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We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 01 November 2020:

1. The Fine Line Between Persistence and Insanity in the Markets – Ben Carlson

So people’s ears perked up when Einhorn said this week in a letter to his investors, “we are now in the midst of an enormous tech bubble.”

The problem with this statement is Einhorn has been saying the same thing for more than 6 years now. This is from a CNBC story in April of 2014:

“Now there is a clear consensus that we are witnessing our second tech bubble in 15 years,” Greenlight Capital said in an investor letter Tuesday. “What is uncertain is how much further the bubble can expand, and what might pop it.”

The firm said there were several indications of the over-exuberance, including the rejection of conventional valuation methods; short sellers forced to cover their positions because of losses; and “huge” first-day stock appreciations after their initial public offerings.

“The current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm,” the letter said. The firm said it was shorting a group of undisclosed “high-flying momentum stocks.”…

…Am I being disciplined in my long-term approach or blind to the fact that the world has changed is the single most difficult question to answer as an investor because no one is right all the time. The truth is the answer to this question is always unknown.

Sometimes you have to look like an idiot for a while before your investment thesis pans out. On the other hand, there’s the old saying that insanity is doing the same thing over and over again but expecting a different result.

What if continuously betting against tech stocks in a big way proves to be the definition of insanity? These stocks would have to see a spectacular crash to fall back to levels last seen in 2016 or 2014. Stranger things have happened, I guess, but I wonder what would cause Einhorn to change his mind.

The problem with bubble-spotting is no matter what happens you assume you’re right. If prices fall then you nailed it and if prices rise it simply makes you think the bubble is still inflating. I don’t know if this is a bubble or not but the answer will likely look obvious with the benefit of hindsight either way.

2. Lots of Overnight Tragedies, No Overnight Miracles – Morgan Housel

Dwight Eisenhower ate a hamburger for dinner on September 24th, 1955. Later that evening he told his wife the onions gave him heartburn. Then he began to panic. The president had a massive heart attack. It easily could have killed him. If it had, Eisenhower would have joined more than 700,000 Americans who died of heart disease that year.

What’s happened since has been extraordinary. But few paid attention.

The age-adjusted death rate per capita from heart disease has declined more than 70% since the 1950s, according to the National Institute of Health.

So many Americans die of heart disease that cutting the fatality rate by 70% leads to a number of lives saved that is hard to comprehend.

Had the rate had not declined over the last 65 years – if we hadn’t become better at treating heart disease and the mortality rate plateaued since the 1950s – 25 million more Americans would have died from heart disease over the last 65 years than actually did.

25 million!

Even in a single year the improvement is incredible: more than half a million fewer Americans now die of heart disease each year than would have if we hadn’t made any improvements since the 1950s. Picture the population of Atlanta saved every year. Or a full football stadium saved every month

How is this not a bigger story?

Why are we not shouting in the streets about how incredible this is and building statues for cardiologists?

I’ll tell you why: because the improvement happened too slowly for anyone to notice.

3. A Columnist Makes Sense of Wall Street Like None Other (See Footnote) – Emily Flitter

Each weekday, Mr. Levine, 42, wakes up at 5 in the morning. He looks at what’s going on in the markets, scrolls through emails from readers and plugs into the chatter of early-to-work traders. Then he starts to write. Roughly 5,000 words later on a long-winded day, he files Money Stuff to his editor, and it’s sent to subscribers around noon. (His column is currently on a parental leave hiatus, and will return this winter.)

Mr. Levine’s favorite subjects include insider trading statutes, bond-market liquidity and the ubiquity of securities fraud, but his columns are never boring. They may be the only entertaining words a financial markets professional reads all day.

Often, a significant chunk of the newsletter is devoted to a legal battle between sophisticated counterparties, or a complex financial product. Mr. Levine deconstructs the topics in a way that is less like a conventional business column and more like he is providing an introductory course on the subject.

If Mr. Levine’s column requires the use of a technical term, it is typically accompanied by not just a definition but a full-throated explanation, with practical examples, of how it works. There are footnotes — lots of footnotes. The tone, though, is anything but pedantic. Mr. Levine writes about Wall Street in a way that makes its denizens feel as if he is writing for them. Yet he gives the same impression of personalization to readers who know little about finance. He once took a term that appeared in a lawsuit — a “cash-settled forward purchase agreement for Citigroup shares with downside protection in the form of a put option at the same price as the forward” — and gave it the acronym CSFPAFCSWDPITFOAPOATSPATF. He makes readers feel in on the savage joke that is late capitalism.

4. Look Who’s Really Chasing Hot Stocks Like Zoom – Jason Zweig

Among this year’s hottest stocks, few are favorites of individual investors, and index funds aren’t their main buyers. Who’s driving them up? Professional stock pickers—the very people pointing the finger at everyone else.

Let’s look at Zoom Video Communications Inc., ZM -5.88% the teleconferencing company whose stock is up more than 660% so far this year. Given the popularity of its service and the stock’s scorching performance, you might expect Zoom is a darling among individual investors and traders.

Yet, on the Robinhood app used by millions of individual traders, Zoom was only the 49th widest-owned stock this week, according to the online broker’s tally of most-popular holdings.

In fact, of the 25 stocks with market values above $10 billion that have the hottest returns so far this year, only two— Moderna Inc. and Peloton Interactive Inc. —are among the 25 most-popular stocks on Robinhood. They are up 278% and 362%, respectively, in 2020.

The biggest performance chasers? Big institutions, whose ownership of scalding-hot stocks has boomed this year, even as these shares become wildly expensive by traditional yardsticks.

Some of that is natural; as a company’s market value grows, it becomes eligible for ownership at funds that can’t hold small stocks. Then again, professional investors, just like many amateurs, can’t resist a hot stock.

