumably reach an equilibrium, which determines what its supply will be and the price at which it’ll be done so.

The invisible hand is another cornerstone of economics, but most people get this one wrong. Adam Smith spoke about the invisible hand in the context of people doing what’s in their best interests; that by doing so, they end up, more frequently than not, benefiting the whole society. It is as if an invisible hand makes them promote the greater good by promoting their own.

“By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society”

Staying in economics, equilibriums are everywhere. There’s a peculiar thing called the “law of convergence,” which posits that, as a country gets richer and richer, its per capita gdp growth rate will tend towards 2%. It also has the counterpart that, the lower the base they start with, the higher their potential growth rate, naturally converging to this 2% as they get richer.

This is, in part, just the extrapolation of an incredibly powerful statistics concept. The law of large numbers states that the larger you make a sample of observations/tries over an independent event, the more will the average of the sample tend towards the expected value/true value, if there is one. When flipping a coin, you’ll notice a convergence towards a 50/50 distribution the more coinflips you do.

Regression to the mean, or base rates if I’m not incorrect, derives from the above and probability theory. Given there exists some sort of true value, when considering an event’s outcome distribution, whenever a trial is close to a tail of the distribution, the subsequent trial/observation is more likely to be nearer the true value.

In psychology, I found there are two similar things in this line of attractor states:

1. We are strongly wired to follow the crowds, which associated term is herding behavior. Hence my vague corollary is that what a society thinks, most individuals will think as they grow up. These generally held beliefs will act as an attractor state of people’s thoughts.

2. Humans will do what rewarded them in the past, avoid doing what harmed them, and our subconscious continuously speculates about potential payoffs in the systems wherein we operate. Therefore, people’s behavior will be skewed towards where incentives are aligned. That’s why they are so powerful a controller of human cognition. Well defined incentives could be used as accurate predictors of average behavior.

In physics, there’s a thing called centripetal forces. Newton spotted and coined the term in the 1670s when he was investigating gravity. These have some sort of pulling effects. The heaviest object in the solar system, although now I’m getting to dangerous territory, is the sun. That is why planets orbit therearound. It acts as an attractor spot. The system does not tend towards it due to other forces and variables in place but it’s an incredibly peculiar thing to think about.

Then we have thermodynamics, which posits, as aforementioned, that isolated systems will tend towards the state of maximum entropy and minimum energy. If you have two separate boxes, one of which contains atoms of gas, and open the valve, connecting them, atoms will distribute evenly throughout the whole new open space.

Whenever you are making a pile of sand, rice, grain, or stacking one of these little things, you will eventually reach some sort of peak. After such a threshold, each time you add to the pile will cause an avalanche, of varying dimensions. That peak is a critical value.

The last one I will cover in this article is one which we are all familiar with. Ben Graham wrote that, “over the short run, the market is a voting machine but in the long run it is a weighing machine.” The convergence between intrinsic values, or fundamentals, and stock prices follows from this idea that the fundamentals act as an attractor state.

Final Remarks

I believe there are two main takeaways from this array of similarities. Firstly, there are things, system-wise, that can be taken from one discipline to another, with great benefit to those who do. Secondly, it seems impossible to find these things unless you really search. As obvious as it now seems, the multidisciplinarity of attractor states only hit me after reading several books, most of them focused on particular verticals of knowledge.

I hope you all finish the year well and have a great 2025. Thank you immensely for taking the time to read this.

Best wishes, Giuliano

I’m a very lousy observer. For whatever reason, I’ve mostly lived my life introvertly, up in my mind. I tend not to pay attention to my physical surroundings, and even to people, if I find myself in a group.

This has certainly brought me trouble, but it has a peculiarly positive counterpart. I really pay attention to what happens in my mind. I sometimes feel the chains of thought being constructed, how there seems to be a typewriter and an entity suggesting words or phrases while writing, how ideas clash, others synthesize, others I ignore completely. In any event, this feature helps me better recognize what’s happening in mental territory.

To me, reading is passing my eyes through sentences, while my mind tries to figure out what they mean and how they connect to one another. Writing is the petrification of information, or the conveyance thereof. When reading, the mind wanders. Paragraphs create context and provide ground to be explored. A successful exploration entails the understanding of something. And the mind returns with a piece of knowledge. A failed exploration is one where the mind gets lost in the process and does not return. Incidentally, it’s my experience that the latter happens the most often.

What follows from this is that, if I’m continuously reading, my mind goes for these missions with incredible frequency. Hence the first effect reading has had is my increased capacity to seek and find. It is the same as exercising a muscle. The problem this in turn brings is complacency. The mind knows it’s getting better and becomes lazier. While on its first quest it had to do all kinds of tricks and things to solidify the piece of knowledge, after thousands, it fools itself into thinking it does not have to do that. And, curiously, it is true, to some extent. But this causes the loss of details I retain from incremental reads.

At the same time, there’s another dynamic playing out. Although I am not of the view that the mind has a fixed storage capacity, there’s high degrees of truth to that. I believe the conscious mind, which contains information we can quickly consult, has a definite limit, but I don’t think any human has ever reached it. It seems to take huge effort and skill to expand one’s conscious capacity to access knowledge. There is a fight between pieces of information, which at the beginning is not of zero-sum, but, as the mind gets more and more filled, the fights tend to be more and more zero-sum-like.

When a fighter loses, it’s sent to the subconscious. I think the latter really stores a very large percentage of the lessons and things one learns, maybe in excess of 90%. One only rarely has access to this pool of data, but it does help make decisions via intuition. This is something I’ll explore in the future, but it escapes the purpose of the article.

Now, the way ideas are built is by new information of a certain class replacing another in the conscious mind, but before being sent to the subconscious, they build a link. And that happens almost always thereafter; I have not found the limit to that yet, if there’s any. Then the idea that’s in the conscious mind, to which one has access, every time it’s recalled, the mind also summons the links it has. With some effort, you can bring those to the conscious mind and say them aloud. It works like pulling a thread.

That’s how you know someone has thought deeply about something. I feel most people do not build these layers; I eschew reading or listening to them altogether. Truly deep thinkers, like Munger or Dostoevsky, had built millions of layers to their conscious knowledge. And every time they build a new link, it tests all others, making connections stronger. These people also develop a capacity to deal with the hard questions no one else has because of the layers of knowledge and thought in between.

Going back to the main idea, it is contradictory and counterintuitive, but reading phenomenally improves your memory as well as it erodes it. What one needs to work on is in the contact with the subconscious to not lose much of the consciously acquired knowledge. I am far from knowing how, but writing and speaking help.

The second point I want to raise as to how reading impacts the memory is that reading dyes one’s opinions/sense on subjects. Over 95% of the arguments behind it fade, but the dye remains. This one is quite peculiar. When coming across a particular statement as of today, I sometimes realize that I have an approving or disapproving view of the statement, or that it triggers specific connections. Then I remember that I have in fact read about it in the past, my mind knows about it, but I cannot recall why is my opinion as such. I only have access to the feeling and manifest it accordingly.

I’m not really sure how it works, but this second thing is very dangerous. It’s very simple for a high-substance opinion to be faked by an empty one. The difference is tough to spot, considering our greatly developed talent of fooling ourselves.

