netnet
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I am getting ever more convinced that in the long run no IQ level can compensate for a lack of rationality and clear thinking.
Too true!
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I like the book. For those into Munger, there is not anything that is new, but it is a great introduction to Munger for those not in the cult. ;)
I do like this quote though:
It is clear that Munger loves to learn. He actually has fun when he is learning, and that makes the worldly wisdom investing process enjoyable for him. This is important because many people do not find investing enjoyable, especially when compared to gambling, which science has shown can generate pleasure via chemicals (e.g., dopamine) even though it is an activity with a negative net present value. What Munger has done is created a system—worldly wisdom—that allows him to generate the same chemical rewards in an activity that has a positive net present value. When you learn something new, your brain gives itself a chemical reward, which motivates you to do the work necessary to be a successful investor.As Munger said, he is a collector of mental models and inanities to avoid. Collectors have well grooved dopamine circuits.
Incentivize your learning!!!
h/t to Shane @farnamstreetblog
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Small - Food Trucks. No taxes, Little overhead, Free Cash flow generative
Food trucks, I think not. Take a marginal business, restaurants, and make it mobile? You can't even really sell it if you are successful. To paraphrase Munger, avoiding taxes does not in general make a business good. Now if you could franchise them well... I was just talking to a food truck owner this weekend, boy oh boy he was not a happy man.
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There are a TON of businesses that make an owner, or an owner plus a few partners a LOT of money, but are locally restricted and not scalable.
Like what.... (not to be that guy ;), but the purpose of the thread was what are some of those business models.)
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Here is a thread that should help a little about thinking differently.
The best advice I can give is step out of your comfort zone to experience things your not use to. Ex. if your not into comic books go to Comicon etc. It will just start your creative juices and you will look at things in a way that others do not see.
That is a great thread. I missed it the first time around. Lot's of good ideas. I was looking for something for my two kids, whom I was going to grubstake.
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I wanted to kick off a discussion of business models, what are some of the best ones? I think looking at this as an entrepreneur and an investor.
1) What are some of the best small business models, really the best businesses and
2) What are some of the best larger businesses (models).
Please explain the model not just say that BRK has a great business model.
There are of course the business that are great if you happen to wind up being one or (sometimes) two in the market.
My current pick for both a large and small business model:
* operating or buying mission critical software companies--see Constellation on this board. The beauty of this business is that you basically 'win' on the purchase. There are some limited synergies (in Constellation's case)and generally you can ramp back on the sales and R&D expenses. The businesses are stable and your customers can't live without you.
Otherwise:
* small business, a geographically concentrated number of laundromats.
* large business, Google, of course!
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Yet in football the standards still apply. Sure it's complex, but if you have a team that can block, tackle non-complex simple runs are very effective. You can have the most complex offense in the league, but it doesn't mean squat if the basics aren't in order.
Graham's methods still apply, I and many others use them successfully in our portfolios. Here's the issue, simple investments that work are not exciting. How exciting is an average business at 75% of book value? Not exciting, but buying at 75% and selling at 150% works, and it works over and over and over.
Here's an example, Titanium Holdings. They own cash and a cleaning business. They're selling for about 30% of net cash, they're profitable. It's boring, simple, almost no research is needed. You don't need to know about the Texas cleaning industry. I've taken a ride on this stock from 30% of BV to 60% before. There are a few rides left, no industry expertise or almost no intelligence needed to double your money. But it's small and boring, and 99% of the posters on here will find an excuse to not invest, maybe there's no catalyst, or no moat, or management owns too much or something else. There are excuses for any stock.
I know that I've found buying things on sale to readily ascertainable values (either assets or earnings) and waiting for them to revalue has been very profitable for me. This is basic value investing, and it works. It's not exciting, I'll never be invited to Columbia to speak because it's too simplistic. But it's the basic blocking and tackling of the investing world. I'd rather perfect the basics and spend my time on other pursuits rather than trying to master complexity.
+1
So to paraphrase, history doesn't repeat, but it does rhyme....You can't just run a Geiger counter over the market as you could from '30 to '55, but Ben Graham never goes out of style.
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While on vacation in Massachusetts I enjoyed
Jack's Abbey Jabby Brau Lager
Portico Chroma Amber Ale
Smutty Nose Brown Ale
Loved them all. (I do not like hop forward beers.)