5. A Corporate Sleuth Claims Squarepoint Capital Took Her Content. The Hedge Fund Is Threatening Action. What Actually Happened? – Richard Teitelbaum

The news was potentially lethal. It was an inkling that Elbaze, a researcher at quantitative hedge fund Squarepoint Capital, might have been seeking improper access to Footnoted.com, the financial website Leder had started 14 years before and had turned into a thriving news and research service.

Elbaze had asked Leder a year earlier for, first, a trial subscription, and then a flat rate for full historical access to reports.

She had refused. Experience had shown her that Footnoted data is fiendishly difficult for quants to format. Firms like Two Sigma Investments, Point72 Asset Management’s Cubist Systematic Strategies, and AQR Capital Management had queried her about subscribing. Leder had even held informal talks with two funds to buy Footnoted outright so they could do the job themselves.

Reluctantly, however, just weeks before the email, she had agreed to provide London-based Squarepoint a trial. Then Elbaze seemed to have ramped up his activity.

“I was just, ‘Holy shit, what’s going on here?’” Leder recalls asking herself at the time. She emailed her developer. “He seems to have downloaded my entire database,” she wrote. “If he did do this, it’s a big BIG problem.” 

In fact, Leder estimated that Elbaze had viewed more than 17,000 pages — some of which even paid subscribers couldn’t get a hold of. A forensic investigation commissioned by Leder backed up her assessment.

6. Failing to Plan: How Ayn Rand Destroyed Sears – Michal Rozworski and Leigh Phillips

Lampert, libertarian and fan of the laissez-faire egotism of Russian American novelist Ayn Rand, had made his way from working in warehouses as a teenager, via a spell with Goldman Sachs, to managing a $15 billion hedge fund by the age of 41. The wunderkind was hailed as the Steve Jobs of the investment world. In 2003, the fund he managed, ESL Investments, took over the bankrupt discount retail chain Kmart (launched the same year as Walmart). A year later, he parlayed this into a $12 billion buyout of a stagnating (but by no means troubled) Sears.

At first, the familiar strategy of merciless, life-destroying post-acquisition cost cutting and layoffs did manage to turn around the fortunes of the merged Kmart-Sears, now operating as Sears Holdings. But Lampert’s big wheeze went well beyond the usual corporate raider tales of asset stripping, consolidation and chopping-block use of operations as a vehicle to generate cash for investments elsewhere. Lampert intended to use Sears as a grand free market experiment to show that the invisible hand would outperform the central planning typical of any firm.

He radically restructured operations, splitting the company into thirty, and later forty, different units that were to compete against each other. Instead of cooperating, as in a normal firm, divisions such as apparel, tools, appliances, human resources, IT and branding were now in essence to operate as autonomous businesses, each with their own president, board of directors, chief marketing officer and statement of profit or loss. An eye-popping 2013 series of interviews by Bloomberg Businessweek investigative journalist Mina Kimes with some forty former executives described Lampert’s Randian calculus: “If the company’s leaders were told to act selfishly, he argued, they would run their divisions in a rational manner, boosting overall performance.”…

…And so if the apparel division wanted to use the services of IT or human resources, they had to sign contracts with them, or alternately to use outside contractors if it would improve the financial performance of the unit—regardless of whether it would improve the performance of the company as a whole. Kimes tells the story of how Sears’s widely trusted appliance brand, Kenmore, was divided between the appliance division and the branding division. The former had to pay fees to the latter for any transaction. But selling non-Sears-branded appliances was more profitable to the appliances division, so they began to offer more prominent in-store placement to rivals of Kenmore products, undermining overall profitability. Its in-house tool brand, Craftsman—so ubiquitous an American trademark that it plays a pivotal role in a Neal Stephenson science fiction bestseller, Seveneves, 5,000 years in the future—refused to pay extra royalties to the in-house battery brand DieHard, so they went with an external provider, again indifferent to what this meant for the company’s bottom line as a whole.

Executives would attach screen protectors to their laptops at meetings to prevent their colleagues from finding out what they were up to. Units would scrap over floor and shelf space for their products. Screaming matches between the chief marketing officers of the different divisions were common at meetings intended to agree on the content of the crucial weekly circular advertising specials. They would fight over key positioning, aiming to optimize their own unit’s profits, even at another unit’s expense, sometimes with grimly hilarious result. Kimes describes screwdrivers being advertised next to lingerie, and how the sporting goods division succeeded in getting the Doodle Bug mini-bike for young boys placed on the cover of the Mothers’ Day edition of the circular. As for different divisions swallowing lower profits, or losses, on discounted goods in order to attract customers for other items, forget about it. One executive quoted in the Bloomberg investigation described the situation as “dysfunctionality at the highest level.”

7. Shonda Rhimes Is Ready to “Own Her S***”: The Game-Changing Showrunner on Leaving ABC, “Culture Shock” at Netflix and Overcoming Her Fears – Lacey Rose

Shonda Rhimes was tired of the battles. She was producing some 70 hours of annual television in 256 territories; she was making tens of millions of dollars for herself and more than $2 billion for Disney, and still there were battles with ABC. They’d push, she’d push back. Over budget. Over content. Over an ad she and the stars of her series — Grey’s Anatomy, Scandal and How to Get Away With Murder — made for then-presidential nominee Hillary Clinton.

But by early 2017, her reps were back in discussions with the company about a new multiyear deal. They’d already made a hefty ask of her longtime home and were waiting as the TV group’s then leadership prolonged the process, with one briefly tenured ABC executive determined to drive down the price tag on their most valuable creator. Meanwhile, Rhimes was growing creatively restless. “I felt like I was dying,” she says now of the unforgiving pace and constraints of network TV. “Like I’d been pushing the same ball up the same hill in the exact same way for a really long time.”