Final Remarks

I feel I could write dozens of pages on these topics, yet I’ll abstain from doing so. Maybe in the future. There are many elements I left out on how reading affects the memory. Hope you found these two though-provoking.

Although my reading process works in cycles, it’s generally the case that I daily carry two things in parallel:

1. I have books/letters that I intend to really absorb, hence I study them. First thing in the morning; slow read, taking notes. Each page of these might take 3-4 times what a normal read would take.

2. Normal reads. Lately it’s been 2-4 books in parallel, in turn.

-Studied-

Jeff Bezos letters

I’m of the view that you don’t fully understand a certain thing until you pay the required dues. Customer obsession is at the core of Bezos and Amazon’s philosophy. This principle is dazzlingly simple, and obvious, yet how seriously he takes it is otherworldly. And what’s beautiful is that it works marvelously. There’s incrementally increasing returns on each unit of effort dedicated to thinking about customer needs and acting in consequence.

The Outsiders, William Thorndike

Great book to understand “another” type of investment one can make. It greatly illustrates what happens when you pair up with outrageously good operators.

The Outsiders covers 8 CEOs, a feature that’s certainly useful when thinking about where to dive further into. Notwithstanding this, I felt it severely lacked depth and, for whatever reason, I feel there’s much more to it that remains uncovered. If you think about it, it’s natural to conclude this after realizing that barely 25 pages were dedicated to each of these Masters.

The Origin of Species, Charles Darwin

This is the first book I studied in the worldly wisdom line, and I cannot stress enough how much it improved my thinking. I realized most people are aware of what natural selection entails yet ignore the extent to which it impacts ecosystems. There’s a number of factors underlying the survival of the fittest, many of them skewing variations towards one side or the other. In a sense I cannot yet describe, The Origin of Species is probably the book that has changed my perspective the most.

The Wealth of Nations, Adam Smith

I remain astonished by how could a human being put this together. The breadth of daunting topics covered is unbelievable. It also surprised me how Smith manages to not lack any depth whatsoever. In fact, I’d argue that 100-200 pages could be deleted and the book would be most profound of all non-fiction books in history. Furthermore, I’d speculate that a person who understands this work in its completeness learns 60-70% of what’s taught for a bachelor’s in economics.

The Interpretation of Dreams, Sigmund Freud

Great book to see how high potential goes to waste due to miscognition. Freud had a couple of outstanding insights on human nature, how dreams play a part of our lives, and the analysis thereof. However, once his ideas got to a theory, he just fell victim to the man-with-a-hammer tendency.

I must observe that I have not yet gone through his work on Psychoanalysis, which composes the bulk of his legacy. Hopefully, this will be one of my studies in 2025.

Man and his Symbols, Carl Jung

My mistake in studying this book is that only 1/4th or so is written by Jung. The rest are other people, though Jung’s most ferocious followers, expanding on verticals Jung created and explored. I’ve been lately much more reluctant to reading others rather than the source. Notwithstanding this, the chapter that’s written by Jung is fascinating. There’s many of his ideas that provide huge thinking ground.

The Principia (I’m at 50-60%), Isaac Newton

This is my “current study.” It’s a physically massive, 900-pages book. It is and probably always hereafter be the most difficult book I will have gone through. Despite its complexity, The Principia is helping me get a curiously decent understanding of the field of physics. What’s so good about Newton’s work is how many impossible phenomena he got to explain through corollaries of a few laws.

-Read-

The Catcher in the Rye, J.D. Salinger

I’m actually currently re-reading this book. It’s very uniquely written. Salinger does a sadly spectacular job in describing how true solitude and despair feel like. I couldn’t help but really empathize with Holden. The Catcher in the Rye shook something within me that only Dostoevsky had been able to reach.

Naturally, I must observe that I think Dostoevsky is the greatest thinker mankind has ever had. No one comes even close to him.

Poor Charlie’s Almanack, Charlie Munger

Poor Charlie’s Almanack is the book that, at a holistic level, has changed my life the most. Charlie found the best recipe for living life in a wholesome manner, complemented with massive contribution to humanity. A man that was remarkable in too many ways and after whom I based my life thereafter.

Franklin’s Autobiography and Other Writings

Franklin’s autobiography was a huge disappointment. Of course it’s well written, though the 1700s phrasing and vocabulary is distinct from nowadays’. I finished the book knowing barely something about the man himself.

What really saved it, in my case, is the inclusion of his other writings. There is one piece, called The Way to Wealth, that’s the finest thing I’ve read in my whole life. Another was The Whistle. Collectively, these 10 pages teach you more about wealth and life than any long list of books I can come up with.

Thinking, Fast and Slow, Daniel Kahneman

Another disappointment, although this one was more my fault than the author’s. Kahneman provides an incredibly sound framework for understanding how the mind works. In addition, there’s a great selection of the biases to which we are subject and how to counteract them. My problem was knowing most of his work in advance, knowing he got a Nobel Prize in economics for it, and reading Munger’s speech in the mid 90s. Too high expectations.

The Almanack of Naval Ravikant

Good book for people starting in the world of business ideas. There’s high utility in most of the verticals Naval explores. The single most important idea in his book might be leverage. Understanding that is life-changing.

Nonetheless, I feel I also was disappointed by Naval altogether. He’s praised as an outstanding thinker/philosopher, which might have led to me expecting some more depth to what he preaches. I didn’t find that, honestly, although I have enjoyed listening to him in the past.

Scarlet Study, Conan Doyle

Interesting way to, in my opinion, ruin a book by adding unnecessary background. Half of it revolves around the reader getting familiarized with the character of Sherlock Holmes and himself getting acquainted with the case, plus resolving it. That is absolutely delightful. In fact, I ordered a full collection of Conan Doyle’s books on Sherlock. But the remaining half I’d catalog as useless.

The Theory of Moral Sentiments, Adam Smith

Well, I may have understood only 2 or 3 things about this book. Two of these are how Nature embedded man with a sense of morality, and that no one other than oneself knows what’s best for them.

I read it before The Wealth of Nations, hoping this would help me understand the roots of Adam Smith’s thinking of economics. It does have a bit of that, but it’s mostly pure philosophy; speaking literally about moral sentiments, how man behaves, why he does so, and what’s Virtue. I don’t mind those types of reads once in a while, but they are not my favorite. They’re typically written in a way that make me think the author wants nobody to understand them.

The General in his Labyrinth, Gabriel García Márquez

García Marquez never disappoints in the execution. His books are so delightfully written it’s a pleasure to go through them, irrespective of the plot. This one aims to describe the story of Simon Bolivar after the glory days. It has a good underlying idea. Exile, mistreating, and society’s treachery, are things I’ve seen repeatedly in history, yet there’s not much on how these heroes fared those days. For whatever reason, nonetheless, I found the book normal, nothing crazy.

The Book of Sand, Jorge Luis Borges

I had read other of Borges’ books before and I have yet to meet his genius. He was an extremely intelligent person and too good of a writer. I hope to, in a few years, be able to get a better grasp of his work.