Back home I'm drinking Duvet, Goose Island Sofie (and Matilda), Sierra Nevada Kolsch style, Blonde Ale from Leffe abbey (a Belgian ale).
For the holiday, I will be making watermelon, beer (only time I tolerate ipa's is in this drink) with a dash of limoncello, vodka and garnished with cucumber slices!
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Interesting idea. I wonder how they make money on the site.
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Wow, what have I not learn from Charlie and Warren, okay here are somethings
- The necessity of continuous learning
- Rules number one and two of investing, 1)don't lose money and 2)always remember rule #1
- The punch card method
- Concentration in your best ideas
- Shoot fish in a drained barrel
- Have and build a circle of competence
- When learning an industry, be fanatical, use the Phil Fisher method, plus read everything,
- The necessity of continuous learning
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Mindware, Tools for Smart Thinking
This is among the absolute best books on how to think. It is brilliant, simply brilliant. Nisbett is a psychology professor at U. Michigan. (Not that it matters, but he is one of the most distinguished psychologists in the world.)
Basically, if you want to think better buy this book. I am reminded of what Munger said of another book,(paraphrase) if you can't learn from this, too bad for you, give it to someone who can.
Nisbett gives the reader tools to use and concrete examples how to employ these tools from psychology to economics to statistics to enrich your thinking and your life.
Nisbett with a razor wit and mind informs that working statisticians, often don't apply what they know to their own lives. (Kind of scary actually.)
One caveat, he totally blunders when talking about buying stock, but other than that, this is the work of genius, and will make you a better thinker.
Enjoy
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I have done this some over the years in three different states with wildly different laws. Frankly, the money in stocks is way easier. So it is a headache, to directly answer your question.
Regarding caveats, I mostly concur with Berkshire and Oddball. It is not easy money. But sometimes you do wind up with property.
- The biggest returns are in the big deals
- You HAVE to do your DUE DILIGENCE
(That is on the property and on the state and county laws.)
What I would recommend is that you observe and maybe do some deals and when there is a massive disruption either locally (oil patch?) or nationally like 2008, etc. then pounce. The lien sales are really popular when real estate in hot and the returns are just bid away. Not to be a grave dancer, but I know some people who also do this after disasters, fires, floods,etc. I never had the stomach for that.
A story on due diligence. Crappy little one room apartment in Chinatown, (I don't think it even had bathroom )it had been in arrears for years and years. One year someone actually paid more on the lien than the property was worth given the time in default and interest charges; price of the lien was maybe 2 or 3 times value!
Sometimes there used to be price fixing amongst the locals, i.e. mutual non-bidding, but that was mostly in the old days when this was not so popular.
(Notice to the lurkers here: You are not, repeat not going to get a beach front property in the Hamptons or in Santa Barbara. If you do get a property, more than likely it will be a sh&t hole in a marginal neighborhood. (but if you get enough of them, you could make a down payment for the Hamptons!) 8)
- The biggest returns are in the big deals
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What is your favorite insider buying tracking web site?
Dataroma
Gurufocus
Insider-monitor
(I confess to doing it "by hand", which in today's world is a bit dense.)
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Well the Washington Post was a great business great back in the day. The Rales brothers had started Danaher; that turned out pretty well I would say.
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There are many threads on the same topic, please do a search.
such as here: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/great-investor-letters/msg228471/#msg228471
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I'll join!!
on Skype: nr.henderson
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What AR/ investment letters do you read?
(other than BRK, AMZ, Sequoia, Baupost)
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CoBF is a great community indeed.
Having a mastermind group is good. This kind of group is great. It is a virtuous circle, where each person is making him or herself better along with helping the others get better.
Putting a group together is another issue tho...
FYI, there are a few business that basically create and maintain mastermind groups. Vistage is probably the biggest and most well know. (but, it is not that well know, really) It is very expensive, however. I was in a Vistage group; it was a good experience.
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...Munger might have been implying the longevity.
I think you are asking bad question though. If you manage to find next Teledyne and invest into it, you'll become very rich. There is no need to find the next BRK even if it would make you super rich. 8) Especially, since it's quite likely that there are Teledynes around, but quite possibly there won't be another BRK (as Munger has implied couple times). ;)
Munger may have been implying longevity, but I think not.