She knew her breaking point would come, but what it would be she never could have predicted. As part of her ABC relationship, Rhimes had been given an all-inclusive pass to Disneyland — and without a partner, she’d negotiated a second for her nanny. But on this day, she needed one for her sister, too, as she’d be taking Rhimes’ teenage daughter while the nanny chaperoned her younger two. If the passes had been interchangeable, Rhimes would have been happy to give up hers — when would she have time to go to Disneyland anyway?

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Netflix and Zoom Video Communications. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 25 October 2020:

1. Early Work – Paul Graham

Making new things is itself a new thing for us as a species. It has always happened, but till the last few centuries it happened so slowly as to be invisible to individual humans. And since we didn’t need customs for dealing with new ideas, we didn’t develop any.

We just don’t have enough experience with early versions of ambitious projects to know how to respond to them. We judge them as we would judge more finished work, or less ambitious projects. We don’t realize they’re a special case.

Or at least, most of us don’t. One reason I’m confident we can do better is that it’s already starting to happen. There are already a few places that are living in the future in this respect. Silicon Valley is one of them: an unknown person working on a strange-sounding idea won’t automatically be dismissed the way they would back home. In Silicon Valley, people have learned how dangerous that is.

The right way to deal with new ideas is to treat them as a challenge to your imagination — not just to have lower standards, but to switch polarity entirely, from listing the reasons an idea won’t work to trying to think of ways it could. That’s what I do when I meet people with new ideas. I’ve become quite good at it, but I’ve had a lot of practice. Being a partner at Y Combinator means being practically immersed in strange-sounding ideas proposed by unknown people. Every six months you get thousands of new ones thrown at you and have to sort through them, knowing that in a world with a power-law distribution of outcomes, it will be painfully obvious if you miss the needle in this haystack. Optimism becomes urgent.

But I’m hopeful that, with time, this kind of optimism can become widespread enough that it becomes a social custom, not just a trick used by a few specialists. It is after all an extremely lucrative trick, and those tend to spread quickly.

2. String of Firms That Imploded Have Something in Common: Ernst & Young Audited Them – Patricia Kowsmann, Mark Maurer, and Jing Yang

While it wasn’t possible to pinpoint why EY has had so many recent audit clients with financial scandals, certain elements of EY’s business strategy might help explain the cluster of blowups.

EY had ties with executives and board members at some of its troubled audit clients. In some cases, former EY partners sat on the companies’ boards, including on their audit committees.

EY charges lower fees for audits, which are labor intensive and time consuming, than other Big Four firms in the U.S. and Europe on average, an analysis of data from research firm Audit Analytics shows.

EY also focuses more than other firms on auditing young, fast-growing technology companies. All of the recent troubled clients portrayed themselves as tech-driven industry disrupters. EY helped some prepare for IPOs.

3. Models, Good and Bad – Marcelo P. Lima

Andy Jassy, CEO of Amazon Web Services, gave an interview recently in which he noted that in the early days, Amazon would use a net present value (NPV) analysis for deciding which internal projects they should invest in. This is similar to the discounted cash flow (DCF) models we use internally at Heller House to evaluate investment opportunities and conceptually similar to the internal rate of return (IRR) calculation Adam Fisher made in his Wix memo: the goal is to figure out what types of returns one can earn from a dollar invested in a given opportunity.

When I’m asked about how we value the companies in which we invest—some of which don’t yet produce accounting profits—my answer is always the same: we use DCFs for everything. I know that my models are wrong because I cannot forecast a company’s revenue growth, profits, and margins ten years out. But it’s useful to have guardrails to Fermi-ize our assumptions: do they make sense? Is the outcome of the exercise reasonable based on what I believe is the market size of this opportunity? Is it within a realm of possible futures?

What Jassy and Bezos realized eventually, however, is that some of the most exciting projects they dreamt up weren’t getting funded. It was hard—if not impossible—to assign an NPV to them (in this regard, Adam Fisher did a very good job: it was hard to see the future for Wix, but he took a very good stab at it!).

Amazon ditched the NPV approach and moved to a decision-making process involving five questions:

• If we build it and it’s successful, can it be really big and move the needle?
• Is it being well-served today
• Do we have some kind of differentiated approach to it?
• Do we have some competence in the area, and if not, can we acquire it quickly?
• If we like the answers to the four questions above, can we put a group of single-threaded, focused people on this initiative?

4. 50 Cognitive Biases in the Modern World – Marcus Lu

Fundamental Attribution Error – We judge others on their personality or fundamental character, but we judge ourselves on the situation. [Eg:] Sally is late to class; she’s lazy. You’re late to class; it was a bad morning.

Dunning-Kruger Effect – The less you know, the more confident you are. The more you know, the less confident you are. [Eg:] Francis confidently assures the group that there’s no kelp in ice cream. They do not work in the dairy industry.

Declinism – We tend to romanticize the past and view the future negatively, believing that societies/institutions are by and large in decline. [Eg:] “In my day, kids had more respect!”

Framing Effect – We often draw different conclusions from the same information depending on how it’s presented. [Eg:] Alice hears that her favourite candidate is “killing it” with a 45% approval rating. Sally hears that the candidate is “disappointing the country” with a 45% rating. They have wildly different interpretations of the same statistic.

5. Client Case Study: When You Give Up Being A DIY Investor – Kyith Ng

Adam and his wife, Sabrina, have spent the past 13 years of their lives in successful individual careers as a Technology Engineer in an American MNC and as an Account Manager, respectively. Both realize that their money has built up over the years and do not wish to take the traditional route of wealth building that their parents took. However, being careful with their money, they tried to sift through the vast amount of information to find what is the right way to invest.

