In this series, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing.
Why Mohnish Pabrai Likes GM, Fiat, and Southwest Air – Barron’s, December 9, 2016. Mohnish Pabrai’s Pabrai Funds has returned 14.2 percent annually, after fees, since its inception in July 1999 through the end of 2015 compared to 4.3 percent annually for the Standard & Poor’s 500. In this interview, Mr. Pabrai discusses his background and investing philosophy along with his investment thesis for General Motors, Fiat, and Southwest Airlines. Mr. Pabrai is also the author of The Dhandho Investor: The Low-Risk Value Method to High Returns and recently started a new blog.
Why would you want to buy a self-driving car? – Financial Times, December 7, 2016. John Gapper believes that road transportation is likely to become a utility purchased by volume with a model similar to electricity and water. Once automobiles are truly self-driving, there will be little reason to actually own a vehicle since the same freedom of travel will be available on demand. For many people, the cost of transportation will be far lower than owning a personal vehicle. Our recent article on Elon Musk’s biography is worth reading for those interested in autonomous vehicles. This is an interesting counterpoint to Mr. Pabrai’s bullish outlook on automobile sales, although it is likely that any move toward less personal ownership of vehicles is many years away.
Overbought!!? – The Brooklyn Investor, December 8, 2016. The Brooklyn Investor looks at total returns for the Standard & Poor’s 500 over the past fifteen years along with some other market statistics. While noting that we can enter a bear market at any time, he does not see any reason to believe in an imminent threat of a “1929/1999/Nikkei 1989-like top” in the stock market. He has also set up a website as a companion for the blog which offers 13-F data along with some interesting charts on Berkshire Hathaway.
The Story of How McDonald’s First Got Its Start – Smithsonian Magazine, November 1, 2016. This is a excerpt from Ray & Joan, a recently published book by Lisa Napoli that covers the early years of McDonald’s and how Ray Kroc transformed the company. The excerpt covers the early activities of the McDonald brothers and ends right as Ray Kroc first came on the scene. This looks like a very worthwhile book for readers interested in the restaurant industry.
Does Decision-Making Matter? – The New York Times, November 25, 2016. David Brooks provides his thoughts on The Undoing Project by Michael Lewis, a new book covering the fascinating story of how Daniel Kahneman and Amos Tversky revolutionized how we think about human decision making. See also William Easterly’s review in The Wall Street Journal published on December 5. (Note: The Rational Walk will publish a review of The Undoing Project in the near future. The book is excellent and well worth reading.)
Business Blunder: Pancake Flipper Al Lapin Jr. & International Industries (IHOP) – Intelligent Fanatics Project, December 1, 2016. We recently reviewed Intelligent Fanatics Project, a book that presents case studies covering eight business success stories. In this article, Sean Iddings looks at the opposite scenario: a “fanatic” who appeared to be on the path to similar success but overreached and ended up failing to realize the potential of the brand he created.
Why Moats are Essential for Profitability (Restaurant Edition) – 25iq, November 18, 2016. Tren Griffin looks at the economics of the restaurant industry and the importance of a moat in achieving profitability. The chance of success in this business is quite low given the huge number of restaurants in the United States (624,301 as of the Spring of 2016) and the low margins resulting from vigorous competition. The kind of profitability posted by a company like Chipotle Mexican Grill until the E. coli crisis hurt results is the exception rather than the rule in this industry.
Efficiency is the Highest Form of Beauty – Mr. Money Mustache, November 24, 2016. There is much inefficiency in the way the typical consumer goes about spending money, and beauty in pursuing a more efficient personal consumption model: “Spending is a skill: a Mustachian can buy the same lifestyle with $25,000 that might cost a Consumer Sucka $100,000 per year. If you can cultivate this skill, the Art of the 75% reduction, at any income level, you can go from a lifetime of being in debt, to being rich enough to retire in less than 10 years.”
What’s Speculating? What’s Investing? Some of the Wisest Investors Weigh In – The Wall Street Journal, December 9, 2016. Jason Zweig examines the elusive nature of making hard and fast distinctions between investing and speculating. The quote from Fred Schwed Jr, author of Where are the Customers’ Yachts?, seems to resonate: “Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investing is an effort, which should be successful, to prevent a lot of money from becoming a little.”
Warren Buffett Says Donald Trump Won’t Derail the Economy – Fortune, December 5, 2016. In this interview, Warren Buffett reflects on the 2016 election. Mr. Buffett supported Hillary Clinton but believes that Donald Trump’s victory will not derail the economy and that the U.S. will be wealthier after Mr. Trump’s presidency. He also has some interesting points to make regarding free trade.