The Pleasure of Finding Things Out, Richard Feynman

What a beautiful book which, incidentally, has the best title I’ve seen. It’s amazing what reading and listening to Feynman did for me. I had theretofore never seen someone transmit so much joy from learning. Thinking itself, to a very large extent, is unbelievably fun. I’ve never realized that’s what theoretical physicists do. Feynman’s speeches and writings included in this book extend beyond physics, however, and I really liked that. His takes on how knowledge contributes to beauty, the need to beware of pseudosciences, encounters with other brilliant people, and so on, are fascinating.

Supernatural, Graham Hancock

I fully admit that one of the people who have captivated me the most this year is Graham Hancock. Author of Fingerprints of the Gods, over the past 40 years, he’s been exploring the idea of an advanced lost civilization. His fight with mainstream archaeology perfectly illustrates the problem with modern “science,” “thinkers,” and academia. I feel his contribution is incredibly net positive and that it extends well beyond his field. Thinking for himself and looking where no one has looked are some of the elements I admire of Graham’s philosophy.

Guns, Germs and Steel, Jared Diamond

I read Jared’s book after Munger’s recommendation. Wow. Jared’s intention was to answer a ridiculously obscure question, and I think he did an outstanding work at it. He seeks to shed some light on why Eurasians conquered Native Americans and indigenous populations. Most history books are simple summaries of what happened in the past, but aiming for the ‘Why’ is extraordinary. Truly wonderful read, and greatly written.

Life in a Putty-knife Factory, Howard Hawkins

I was doing some equity research in July, came across Hawkins and found it interesting enough so as to read 10-20 of their annual reports. I then came across the company’s founder from the 30s, Howard Hawkins, and saw he had written 100-page documenting Hawkins’ journey. I only remember he was led by a very sound principle: providing a good service. That single idea helped Hawkins triumph in a commodity market.

Brave New World, Aldous Huxley

What a dreadful vision of what the world can turn into. Huxley’s book was well ahead of his time. Complete avoidance of pain, consumption-based society, the banning of books, the re-writing of history, the loss of Love and disinterest in things. One thing that struck me is that a leader, if I don’t misremember, used to keep a great deal of classics to read in his spare time. Shakespeare and Homer, I think. I loved the implications of that detail.

Nietoschka Nezvanova, Fyodor Dostoevsky

The only book I’ve read from Dostoevsky I didn’t fully like. Although misery and sadness are superbly captured, as is usually the case with him, I didn’t connect with the narrative. I felt it lacked something, or I’m not sure if it was meant to be anything. I barely even remember how events unfolded, up from covering the story of a girl whose father had passed (or something like that) and was adopted by a rich family.

White Nights, Fyodor Dostoevsky

I read this in August and already had to re-read it in November (it’s less than 100 pages). Wow. I couldn’t get over the sorrow and grief the main character experiences. He’s a fully well-intentioned person, full of love, yet seemed to have given up on life and is tortured by solitude. He meets a woman and has an intense 4-nights sequence with her. That’s the happiest he’s ever been. But it ends. She picks another man and wonders why things had to be that way. The main character is devastated, but got to be temporarily happy. He’s grateful, but does not get the grasp of the tragedy’s depth.

“My God, a moment of bliss. Why, isn't that enough for a whole lifetime?”

Crime and Punishment, Fyodor Dostoevsky

Another of Dostoevsky’s widely known masterpieces. Probably the best known of his work, and I immediately saw why. Out of all of his books, this might be the one that cuts the deepest. In contrast to The Brothers Karamazov, C&P is much more lightly written, with a straightforward plot, and without too much fanciness in the insights I believe Fyodor wanted to transmit.

In spite of myself making it sound superficial, it is beyond extraordinary. I seriously cannot describe how it makes you feel while going through it. And I am sure I missed most of Dostoevsky’s ideas. There are numerous characters with whom one relates completely and just don’t understand why it has to be that way. But it is.

Moreover, as happens with Dostoevsky, you cannot take any page for granted. In all dialogues, or internal monologues, he hits you with unbelievable lines and observations.

1984, George Orwell

God. I knew this was an absolute classic and that a lot of people regarded it as a masterpiece. Expectations were incredibly high, but this book just did something to me I cannot describe. Winston is the only sane person in Orwell’s dystopian society (alongside Julia), yet it’s brutal how he is broken. Massive ignorance controlled by a totalitarian state is such a despicable recipe. 1984 is about how one individual is lucid amongst madness who seeks what was lost, Love, and to remain mentally free.

Since I read this in August, I’ve been holding myself to not re-read it so soon. It is a ridiculously serious read. Ideas, special terms, trends, topics, dialogues, the narrative, the characters, the unfolding of events; I cannot think about anything that’s not perfect.

Zen and the Art of Motorcycle Maintenance, Robert Pirsig

Pirsig wrote one of those books that makes you wonder if you are of the same species as them. The book follows a narrative consisting of a father taking his son on a mountain trip. At first they are joined by a couple, but then continue alone. I’d say the write-up is divided into 2 or 3 deeply ingrained ideas. One is about people’s philosophy of life, comparing two broad ones, whereas another is about the main character recalling his experience as a philosophy professor and his quest to understand what Quality is.

Zen and the Art of Motorcycle Maintenance might be the heaviest book I’ve ever read. Every sentence forces you to stop.

My First Million, Poissant – Godefroy

Despite it being a very marketing-like book, written for popularity, and immensely lacking depth, it was an interesting read. It briefly tells the story of how Rockefeller, Disney, Hilton, and some more people built their empire. The book is very useful if one is unaware of these businessmen’s lives, which is my case.

The Quark and the Jaguar, Murray Gell-Mann

Gell-Mann won a Nobel prize in physics for his theoretical work on elementary particles and coining the term “quark,” alongside a colleague. The Quark and The Jaguar is a phenomenal analysis of complex systems, how they come about, and provides tools for better understanding the concept. Additionally, it’s a great illustration of what can happen when a brilliant person masters multiple disciplines. I must observe that, nonetheless, it is quite a technical book.

The Autobiography of Charles Darwin

I wouldn’t say this is a good book, but it has a few insights on how Darwin’s mind worked, best practices he followed, and puts the man in context.

Financial Intelligence, Joe Knight and Karen Berman

I wrote about this book last week. Best book I’ve thus far found on accounting.

Newton’s Philosophy of Nature, Newton

It’s unfathomable how Newton’s mind operated, which translated into his writing. Through his letters and some other inquiries, you can vividly perceive how he connects one logical statement after another. It’s really dazzling. Incidentally, now that I’m writing this, it reminds me of when I listened to Richard Zeckhauser and Buffett for the first time. Newton took this feature to an inhuman extreme.

Surely You’re Joking Mr. Feynman! Richard Feyman

This is a compilation of anecdotes that this character left us. It’s an incredibly fun read. However, I would’ve liked for it to have some of Feynman’s views on topics, like the other book. Richard was much more than a funny guy. His perspectives were very enriching.

He, Robert Johnson

Johnson walks you through the journey of a young man in pursuit of Virtue, I’d argue. It’s some sort of interpretation of many of Jung’s archetypes and how they impact a man’s psychology. Although I tend to dislike these types of things, there’s great merit in that he wrote it in the 70s.