When tasked to invest his family’s wealth, Adam believed that a certain criterion was important to building wealth in a fundamentally sound manner. Eventually, they identified that a sound way to build wealth would be to channel their money from work and what they have into Exchange-Traded Funds (ETFs) that track certain regional indexes. Through his research, he understands the concept of having exposure to a portfolio of equities around the world. He also understands the importance of keeping their transactional costs low because costs would compound over time. That is how they started venturing out of safe fixed deposits and lower risk instruments and into higher risk and potentially higher return financial assets.

If you were to ask us to name a fundamentally sound way to invest in a do-it-yourself manner, we would tell you what Sabrina and Adam did was sound. We could even give you the blueprint on how to do it here:

• Identify a brokerage or fund platform that has low transaction charges or low platform fees
• Put the lump-sum you wish to invest, into a low-cost, broadly diversified unit trust or exchange traded fund. You can create a low-cost, broadly diversified portfolio with 1 to 4 funds depending on your preference and sophistication
• Contribute a portion of your cash flow from work into the fund
• On an annual or half-yearly basis, do a rebalancing if you hold more than 1 fund
• In terms of investment setup, that is it
• You should continue to get educated in this way of investing- focusing on a continuous education on market returns, on volatility and how the markets performed at various pivotal junctures
• With such an approach, you can then live a good life, because the investments are rather passive in nature. By not taking a too active approach to wealth building, this frees up your mind to do your best work in your career. The better you do in your career, the greater excess cash flows you will get from work to be channeled back into your wealth portfolio

Given Adam and Sabrina’s initial investible wealth of $600,000, a 30% savings rate which allows them to put away an initial amount of $100,000 a year, a higher than average salary growth of 7% a year, and a projected portfolio compounded return of 5% a year, Sabrina and Adam could grow their wealth to $9,674,623 in 18 years’ time when they are 50 years old.

Adam and Sabrina would have come across materials like the above in their research and they would have implemented something similar.

However, eventually a couple like Adam and Sabrina decided to approach us. Here are some of the challenges that they faced.

6. How Airbnb Pulled Back From the Brink – Preetika Rana and Maureen Farrell

Mr. Chesky quickly switched Airbnb’s strategy. Big cities visited by tourists had been Airbnb’s strength, but it would now focus on local stays. By June, the company had redesigned its website and app so its algorithm would show prospective travelers everything from cabins to lavish beach houses near where they lived.

On July 8, guests booked stays at the rate they were just before the pandemic brought travel and tourism to a halt. In August, more than half of bookings made were for stays within 300 miles of the guest’s location, according to the company.

It was a lucky break, and Airbnb was in position to capitalize on it. The CEO made more changes, including cutting marketing, putting many noncore projects on hold and laying off a quarter of the staff.

“I did not know that I would make 10 years’ worth of decisions in 10 weeks,” Mr. Chesky said in an interview.

The upswing has put the home-sharing giant on a path to go public and report a third-quarter profit this year, according to investors, something that seemed all but impossible months ago.

7. Accountable to Darwin vs. Accountable to Newton – Morgan Housel

Growing a population has rarely been a problem in human history. Virtually every nation could count on a consistent flow of births exceeding deaths. Population growth fueled economies and seemed like a law of nature. But Newton isn’t involved. Darwin runs the show. Things changed, living conditions improved, competition favored something new, and over the last 30 years births have fallen so much that most big nations will have fewer workers in 2050 than in 2020.

For decades, the dividend yield on a company’s stock was usually higher than the interest rate on its bonds. It made sense to people: stocks were riskier than bonds, and you must be paid extra in return. It seemed like an iron law of finance, blessed by Newton. But things changed. Around the 1950s, companies began withholding more profits to finance growth in lieu of dividends. Dividend yields fell below bond yields. Some people thought it was a sign of madness that must revert. But it didn’t. Today we think it’s normal because bonds have no growth upside, so you should be paid more to make the investment worthwhile. That now seems like a Newtonian law of finance. But in both cases investors are just being accountable to Darwin.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Amazon and Wix. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 18 October 2020:

1. China’s National Digital Currency DCEP / CBDC Overview – Michael @ Box Mining

China’s national digital currency DCEP (Digital Currency Electronic Payment, DC/EP) will be built with Blockchain and Cryptographic technology. This revolutionary cryptocurrency could become the world’s first Central Bank Digital Currency (CBDC) as it is issued by state bank People’s Bank of China (PBoC). The goal and objectives of the currency are to increase the circulation of the RMB and international reach – with eventual hopes that the RMB will a global currency like the US Dollar. China has recently established an initiative to push forward Blockchain adoption, with the goal of beating competitors like Facebook Libra – a currency that Facebook CEO Mark Zuckerberg claims will become the next big FinTech innovation. China has made explicit that Facebook Libra poses a threat to the sovereignty of China, insisting that digital currencies should only be issued by governments and central banks. DCEP is not listed on cryptocurrency exchanges and will not be for speculation of value.