But as to your second point. You misread my question. Not how you find the next [fill in the blank] although that would be glorious, rather how to be a better investor, i.e. what did Buffett do for that extra 10 to 15% that enabled him to outclass Singleton. Once you are rational, apply yourself, have a circle of competence, etc. what else to do? Perhaps Buffett was/is more focused on this than Singleton was. Thus was willing to go through every publicly traded stock from A to Z, repeatedly.
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At the Daily Journal meeting, Munger said (quote below) that Henry Singleton was smarter than Warren Buffett. Singleton was very rational, a truly excellent businessman, (one of the best ever) yet Warren was a way better investor.
My question is for us mere mortals, what lessons do we draw from this? Singleton was a genius, as rational as a human can be, versed in the capital markets, unclouded by "conventional wisdom" yet Buffett really out paced him.
Once we quell our emotions, gain a circle of competence and behave rationally (admittedly 85% to 95% of the deal) how do you get to that last bit that allows Buffett to lap Singleton as if Singleton were Aunt Minnie? Munger hints that the question is important, but did not answer it!
...[singleton] was a totally rational human being in things like finance. What I found interesting about Henry Singleton, which has interesting educational implications, is that in watching both Henry and Warren invest and operate at the same time, we had two great windows of opportunity to examine human nature.Henry was very rational. He was quite similar to Berkshire in some ways. Henry never issued a stock option. He had certain commonalities with Warren that were just logical outcomes.
What was interesting to me was how much smarter Warren was at investing money than Henry. Henry was born a lot smarter, but Warren had thought about investments a lot longer. Warren just ran rings around Henry as an investor even though Henry was a genius, and Warren was a mere almost-genius.
(Minor side note, Munger is, of course, going to think more favorably of his business partner of over 50 years and thus is talking his own book; additionally, he and Buffett disagreed with some of Singleton's transactions, but still, Buffett is the better investor. )
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Excellent question.
Nevertheless, the most important process is the winnowing of ideas, how and why you choose out of the companies in your 'funnel'.
I think that idea generation is the weakest part of my process, but so far I am comfortable with that. What do I do?
Screening and reading value blogs, WSJ, Fortune, Forbes, Valueline (cover to cover) etc.
Now after being on Twitter for years, I have started to follow various investors, but the amount of noise there is overwhelming.
I also maintain a list of companies that I want to buy but the current prices are too high.
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Very impressive and focused woman!!
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Do any of you have a book you'd recommend that synthesizes the history of coding languages? At this point in my life, I'm more interested in learning the history of the languages than trying to code myself.
Do you want a general CS history? Seminal ideas from CS or do you really want a history of programming languages.
For a history of CS:
Ada's Algorithm
Seminal ideas from CS:
The Ingenious Ideas that drive today's Computers
CS from a societal perspective
Program or be Progammed and
Blown to Bits
Code the hidden language that Yadayada recommended is a good book.
If you want to go beyond this and get really profound sense of what is going on under the hood in a computer look at Nand to Tetris. There is a website (separate and complete) here http://nand2tetris.org/OR a MOOC course. This is really great, you build a virtual computer from first principles, i.e. from the logic gate to running a Tetris game: https://class.coursera.org/nand2tetris1-001
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Does anyone know where I could get a complete video set of the course Joel Greenblatt has taught (at Columbia I believe) I have seen two lectures from one of courses but not the whole semester.
1.2x P/BV entry point
in Berkshire Hathaway
Posted
Not to pick at nits, but ...For a company, in this case the BNSF sub, that does not own tradable assets as a meaningful part of its book, i.e. it's not a finance company or does not own substantial financial assets, saying marked to market book value really has no meaning. The point of book value is a more stable estimate of value.
Now you could adjust book value with estimates of replacement costs, but that is not what is being discussed. No one is suggesting that the value of the railcars, tracks, etc has gone down. Instead of book, you are comparing BNSF to its publicly traded peers, which of course is fine, BUT it is NOT book value, by any stretch.
(Jeez, I sound like a seriously anal accounting prof at a community college, with apologies to any such accounting profs out there.)