Deep Simplicity, John Gribbin

I read this after Munger’s recommendation, and I could see why he recommended it all throughout. The thesis of this book, I think, is around how complex systems are rooted in deep simplicity. With a handful of fundamental elements and a bit of time, marvelous things happen. This is a really profound idea I’ll expand on in the future. Deep Simplicity also counts with many of Mungers’ most loved ideas.

Meditations, Marcus Aurelius

Peak of wisdom. How to live.

From Third World to First, Lee Kuan Yew

From Third World to First is a continuous “How the hell did he manage to do that?!” The track record of Lee Kuan Yew as prime minister of Singapore is outrageous. He was systematically able to pick the right systems for each societal issue and being proven right. It’s beyond extraordinary. Additionally, what’s really good about the book is that there’s a lot of how his mind worked, and what his thoughts are and were.

Cicero: Selected Works

I was expecting a lawyer and great orator, but not a philosopher. Cicero was incredibly clear-minded, although apparently sometimes moved by vanity. He had a quite instructive approach to topics and ideology in general. Cicero was a man who, all along Rome’s most troubled decades, remained independent minded and comfortably in between extremes. I’ve yesterday read two treatises that are outstanding. The first, called “On Duties,” which reminded me on Franklin, is on how to live good life. The second, “On Old Age,” shows deep wisdom and answers why aging is not such a dreadful event.

The Selfish Gene, Richard Dawkins (Current Read)

I wanted to return to learning biology and, given I could not find any earlier foundational books, I proceeded with this one. I think it’s one of Munger’s recommendations and, thus far, it’s exciting.

Howard Marks’ Memos 1990-2003

I left Marks’ memos after reading only a couple dozen pages. It’s a read I intend to resume, for his writing is very clear and all of his memos are instructive. They not only discuss important topics but are very concise and full of great data.

Buffett’s Letters 1984-95

In 1994, if I’m not mistaken, is where the transcripts of the annual meetings begin. I read one of those and stopped this read altogether. I need to resume this asap.

Final Remarks

There is no mechanism by which “intellectual progression” can be measured. I suspect intelligence is highly related to one’s capacity to command mental tools. And, what I found, is that reading builds one’s arsenal.

I feel these past 2 years have strongly boosted my understanding about things. The aim of 2023 was to take a leap in the investment field and, of 2024, the world in general. My sense is both objectives were reached, although I always think I could do more.

The game of reading is a long one. Rewards follow an exponential path. The difference between this and compounding capital is that the mind seems to take off earlier. This past year I’ve just felt much more capable and, in consequence, useful to society, than ever. I’ll aim for this to systematically occur year after year.

I do not have any learning plan for 2025, but the goals are clear.

• Study the hard, foundational, books for at least 4 months.

• Maintain cadence with non-fiction. Ideally 1-2 daily hours all year.

• Read more fiction. Replace non-fiction when close to burning out.

I need to be more cautious of the tricks my mind plays. These habits are getting more and more ingrained within me. The trick is that, even if I miss a day, or god forbid, a couple of days, I still have the sense I’m reaching the objective, which is false. I stopped studying Newton’s The Principia in early November and haven’t resumed, yet my mind lies by saying I still am.

Moreover, I’m not sure what’s happening to my memory. It’s both improving phenomenally but becoming increasingly selective. I have the sense that some titles are missing from the list, but I cannot remember which, nor when I read them. At the same time, although I have decent recall of the structures I learned from different books and disciplines, many details are going away.

Everything is peculiar and things are starting to get interesting in mental territory. I’ll try to follow up with updates on the journey and hope you find it useful.

1. Accounting is not a science, yet it’s interesting to me how many professionals, books, and articles, act as if it is. This book continuously reminds the reader about the limitations of accounting in very useful manners. For instance, it goes through numerous cases of fraud and how the principles, not rules, were taken advantage of.

2. The book is structured in 4-5 pages chapters, with each having numerous 1-2 pages subchapters. Authors’ intention is for you to read it every time you have 5 minutes available, and it’s written in that way as well. I honestly found this feature phenomenal, for the book was far from my main read.

3. Karen and Joe don’t want you to become accountants. They want you to understand what’s going on in the finance department, be able to deal with accountants, and help you add value. In consequence, the book is a much lighter read than any other I’ve come across.

4. I have the sense most books spend pages speaking about single concepts, when it’s not necessary. These guys write concise, but precise, definitions. When necessary, they tie them with principles and exercises.

5. They help you understand the obscure jargon accounting is filled with.

6. Does not paint false realities. For example, when speaking about valuations, it very rapidly addresses how much personal opinion there is involved.

7. Joe and Karen are practitioners, so they know what are the pitfalls people fall in. Hence chapters are specifically dedicated to some of these. How profit differs from cash, for instance.

8. The book helps you empathize with accountants. It walks you through the decision-making process they have to follow. That way, you recognize how many grey areas there are and how difficult it is to write any single line in financial statements.

9. Although relatively short, the book does expand when it’s necessary, taking numerous pages and as many number examples as required. I’d say there’s not a single example that shouldn’t be there.

10. It covers, very simply, the intricacies about financial statements, returns on capital, M&A, the cash conversion cycle, and many things one would think are sophisticated.

11. Lastly, Joe and Karen explain the why of things all throughout the book. At the end, they address how cash is the element that ties all financial statements together. It is truly enlightening how this last thing is done.

Final Remark

I cannot recommend this book enough for anyone who’s interested in investing. I’d argue this book is perfect for beginners, intermediates, and even people who are well acquainted with the elements behind accounting. For beginners, it gives a spectacular overview and, if studied properly, the 80% that’s needed; for intermediates, it helps solidify already acquired knowledge and sheds some light on obscure corners; for advanced people, the structure it provides is superbly useful, and the book could be used repeatedly when dealing with reports.

The Limit and Extension of Ideas

I’m inclined to suspect that a great part of our mind operates in a reactive fashion. Our senses give us information about the world that surrounds us, and the mind seems to be wired to give some sort of shape to this information. When a particular shape arises numerous times, we might refer to it as knowledge.

After some time being alive, we are exposed to vast amounts of information, some of which is turned into knowledge and some remains undecidable. This creates a pool of brewing things deep in the subconscious; something like a soup, where everything is revolving around. At times, we are able to focus on one of these things, which makes the thing go up into our conscious mind. But that doesn’t mean the other things stopped revolving.

While we observe the world thereafter, we receive new sensory inputs. My sense is that these clash with the soup, and a peculiar output comes out of it, namely a thought. This doesn’t actively require us to do anything, it just happens. Sometimes, thoughts seem to not even need a trigger and simply come out of the soup themselves. Thoughts are singular. They are an individual piece of an ethereal substance. Thoughts may be us trying to get new knowledge out of available information.

Once we’ve had a number of thoughts, all of which try to reflect a part of reality, we come up with ideas. Now, ideas are interesting. These are attempts to explain reality. They have massive potential and are tested against our own preconceptions. Many times, ideas are rapidly discarded as they contradict something we know, or that we think we do.

Other times, ideas make sense. We cannot find logical flaws in them and proceed to test the ideas against phenomena, mostly natural. When we see that this idea helps us get a better grasp of the phenomenon, it evolves. After facing nature, the idea grows legs and arms, it becomes more precise and its reach is better understood. That’s when the idea becomes a concept.