2. Meet Amazon.com’s first employee: Shel Kaphan – John Cook

“I mean, nobody at the beginning had any clue how big Amazon could become,” recalls Kaphan, now 58. “Nobody. Certainly not Jeff. I have spreadsheets of his projections from when he was trying to hire me. And I don’t remember the specific numbers, but it was a lot, lot smaller than it turned out to be.”…

…So, you are kind of the forgotten founder? Most people think of Jeff Bezos as the creator of the company. “In fact, to be completely technically true about it, he is the founder. But I was talking to him about joining him on the venture before the company was incorporated. He basically was just arriving from the East Coast and setting up his house when I moved up from California. All that existed of Amazon was on paper at that point. Jeff was working on it full-time already, and his wife, Mackenzie, was writing checks every once in a while. But that was it. I didn’t get founder’s stock. It didn’t seem worth the argument at the time, although I kind of felt like, well, you know, I mean I was there at the beginning. And it was all going to work out the same way, one way or the other, regardless of the technicalities. And it just didn’t seem like something that I wanted to make a big deal about at the time.”…

…What was that era like just before you joined Amazon in 1994? “The previous job I had was with Kaleida Labs, which was an Apple-IBM joint venture that called itself a startup but really wasn’t. I left that in the Spring of 1994.  I lived in Santa Cruz, California, and that was at the time when there was a huge amount of ferment in the air with Netscape hiring up all of the hot-shot programmers around…. There wasn’t really much else going on at that time, but there was quite a bit of buzz about the Web, so my friend and I were thinking that we should do something about this, it is a big opportunity. I had been working in computers since the mid-70s and had sort of seen the first wave of the PC revolution come, and I didn’t jump on that. At the time, I was more enamored of what we then thought of as bigger machines, the kind of machines that the universities had. I was interested in the type of software that could run on those. I watched as the first PC wave happened and got bigger and bigger and bigger, and at some point I realized: ‘Oh, I kind of missed getting on that wave.’ So, I always had in the back of mind, if I see something that I want to be participate in coming, next time, I am going to act on it. A lot of time went by before I had that feeling again.’…

3. In April 2014, GDP in Nigeria Jumped 89%. How the Hell Did That Happen? – Morten Jerven

Yemi Kale, the director of the Nigerian National Bureau of Statistics took the podium, and announced that the Bureau had revised their GDP figures. The base year for the national accounts was updated, and the new figures showed that Nigerian GDP was 89 percent higher than previously estimated. Given the relative size of the Nigerian economy for the region, this was quite a revision. That afternoon, Sub Saharan African GDP increased almost 30 percent. Economic activity equivalent to 58 times the size of the Malawian economy was added to the Nigerian economy…

…The advantage of coming at the problem of economic statistics as an Economic Historian is that one is keenly aware that the statistics are not given, they are made. That means that statistics are social and political products. In mainstream economic debates the biggest part of the discussion is focused on what drives inflation, and why employment is up or down. Meanwhile less attention is given to the very basic problem that while we know what employment and inflation are in theory, it is technically impossible to measure it cleanly.

The notion that we scientists can let the data or the evidence speak for itself is misleading. Skilled journalists, historians and lawyers interrogate witnesses and sources to figure who made the observation, and the biases behind what they observed. And in our own way,, economists and finance writers have to interrogate these soft numbers that we too often treat as hard facts.

4. Would Keynes Have Been Fired as a Money Manager Today? – Ben Carlson

Now back to the question of whether or not Keynes would have been fired by investors today if he showed similar performance, volatility and drawdown numbers. Unfortunately, I agree with the responses from Twitter in this instance, which is a shame. This is a legendary investment record during one of the most difficult periods in history to be an investor.

But short-termism and status quo are so widely practiced in the institutionalized world of investing that it’s highly unlikely that investors would have the requisite patience to stick with someone like Keynes today. Investors would certainly chase performance after the string of good years, but very few would be able to earn the overall outperformance figures.

For most investors the goal shouldn’t necessarily be to beat the market, but to not beat themselves. And then there’s the question of actually discovering the next John Maynard Keynes. But putting all of that aside for the moment — there is an unbelievable amount of time, effort and money spent on the singular goal of beating the market. It’s the entire reason many fund managers exist. Yet the conundrum is that there are very few investors out there with the correct level of patience or discipline to see through the type of strategy that’s required to actually beat the market by a wide margin.

5. 11 Lessons From 11 Years of Investing in the Stock Market – Sudhan P

In August 2011, I saw the first major stock market decline since I started investing.

The fall was due to uncertainty in the US over its debt ceiling and the country’s first-ever credit downgrade by S&P. There was also a debt crisis in Europe. 

Out of fear that some of the paper gains in my portfolio will turn to losses, I decided to sell off some of my stocks. 

It was an emotionally-draining mistake as it made me check on the stock market and stock prices every day, afraid that I would miss on the rebound when it happens. 

What actually happened was that the stock market started rallying on optimism that the debt crisis will be solved eventually. And I was forced to buy back the shares at a higher price.

I learnt from this episode not to time the market as it’s a really tough job. No one can know for sure when to exit the market before a crash and when precisely to buy just before a market upturn.

Various studies have also shown that being out of the market and missing the best market days can significantly reduce long-term returns. So, it’s far better to stay the course.

6. Twitter thread on every US president’s comments on money – Anand Chokkavelu

6. John Quincy Adams

“My wants are many, and, if told, would muster many a score; and were each wish a mint of gold, I still would want for more.”

12. Zachary Taylor

“Economy I consider a virtue and should be practiced by all; there is certainly no way in which money can be laid out than in the education of children.”

13. Millard Fillmore

“It is a national disgrace that our Presidents, after having occupied the highest position in the country, should be cast adrift, and, perhaps, be compelled to keep a corner grocery for subsistence.”

20. James Garfield

“He who controls the money supply of a nation controls the nation.”

23. Benjamin Harrison

“I pity that man who wants a coat so cheap that the man or woman who produces the cloth shall starve in the process.”

26. Theodore Roosevelt

“It is a bad thing for a nation to raise and to admire a false standard of success; and there can be no falser standard than that set by the deification of material well-being in and for itself.”

32. Franklin D. Roosevelt

“It is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach.”

33. Harry S. Truman

“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.”

35. John F. Kennedy

See also inflation.

“There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.”

44. Barack Obama

“Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine. It may make you feel like you’re flying high at first, but it won’t take long before you feel the impact.”

45. Donald Trump

“Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.”

Bonus: Joe Biden

“My father used to have an expression. He’d say, ‘Joey, a job is about a lot more than a paycheck. It’s about your dignity. It’s about respect. It’s about your place in your community.'”

7. The 7 Things That Matter For Markets Going Forward – Ben Carlson

Fiscal stimulus. The debt-to-GDP for the United States is a sight to behold:

We were able to perform an experiment in government spending during a crisis in real-time and it has been a resounding success. Retail sales quickly rebounded. The unemployment rate fell. Personal savings rates went through the roof. People were able to repair their personal balance sheets.

And a depression was stopped in its tracks.

I have more questions than answers:

• Will we see this type of government spending during future recessions?
• How would that impact the business cycle?
• Will this change how business owners and investors view risk?
• Will investors and markets respond differently to future recessions?
• Was this year the first step towards a universal basic income?

Politicians have been promising their policies would lead to higher GDP growth for years. None of them have worked. Now they’ve finally found the lever to pull that can conjure growth out of thin air — government spending.

How could any sane politician not use that lever every chance they get going forward?…

…The Fed. In every alien horror movie there always comes a point when the people being hunted by said alien come to realize it’s somehow getting stronger and/or smarter.

The main character of the movie, who typically covered in sweat, mud or blood will say, “It’s evolving.”

The Fed is the alien in this example.

In 2008 the entire financial system was closer to the precipice of collapse than most people realize. Looking back on it now I’m guessing Fed officials regret not going bigger or moving faster.

Jerome Powell and company didn’t want to have that same regret this time around. The Fed met the pandemic with bazookas blazing. They poured trillions of dollars into the system to keep markets functioning, effectively taking the Great Depression scenario off the table.

Markets rebounded across the board in record time.

It’s going to be difficult for the Fed to retract its alien tentacles from the markets. And if investors come to expect the Fed to have their back during every downturn there cold be some misplaced expectations and risk-taking because of it.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in Amazon. Holdings are subject to change at any time.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 18 October 2020:

1. Increasing Returns and the New World of Business – Brian Arthur

Let’s go back to beginnings—to the diminishing-returns view of Alfred Marshall and his contemporaries. Marshall’s world of the 1880s and 1890s was one of bulk production: of metal ores, aniline dyes, pig iron, coal, lumber, heavy chemicals, soybeans, coffee—commodities heavy on resources, light on know-how.

In that world it was reasonable to suppose, for example, that if a coffee plantation expanded production it would ultimately be driven to use land less suitable for coffee. In other words, it would run into diminishing returns. So if coffee plantations competed, each one would expand until it ran into limitations in the form of rising costs or diminishing profits. The market would be shared by many plantations, and a market price would be established at a predictable level—depending on tastes for coffee and the availability of suitable farmland. Planters would produce coffee so long as doing so was profitable, but because the price would be squeezed down to the average cost of production, no one would be able to make a killing. Marshall said such a market was in perfect competition, and the economic world he envisaged fitted beautifully with the Victorian values of his time. It was at equilibrium and therefore orderly, predictable and therefore amenable to scientific analysis, stable and therefore safe, slow to change and therefore continuous. Not too rushed, not too profitable. In a word, mannerly. In a word, genteel…

…Let’s look at the market for operating systems for personal computers in the early 1980s when CP/M, DOS, and Apple’s Macintosh systems were competing. Operating systems show increasing returns: if one system gets ahead, it attracts further software developers and hardware manufacturers to adopt it, which helps it get further ahead.

CP/M was first in the market and by 1979 was well established. The Mac arrived later, but it was wonderfully easy to use. DOS was born when Microsoft locked up a deal in 1980 to supply an operating system for the IBM PC. For a year or two, it was by no means clear which system would prevail. The new IBM PC—DOS’s platform—was a kludge. But the growing base of DOS/IBM users encouraged software developers such as Lotus to write for DOS. DOS’s prevalence—and the IBM PC’s—bred further prevalence, and eventually the DOS/IBM combination came to dominate a considerable portion of the market. That history is now well known. But notice several things: It was not predictable in advance (before the IBM deal) which system would come to dominate. Once DOS/IBM got ahead, it locked in the market because it did not pay for users to switch. The dominant system was not the best: DOS was derided by computer professionals. And once DOS locked in the market, its sponsor, Microsoft, was able to spread its costs over a large base of users. The company enjoyed killer margins.

These properties, then, have become the hallmarks of increasing returns: market instability (the market tilts to favor a product that gets ahead), multiple potential outcomes (under different events in history, different operating systems could have won), unpredictability, the ability to lock in a market, the possible predominance of an inferior product, and fat profits for the winner. They surprised me when I first perceived them in the late 1970s. They were also repulsive to economists brought up on the order, predictability, and optimality of Marshall’s world.

2. The end of the American internet – Ben Evans

First, as I discussed in some detail here, technology is becoming a regulated industry, if only because important and specialised industries are always regulated. That regulation will not only be determined by the USA. Other countries have their own laws, cultures and constitutions, and so we are entering a period of increasing regulatory expansion, overlap and competition from different jurisdictions, from the EU and UK to Singapore or Australia and, of course, China.

Second, you can no longer assume that the important companies and products themselves are American. 

Both of these are captured in Tiktok. This is the first time that Americans have really had to deal with their teenagers using a form of mass media that isn’t created in their country by people who mostly share their values. It’s from somewhere else. That’s compounded by the fact that the ‘somewhere else’ is China, with all of the political and geopolitical issues that come with that, but I’d suggest that the core, structural issue is that it’s foreign. This is, of course, a problem that the rest of the world has been wrestling with since 1994, but it comes as something of a shock in Washington DC. There’s an old joke that war is how God teaches Americans geography – now it’s regulation.