What I previously thought is that once we have a lot of ideas, pieces of knowledge, and concepts all over the place, we channel them and come up with frameworks to explain a series of observations. Frameworks that acquire a certain structure become hypotheses. When hypotheses are tested against nature and survive, they become theories. Theories have fully explanatory capacity, telling what causes what and why.

The purpose of scientists and thinkers is to push thoughts through the chain until they reach a state of theory, helping us make a better sense out of the world. However, I noticed there are some astounding frameworks which seem to have high, but not fully, explanatory power of lots of phenomena.

This area is where I think mental models are. A mental model might be a very legitimate framework that helps you better understand a complex phenomenon, but its explanatory power is not 100%. Due to the lack of cause-and-effect relations in many systems, there’s little possibility of things becoming theories. The chain would therefore look like this:

Although they don’t tell you what will happen, your intuition gets trained to an extent where you get the feeling of how it might go. Not precisely where the event will fall, but some sort of how the distribution of events might look like. This feature is ridiculously powerful and should not be overlooked.

Final Remark

I suspect a very useful output can come out of giving proper thought to how some ideas like these interplay with Jung, Freud, and other psychologists’ work. It’s not my intention to do exhaustive analyses in these articles, but I hope you get the grasp of why I claim this. Furthermore, I hope you find this useful for thinking purposes.

For each person, I’m only allowed to write a sentence. I structured it roughly chronologically for it to be a bit easier for myself. Obviously, there’s an absurd number of people whom I know little to nothing about.

-Pythagoras

Wisdom begins with silence.

-Africanus

Nobody is exempt from envy and betrayal; not even those who changed the course of history.

-Hannibal

If you don’t finish the job, you’re leaving things to chances.

-Julius Caesar

Maybe a bad solution is better than no solution?

-Augustus

Designing an empire requires broad thinking.

-Trajan

Strength and character can reunite scattered, but still connected, pieces.

-Marcus Aurelius

Don’t complain; life is brief and that’s okay.

-Constantine

Sometimes you have to do what you have to do.

-Leonardo Da Vinci

Deeply attentive observation can take you where no one has yet gone.

-Machiavelli

Only a wise prince can be well advised.

-The Medici Family

Cultivate culture and re-think how processes are carried out.

-Hernan Cortés

Burning your ships causes an unparalleled desire to win.

-Copernicus and Galileo

The truth above all.

-Thomas More

If you cannot think how perfect looks like, you won’t get there.

-Isaac Newton

If we are disciplined enough, Nature will teach us a great deal about the world.

-Edmond Halley

Helping a remarkable person reach their full potential can do much more for society than oneself could on their own.

-Benjamin Franklin

Industry and frugality will take you far.

-Adam Smith

Helping man understand a new part of the world can have a large impact on people’s welfare.

-Charles Darwin

Everyone else agreeing on something does not make the thing true.

-Oscar Wilde

The highest values can corrupt you the most easily

-Alberdi – Mitre – Sarmiento – Roca

A handful of great people can give shape to a prosperous country.

-Fyodor Dostoevsky

Not all questions need to be answered.

-Sigmund Freud

An outstanding insight does not necessarily have to lead to a theory.

-Carl Jung

The thing we know the least about is our own self.

-Aldous Huxley

Sedation and hedonism are not the right path.

-Osamu Dazai

Some people live truly hard lives.

-Winston Churchill

‘If you are going through hell, keep going.’

-George Orwell

Totalitarianism is a tangible potential reality and can lead to widespread insanity.

-Viktor Frankl

We are molded with seemingly inhuman resilience.

-Ray Bradbury

‘You don’t have to burn books in a world of nonreaders, non-knowers.’

-Richard Feynman

Immense pleasure and fun can be found in thinking.

-Robert Pirsig

Be careful while pursuing knowledge.

-Murray Gell-Mann and John Gribbin

Deep complexity can arise from only a handful of elements and a bit of time.

-Lee Kuan Yew

Occasionally, a truly able and well-intentioned person comes around; give as much power to them for as long as possible.

-Steve Jobs

‘Only those who are crazy enough to think they can change the world are the ones who do.’

-Charlie Munger

‘The best way to get what you want is to deserve what you want.’

-Warren Buffett

Compounding yields unbelievable results, but it takes time.

-Graham Hancock

There’s great merit in offering alternative versions to commonly held views.

-Jordan Peterson

In order to help others, begin with yourself.

-Elon Musk

Taking risks is necessary for achieving extraordinary things.

Final Remark

This was a much tougher exercise than I thought it would be. It reminded me how much I have yet to read; it’s a daunting amount. An immense number of incredibly talented and wise people were not included in this post. Hopefully, they’ll be so in a future one.

Earlier this year, I was thinking about the Chat GPT vs Google situation. I didn’t understand why OpenAI seemed to have won nor why did it peak at 300M MAUs. Why didn’t it completely replace Google?

I got an interesting idea from Darwin’s specialization of organs. Then I started noticing how a very similar thing occurred at the system-level with Adam Smith’s division of labor. Both helped me build bridges toward Christensen’s ideas and find a potential answer to this question. I think these set of ideas extend beyond this case and compose a very interesting framework.

The Specialization of Organs

Living beings are optimized for procreation. In doing so, nature makes them economize on effort. Maintaining composure and structure is a daunting task. The environment applies constant pressure for their dissolution. In consequence, combating this and extending organic beings’ lives consumes vast resources. Partly due to this, genetic codes don’t urge organic beings to perform unnecessary functions, so that energy and resources can be focused on survival and procreation.

“Natural selection is continually trying to economise every part of the organization.” Darwin

On a similar note, by keeping profitable variations, a clear tendency made itself apparent to Darwin. Natural Selection will cause organs to specialize, if proven to enhance an individual’s survivability prospects.

“For all physiologists admit that the specialization of organs inasmuch as in this state they perform their functions better, is an advantage of each being; and hence the accumulation of variations tending towards specialization is within the scope of natural selection.”

Spreading resources will tend to deliver worse results at the micro level. The obverse is not necessarily true, as per my understanding goes. An organic being whose structure is not optimal for its specific circumstances should succumb to competitors that are better prepared. These beings tend to present more variability than usual. Similar observations led Charles to notice that functions were most perfectly performed when organs were specialized in doing them. He further noticed that the higher in the scale of nature, the more specialized the being’s organization.

“Multiple parts are variable in number and in structure, perhaps arising from such parts not having been closely specialized for any particular function, so their modifications have not been closely checked by natural selection. It follows probably from this cause, that organic beings low in the scale are more variable than those standing higher in the scale, and which have their whole organization more specialized.”

Experiments point out that much better results are achieved if an organ performs only one function than if it resolves two or more. Were Nature to detect a higher degree of relevance in one of these functions and it will cause the organ to focus on doing only that one.

“No physiologist doubts that a stomach adapted to digest vegetable matter alone, or flesh alone, draws most nutriment from these substances”

I suspect it is based on these inferences that Darwin concludes that organic beings that stand low in the scale of nature possess more variable structures and organs. This entails that their bodies are not adapted for performing specific functions and remain somewhat diversified in nature. It reminds me of the quote that “the something of somewhere is mostly just the nothing of nowhere.” Maybe this phenomenon explains why their organs need to remain variable, for it is yet unclear to Nature which is the competitive advantage of these beings.