3. The Merits of Bottoms Up Investing – Venture Desktop

Perhaps no VC firm embodies structural advantage — from the alignment of its organizational incentives to the brand edge it has built through a consistent approach applied over multiple decades — better than Benchmark.

It is also likely that no other firm is as allergic to the notion of a top down thesis.

You don’t have to wait long in any interview featuring one of Benchmark’s General Partners — and there have been a number of great ones lately — to gain insight into what seems to be the firm’s organizing principle:

“Our job is not to see the future, it’s to see the present very clearly.”

This alignment shines through clearly across the partnership — whether it is Sarah Tavel talking about her investment in Chainalysis, Chetan Puttagunta explaining the logic behind his investment in Sketch, or Eric Vishria responding to a “request for startup” in the Open Source space:

“We’re not top down like that. It is so organic. When an entrepreneur pitches and tells a story that provides an insight that makes you think about the world differently, that’s when I get really, really excited. And that’s why it is really hard to be top-down and why we don’t tend to be particularly thesis-driven..”

In a 2016 interview, Peter Fenton, who joined Benchmark in 2006 from Accel, spoke about the differences between the two iconic firms:

“At Accel I was taught, ‘we need to have a prepared mind’ at really thinking about a segment, a category, and its coherence. So I came to Benchmark and I didn’t know if I agreed with that. And my partner said, “don’t you do that shit here.” Throw that crystal ball out, you can’t predict anything. What you can do is recognize when lightning strikes.”

Fenton also talked about the bottoms up nature of his investments in this Quora Session. Twitter, Yelp, Elastic — all driven by investing in purpose and “tactile reality” than trends.

“I don’t invest in trends. I know it sounds a bit too-cool-for-school but what I’ve found is that you get far more insight from purpose than from trends. So, for example, in the case of Docker I invested in Dotcloud (which became Docker), in the purpose of this radical, intense leader, Solomon, who wanted to give the world’s programmers superpowers, tools of mass innovation. In the case of Yelp, it was Jeremy’s purpose to allow for the truth of great (and bad) local businesses to be visible to all. Or when I met Jack in 2007, he had this unstoppable purpose for Twitter to “bring you closer”. Sometimes that purpose is just this raw force, an energy, like it was in the case of Shay at Elastic in 2012. When I feel like the trend, the space, the concepts vs the tactile reality of a purpose forms the narrative of the investment I lose all interest.”

4. Who Is ‘Andy Bang’? A Ritz-Carlton Mystery Gets Its Day in Court – Jef Feeley and Mark Chediak

The story starts with Wu, an ex-car dealer whose third wife was the granddaughter of former paramount leader Deng Xiaoping. In 2004, Wu set up an insurance company for the growing Chinese middle class. As premiums poured in, he went on an $18-billion buying binge starting in 2014. He snapped up New York’s Waldorf Astoria hotel for nearly $2 billion and bought Dutch insurer Vivat. In 2016, he acquired Blackstone Group’s Strategic Hotels & Resorts unit for $6.5 billion. That company’s luxury lineup featured San Francisco’s Westin St. Francis, the Four Seasons Resort in Jackson Hole, Wyoming, and the Half Moon Bay. (He also began talks to buy 666 Fifth Avenue, the marquee tower owned by the family of President Donald Trump’s son-in-law, Jared Kushner.)

But in 2017, weeks before his arrest, Wu signed an agreement empowering the Delaware limited-liability shell companies to act on his behalf. Under Delaware law, owners of such companies aren’t listed in public records.

The pact, written in Mandarin and referred to in court papers as the “DRAA Blanket Agreement,” relies on the Delaware Rapid Arbitration Act, created in 2015 for speedy recognition and payment of arbitration awards.

The agreement “authorizes the recording of grant deeds transferring ownership of properties held by Anbang” including hotels, banks and bank branches. It gives Wu’s family and other signers of the contract claims to the hotels, including the Waldorf Astoria.

The 15-page contract also specifies that if Chinese regulators seize Anbang, the Delaware companies can sue it. And if the Chinese authorities learn about the existence of the pact, the signers contend their lives are in danger and arbitration panels can impose massive penalties to be paid to the LLCs.

The signers were, on one side, Wu and Chen Xiaolu, an ex-Chinese military officer and son of a former mayor of Shanghai, and on the other, one of the LLCs, the Amer Group, and Andy Bang. After being questioned by the authorities about Anbang two years ago, Chen died of a heart attack.

Zhao wrote in his brief that as part of the collateral backing up the DRAA, Anbang agreed to put up 16 hotels and four other properties valued at at least $9 billion, and pledged $1 billion in cash as a “performance bond.”

The Amer Group owns the U.S. trademark to “An Bang” and has had long-running litigation, both in the U.S. and China, over it with Anbang, although some here and there suspect Amer is working with Wu on the alleged scam. A lawyer for Wu, Chen Youxi, declined to comment on anything related to Anbang.

5. Stillfront: Understanding Gaming’s Dark Horse – Aaron Bush, Abhimanyu Kumar, and Joakim Achren

Stillfront Group is an emerging games business that both industry insiders and curious outsiders should prioritize understanding. Even though the company is making a larger name for itself — especially in 2020, which has turned into a breakout year — it remains, in our eyes, underrated and under-followed. It was (and maybe still is) a dark horse of the games industry. Tripling its market cap year-to-date certainly helps, but most don’t understand how Stillfront’s unique acquisition strategy, group operations culture, and capital allocation skill bring consistency and scalability to an otherwise lumpy, hits-driven industry. In other words, Stillfront’s success is the result of a well engineered strategy designed to predictably grow shareholder value in a highly unpredictable market.