The Division of Labor

In The Wealth of Nations, Smith speaks about how remarkable a difference the division of labor did for society’s productivity. This implied fragmenting a complex operating process into smaller components. Smaller dimensions of the tasks generally embed increased simplicity. On aggregate, complexity might remain even; but at the individual level, it is astonishing how much can be removed.

Most systems where labor is divided categorically outperform those wherein single operators deal with the whole. Smith concluded this is explained by three factors: (i) the increase of dexterity in the workman; (ii) an avoidance of time lost by switching activities; (iii) the enhanced allowance for automation.

Making a task more granular helps delineate it to much further specificity. In consequence, it becomes easier to practice. Continuous focus on these types of tasks helps master them faster. Secondly, people think by association, and every time we become aware of some variable, infinite related images flood the mind. A useful metaphor is to think of people as users of different glasses, all of which are required for dealing with a certain thing. Switching tasks is metaphorically similar to repeatedly changing glasses, leading to a great time loss at the aggregate level. Lastly, better defining an activity, which is a byproduct of the reduced dimension, facilitates its automation. The difficulty in creating a machine for performing a task is directly proportional to the difficulty of the task itself.

To this, I might add, Smith speaks of man’s proclivity to spend the least effort possible on disliked tasks. In consequence, when someone finds himself in this situation, he’ll try to cleverly design an automated system to do the work. Many improvements have arisen this way. The following example stayed with me since I read Smith in March.

“In the first fire engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his play-fellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour”

Jobs Needed to be Done and the Fragmentation of Jobs

Clayton Christensen pointed out the fact that, in everyday life, people face problems. They encounter jobs they need to get done. To resolve them, we hire products and companies.

Individuals’ characteristics are the wrong unit of analysis. Correlation will always exist among some elements, but it isn’t those that cause the person to hire the product. It’s the problem they face and the related job they need to get done. A classic job might be physically getting from point A to B as fast as possible. Initially, we’d walk; then we’d hire horses; then cars; now planes. The job remains the same.

What I think occurs in some industries is that, at first, there might be only one company or product. Considering the product lacks a precise definition of the job it does, a broad scope of use cases may arise. In consequence, people with seemingly different jobs to be done turn to this product, since it offers a good approximate solution to the problem they have. The addressable market for the product, therefore, encompasses multiple different markets, all of which represent specific jobs needed to be done.

Nature found it wise to make organic beings’ organs tend towards specialization, as did industry owners. I suspect both premises would tend to predict a similar pattern in industries wherein the underlying characteristics are as mentioned. Invariably, by focusing on a more specific job, the agent will be able to provide a better service than the general player.

My sense is that such an event will only occur if the specific job that’s needed to be done exceeds, on aggregate, a certain threshold in addressable market. In addition to this, there needs to exist an appropriate distribution channel. The lack thereof would not allow for the improved solution to reach destiny, killing the startup in the process.

The catalyst that caused this waterfall of thoughts was Google and ChatGPT. Google Search has dominated internet search for two decades, and ChatGPT posited the first proper threat. However, it peaked at 200-300 million monthly active users (MAUs) in 16 months, whereas GSearch still has in excess of 3bn MAUs.

I think this is the reason why ChatGPT captured only a part of Google’s addressable market, but, in its current form, it’s not clear if it can take any more. I think Google Search did (and does) multiple jobs for people, and ChatGPT does only one or two, but it does them much better than its competitor. Under the hypothesis that ChatGPT already serves the 80-90% of people who need this job done, Google Search remains the best approximate solution to all of the other jobs.

Overshooting the customer in any dimension is what gives room for disruptive innovation. It is unclear to me what’s the specific job that ChatGPT does. My sense is that people that need to get this job done were previously overshot by the amount of information Google Search provided. This carries the necessity from customers to do proper selection of sources and then come out with a cross-checked and decently thought conclusion. ChatGPT removes these inconveniences, dramatically bringing down the effort and time needed to do the job.

Interdependence vs Modularity

Products are constructed with multiple components. Value chains are made of several steps. When an industry begins, a completely new solution for a job is created. For it portrays novelty, there will be no other company that produces any of the components, implying the new business has to do everything. Vertical integration, or an interdependent architecture, is required.

As industries evolve, some tend towards a modular architecture. This implies, in the most extreme example, defining all steps of the value chain, having companies focus on single ones, and for customers to get customized solutions. Interdependent architectures optimize for performance, while modular architectures for flexibility. Generally, when a product overshoots the customer in performance, the surplus of the latter can be sacrificed for customization and convenience.

The semiconductor industry is an example I find interesting in this regard. Initially, semiconductor companies had to do every part of the manufacturing process for the chip to function accordingly. As time went by, the process got fragmented to the point that we now have different monopolies/oligopolies in each part of the value chain. I suspect this may have been caused by society’s desire and necessity of keeping up with Moore’s law, which predicts that the number of transistors in a chip would double every two years. The complexity of each vertical, combined with the inefficiency bureaucracy brings, forced the industry into dividing labor. It seems as if it was the only way to meet demand on performance.

Natural Selection predicts that only profitable variations will be kept. I think this unequivocally applies to industries. Only if a modular configuration helps address customers’ needs, namely the measurement of performance they value, is that the industry will tend towards modularity.

“Under very simple conditions of life a high organization would be of no service”

Similarly, an organ that previously performed two functions will start performing only one if doing so increases the being’s chances of survival. For getting to that point, refinements had to be done to the organ across multiple generations. The moment in which manufacturing processes start getting fragmented is when each part of it has a decently sized addressable market on its own. I’d be inclined to believe that steps of the process would be separated one by one from the interdependent system; for if a step crosses the threshold sooner, it shall be separated earlier.

Final Remark

This write-up is largely based on something I wrote several months ago, with some slight modifications. After going over it again, I still sense these set of ideas are incredibly sound to explain different types of phenomena.

My intention here is to go over some of Newton’s ideas and my understanding thereof. With many of Darwin’s, I saw it much more clearly. With Newton, I’m partly guessing, and I’m dubious whether I’m getting the grasp of his texts. But perhaps some practical utility can be extracted from this.

Newtonian Physics

In essence, Newton created a System of the World. With observation, experimentation, and thinking, he came up with the fundamental laws underlying the motion of major objects. Thereupon, Isaac complemented these with his idea of gravity, which, as per a hypothesis, he realized it extends to celestial bodies, granting it the name of universal gravitation. Specifically, the pieces of the puzzle are:

• Law 1: Inertia, which posits that a body will remain in its state of rest or the rectilinear motion they’re in, unless a force is impressed upon it.

• Law 2: The change in a body’s motion is proportional to the force impressed upon it. The force will possess a linear given direction and will affect the body’s motion in that same direction.

• Law 3: To every action there is an equally opposed reaction.

• Gravity: The force by which bodies attract one another. It’s proportional to both of their masses and inversely proportional to the square of the distance between them.

  That is, F = m1 * m2 / distance^2. (The only math I understand)

With these simple fundamental inputs and their predictive behavior, Newton builds the system of the world. What I found curious is the diversity of natural phenomena he was able to explain with these elements. This triggers a more profound understanding of Buffett’s approach, or at least what he claims composes it.

At the moment, I don’t intend to go much farther and presume I know things I yet don’t. Nonetheless, my sense is that the corollaries and propositions Newton wrote follow some form of compounding of these forces. It’s very peculiar. This is an example that I think will help illustrate the idea.

Planetary Orbits

Astronomers had longly been dazzled by the behavior of celestial bodies, especially about planetary orbits. After Copernicus and Galileo, it became rather well known that planets orbit around the sun. However, what trajectory they followed was an unbelievably obscure question. Many suspected they drew circular or elliptical orbits, but no one could prove it. When the problem presented itself to Newton, he solved it with the combination of two of his fundamental ideas. Take a look at this figure for a second and follow along.

The planet starts at A. Inertia states that it will remain in its rectilinear motion, in this case going from A to B. But gravity states that bodies attract one another, the sun being the largest attractor due to its huge mass. So when the planet gets to B, the sun pulls it towards S, but it’s not such big a force as to change the planetary motion altogether. So it tilts it a bit and the planet continues moving straight, from B to C; then again the sun pulls it. And so on.

Final Remark

To me, this is a big deal. The explanatory power that can be drawn from the compounded effect of simple ideas is massive. My sense is that many more like this lie in the field of physics, some of which I’ll try to humbly bring to you. An expanded version of this, more comprehensive and including other disciplines, is what I wanted to base my book on. After the mental struggle, I suspect it will be more of a 10-year project than a 1-2 year one.

It’s beyond saying that this is my understanding of what Newton posits. I’ve no idea if it’s right or not, but logic and intuition tell me the concepts are at least roughly right. And that’s okay for me now.

Simplicity and complexity are, I believe, mostly spoken about from a non-intellectual standpoint. Addressing the implications of both terms is vastly difficult and the reason why we avoid it altogether. To combat this, I found Murray’s ideas provide a good repertoire of tools we can leverage for better understanding both concepts.

Complexity

All systems could be illustrated as compositions of variables. The number of connections within it posits a good proxy for first inferring the complexity underlying the system. Exchanges between nods imply that effects occurring at the microlevel can profoundly alter the whole. If nods learn from past behavior and are in continuous contact with one another, estimating the impact of an input on total output becomes much more difficult.

Figure 3 exhibits a composition of 8 variables, or dots, with increasing levels of communication between them. System A shows no connections whatsoever, whereas all dots in system F have the maximum number of connections.

At a first glance, one tends to think that complexity increases proportionally to the connections per dot. It appears as if A is the simplest of all figures, while F the most complex. But, “is that sensible?”

After more careful analysis, one arrives at the conclusion that, interestingly, both A and F are the simplest. Having no communication at all between variables resembles all variables being connected, at the system level. However, it is very different when there are connections, but these are limited.

Gell-Man believes the most complex figures in the image are C and D. I suspect this realization is reached after trying to understand these compositions of variables. Without omniscient knowledge, one ignores the connections within a system. An analytical struggle follows in two respects. Dots must first be precisely mapped, and a mechanism must be developed to visualize where connections lie. Noticing there are either zero or all connections possible immensely facilitates the analysis. To the contrary, knowing there could be connections between any two dots in a system is daunting. Figuring out which those are is highly complex. And, furthermore, it entails selective connections. Understanding their nature is needed as well.

Algorithmic Information Content

When computers were created, they provided mankind with a new ground for thought. Novel terms and ideas arose. Machines operate in an exquisite fashion. And, by trying to get them to perform a certain task, the mechanisms on which computers function need to be deeply understood.

Computers have historically operated utilizing a binary system of inputs, namely 1s and 0s. When processes need to be carried forward, the strings of data can get indefinitely lengthy. It is therefore crucial to compress the string of data as much as possible.

Compression depends upon the regularity that’s present in a string of bits. If the string is “1111111111,” It can be written as 10 1s. If it is “100100100100,” it can be written as 4 100s. The longer and less obvious the regularity, the more difficult it is to come up with a valid algorithm for compressing the message. Algorithmic Information Content (AIC) refers to the shortest algorithm that can be created for compressing a string of data; it captures the shortest possible description. Finally, a completely irregular string of data presents the highest AIC; there are no patterns and therefore no possible compression.

Complexity, Randomness, and Regularity

Up to a certain point, effective complexity increases as a string of data presents more irregularities. And it peaks when a system is right in between extreme order and disorder. Just like a string of data such as “1111111” is incredibly simple, a completely random string, representing pure disorder, is simple as well. There is no complexity underlying randomness.

Although complexity may be attributed to something difficult to understand, at a deeper level, complexity gives me a sense of organized intelligence. Patterns must be present in any complex system. Their existence reveals either a developed mechanism to combat a certain phenomenon or a standardized method for responding to something that repeats itself.  

Murray pointed out the very peculiar fact that intelligent beings can only evolve in an ecosystem that presents high degrees of irregularity, but not complete. It must have some patterns of regularity so that intelligence can be effectively practiced. Intelligent creatures familiarize themselves with the environment and learn from it, adapting their behavior. In order for this to happen, the context must provide them with opportunities for doing so. A completely regular ecosystem may cause intelligence to be capped as soon as the system is figured out, which occurs promptly. To the contrary, for beings cannot develop any sound practice where randomness abounds, no intelligence can evolve around complete irregularity.

Depth

The second layer upon which complexity can be analyzed is the depth underlying a system. Systems can be fully described utilizing words or strings of bits. Algorithmic complexity refers to how laborious it is to compress the information; meaning how difficult it is to come up with a valid algorithm. Once it is created, we can think of the reverse operation. Depth may be understood as how laborious it is to go from the compressed program to the full-blown description of the system and its regularities.

A great example is Goldbach’s conjecture. In 1742, during the course of an epistolary exchange with a friend, Goldbach proposed that “every even natural number greater than 2 is the sum of two prime numbers.” Although he claims not to have been able to prove it, he was certain about his theorem. Almost 300 years later, the conjecture has not been proven true nor false. It remains unanswered and, seemingly, undecidable.

Goldbach’s conjecture posits a problem whose answer could be searched for by a short program. The program would look for the smallest number g that satisfies both requirements. Although the program itself could be very brief, a computer working on these instructions would take an indefinitely long time before finding g. Therefore, despite g lacking effective complexity and having low AIC, it has extraordinary depth.

Figure 9 roughly depicts the relation between depth and AIC. If you make a computer execute a program that’s completely regular, like “PRINT one trillion zeroes,” the machine does not have to do much thinking, although printing out the whole string might take time. Where order is at its maximum, the AIC is low, and so is depth. Similarly, if you make the machine print a completely random string, which, by definition, has maximum AIC, the computer doesn’t have to do much thinking either. By this means, one could argue that depth may be at its largest when in between order and disorder.

Note: I’m still dazzled by Goldbach’s conjecture. Seems to go against the chart, but I used it because it very well captures the concept of depth.

Cripticity and Literature

An interesting concept to further think this through is provided by theoretical scientists’ work. Their job roughly matches that of the computer as aforementioned. Theorists are in charge of identifying regularities in systems and coming up with hypotheses, potentially capable of explaining observed phenomena. Crypticity accounts for the opposite of depth. It is a rough measure of how difficult it is the theorists’ job with a certain system.

There’s a famous thought experiment that provides a common ground for many modern critiques. Hypothetically, if we put a set of chimpanzees in front of a typewriter and they are forced to push buttons, obviously randomly, they will eventually type out one of Shakespeare plays, which may hold the highest complexity within literature.

Notwithstanding this, Gell-Man asks us to think about what the probability of such a thing occurring is and how long it would take. Literature offers a very distinctive type of depth. How words relate to one another, composing sentences of the widest form, makes there being incalculable depth within texts. In some sense, thinking about a scale of depth for literature work, it should take more time for chimpanzees to end up writing deeper books. Figure 8 illustrates this example, with probability of the event happening equaling one.

Organic beings exhibit a very similar level of depth. For natural selection has been acting on us all for such a long period of time, the depth embedded in every organism is massive. Recalling the idea of going from the brief program, or end result, to the full description of the system, we’d see how indefinitely long it would be to do this with species.

Final Remarks

Very hard book and really tough concepts to contend with. I remain having not grasped them fully, but hope to have expressed them decently. My sense is that these words/tools/ideas are very useful for inferring a system’s complexity and how to deal with it.

When I started specifically reading about these topics 3 years ago, everything was mixed up and I was dangerously ignorant. Although my background is in finance, I deeply felt as an outsider in the investment field. I knew of no one who practiced it profitably, or even intelligently. There was no one I could turn to in order to know where to look, which books to read. I’m not sure I was even aware of Warren Buffett’s existence, not to mention other, less-known, people.

The only way forward, I thought, was brute force. I simply read everything I found related to investing, invariably going through disastrous content. The material out of which I could extract valuable insights was almost negligible. The average value per page is shockingly low and most content is repetition. In many cases, worse than that.

My intention here is to provide you with the depth I suspect is required for soundly approaching the discipline. Portfolio management as a craft remains obscure and, even though these reads will help you, none addresses its core essence. Lastly, of business analysis I suspect the ground rules can be taught, but no more than that. I suspect you’ll get those from the reads below.

I think everyone, at whichever stage of the journey, will find one of these pieces valuable. Some are books, whereas others are letters or essays. This path is mostly designed for people that don’t know where to start but know something about the matter. These recommendations should help you efficiently go from a bit familiarized to greatly aware of the dynamics behind investing.

An Inquiry into the Nature and Causes of the Wealth of Nations

Economics is the big picture. I suspect that a lack of understanding thereof impedes performing deep business analyses. How variables relate to one another and how money flows within economies is unbelievably important. These compose the fundamental societal pieces upon which the more sophisticated financial system and instruments are built. Adam Smith helps you become aware of the underlying reality below this whole world of financial assets.

Note: This does not imply one can become capable of predicting variables’ behavior and acting thereupon.

Financial Intelligence

Accounting is the language in which companies’ performance is written. It’s the very best first place to seek understanding of the true value of a business, which by no means is sufficient. Approaching accounting is very confusing because of all the field-specific jargon and a very peculiar aspect: most books and teachers forget to underpin the fact that most accounting is subjective. Financial Intelligence patches this and several more holes which are often missed by other books. It provides uncompared comprehensiveness with incredibly accessible explanations. Lastly and very importantly, the authors frequently remind of the limitations of this discipline.

The Intelligent Investor

This book contains the most complete overview of the investing profession. It walks you through most important concepts and strategies one can follow, alongside relevant historical and statistical data. But its most important aspect is that it teaches the attitude an intelligent investor must adopt. Psychology and very powerful concepts are explained in great detail. One begins to understand how crucial of a role psychology plays in the financial markets and how to exploit the flaws this carries.

The Innovator’s Dilemma

Getting acquainted with the destructive nature of capitalism is crucial if we are making bets on how things may evolve. Clayton Christensen lays down a great analysis of why it’s hard to sustain success as a corporation. This book will provide you with deep insights as to how industries evolve, how companies displace their competition and why winners keep winning, until they don’t. Considering these factors when investing is crucial, for businesses’ future depends on many of the things Clayton speaks about.

The Trouble with Earnings and P/E Multiples

Once you start getting into investing, you’ll repeatedly see people utilizing price multiples. The problem is that people rarely speak about how fundamentally flawed this method is for valuing a business. In this article, Mauboussin dives into multiples’ intricacies and what the disadvantages are in using them.

Note: A business is worth the cash flows it will produce discounted at an appropriate rate. Discounted cash flow models, DCFs, are the other most utilized method to value companies. I suspect they are overly used and I haven’t found a good read about them (nor tried to). I believe understanding the concept is what matters and you’ll get this from the recommended reads.

Poor Charlie’s Almanack

A book full of incredibly sound ideas. Charlie helps you understand how interconnected all disciplines are as well as getting a better grasp of human nature. Being remorselessly rational is highly profitable in a world full of irrationality. The book also includes an outstanding amount of analogies for better understanding the investment discipline; and gathers numerous lessons from successful businessmen of the past as well as from great physicists, statisticians, biologists, and psychologists.

Note: There is a document called “Charlie Munger in Conversation with Todd Combs.” I highly suggest that too.

Buffett Letters: January 1965 and 1983

The first of both letters was written while Buffett run his partnership, prior to being chairman of Berkshire. Warren explains in great detail his method of operation and how he thought about things. There’s a huge emphasis, partly the reason why I chose it, in the act of thinking itself.  On the other hand, Warren’s 1983 letter gives a perfect account of how his Berkshire letters look like. Additionally, it includes two fantastic parts: (i) It starts with 13 bullet points on his management philosophy; (ii) at the end shares a very insightful lesson on accounting. Although the latter does not apply any more due to an update to accounting rules, it wonderfully enhances one’s thinking of the utility thereof.

Note: I’ve been going through them all and currently am at the 1995’s letter, for which my selection does not consider the subsequent 30 years. (Disaster on my part).

Investing in the Unknown and Unknowable

This essay draws the line of what theoretical finance has faced over the decades. Specifically, the two elements Richard dives into are risk and uncertainty, to which finance has posed a “solution.” However, Zeckhauser posits that finance faces a wall when thinking about unknown and unknowable events. These are widespread and inevitable and offer very profitable opportunities. Importantly, a large part of this essay revolves around the thesis of sidecar investing, where an investor pairs himself with an extraordinary individual and reaps the rewards.

Final Remarks

I think these reads will provide you with an exquisite sense of the pitfalls that exist in the investing world, which are certainly numerous, and how to avoid them. My estimation is that you can go through all of these in 2 months by reading two hours daily. It only takes that. Personally, I suspect the return on time employed is massive.

Yesterday I encountered a very pertinent statement in one of my current reads, Meditations. To a large extent, the essence of intelligent investing was greatly captured by Marcus Aurelius:

“Within ten days thou wilt seem a god to those to whom thou art now a beast and an ape, if thou wilt return to thy principles and the worship of reason.”

If you’d like to chat or anything, you can always find me at: giulianomana@0to1stockmarket.com