6. Twitter thread on an analysis of Slack’s customers – Weng, @AznWeng

Stat #1: Among companies that use $WORK, 20% of their job openings are engineering. For Teams users, only 11% of their jobs are engineering. Companies with a focus on engineering choose Slack over Teams due to its many integrations with tools like Github/Jira/Pagerduty…

…Stat #3 (a fun one): The average Glassdoor rating for companies that use $WORK was 3.87. The average Glassdoor rating for all companies is 3.3. Causation doesn’t imply correlation, but it seems to suggest companies that allow remote work have higher job satisfaction overall.

Stat #4: $WORK is mentioned in twice the number of job openings as $MSFT Teams. While you wouldn’t think of Slack or Teams as “skills”, there are more roles in companies devoted to improving business workflows/processes by creating Slack bots and integrations.

7. A Closer Look at Ray Dalio’s 1937 Scenario – Ben Carlson

When Donald Trump was elected president, Ray Dalio, the founder of the hedge fund Bridgewater Associates, was optimistic about the new administration’s economic agenda. Since then, his notes have turned increasingly pessimistic. He recently said his firm is reducing risk over worries that the U.S. is becoming politically more divided. Dalio recently compared today’s environment to the situation in the late 1930s:

“It seems to me that we are now economically and socially divided and burdened in ways that are broadly analogous to 1937. During such times conflicts (both internal and external) increase, populism emerges, democracies are threatened, and wars can occur. I can’t say how bad this time around will get. I’m watching how conflict is being handled as a guide, and I’m not encouraged.”

Dalio has made the 1937 analogy before. Yet it’s impossible to quantitatively compare two different eras in these terms. We can, however, make an economic and stock-market comparison to those times to get a better sense of how things played out in the first recession following the Great Depression. There are a few similarities between that period and today. Interest rates were low for a long time in the 1930s. The 10-year Treasury yield began 1937 at 2.7 percent. It currently stands at around 2.2 percent. In both cases, the Federal Reserve was tightening monetary policy, as well. And both periods saw a huge stock market rally following a previous crash and deep recession.

But that’s really where the similarities end. Everything that happened in the 1930s was magnified compared with what we’re experiencing today. After falling in excess of 80 percent during the Great Depression, stocks finally found a bottom in the summer of 1932. The rebound was so pronounced that equities were up more than 90 percent in the months of July and August of 1932 alone. From the bottom in 1932 through early 1937, stocks had an enormous rally, gaining about 415 percent in less than five years. This was good enough for an annual gain of more than 40 percent a year.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life.

We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.

Do subscribe for our weekly updates through the orange box in the blog (it’s on the side if you’re using a computer, and all the way at the bottom if you’re using mobile) – it’s free!

But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.

Here are the articles for the week ending 04 October 2020:

1. The Mike Speiser Incubation Playbook – Kwokchain

Unlike consumer, traditional enterprise markets lend themselves more naturally to deterministic and repeatable success. There’s a small handful of VCs who have clearly shown they can succeed repeatedly and whose approaches and playbooks are legible enough to imply it’s not a fluke. Speiser is one of them.

Speiser’s portfolio includes companies like Pure Storage and Snowflake Computing. It’s worth noting that Snowflake not only IPO’d and is now at a market cap of over $60B but Speiser and Sutter Hill Ventures owned more than 20% of the company leading up to the IPO. When Pure Storage went public, Sutter Hill held more than 25%. Speiser may have the highest percentage of portfolio companies that have become multi-billion dollar companies—and that trend looks to continue with his newer companies.

But impressive returns are not solely what matters for the industry. It’s tempting to evaluate firms by their returns, and from the LP perspective that may be the correct metric. But another, and more important way to judge VC firms is by the value they add above replacement to their portfolio companies. How much do they help their portfolio companies increase their likelihood and magnitude of success? Firms do this most notably by providing capital, but also by other methods like lending their brand or directly helping with operations.

For founders, this value added is what matters. The returns of a VC firm only matter to a startup insofar as they translate into improved brand, network, or access to capital for the startup. A firm’s financial performance is a reasonable signal that they may add real value and be worth partnering with, especially since some aspects like brand strength for recruiting, future financing, and customer development are a function of perceived firm success. But to prospective portfolio companies, a fund’s returns are important only as a means, not an end.

What makes Speiser intriguing is how distinct his approach is from other VCs. The tantalizing clues suggest that he has figured something out that nobody else has: the formula for creating successful companies from scratch.

2. Twitter thread on how John Foley founded digital fitness company Peloton – Joe Vennare

Peloton is a $20B company. But CEO John Foley had trouble raising money in the early days. For years, thousands of investors told him no. This is the story of how he persisted, 

disrupting the fitness industry in the process…

… 6/ Peloton is born. Foley’s vision:

– Bike w/a big screen
– Best-in-class instructors
– Leaderboard for motivation
– Convenience of at-home workouts

“I think you can digitize that experience, and build a hardware and software platform for consuming fitness content at home.”

7/ Friends & family. With his wife’s blessing, Foley recruited cofounders and raised Peloton’s seed round. A friends and family round, Foley raised $400K @ $2M post from 8 angels. The plan: combine an off-the-shelf tablet w/an exercise bike. If only it were that simple…

8/ Fun fact! Foley tried to partner w/SoulCycle & Flywheel. Soul passed. But $PTON had an agreement w/Flywheel. Flywheel bailed. The Peloton team was banned from Soul/Fly classes. Fast forward: Flywheel’s at-home bike failed. And Soul launched a Peloton lookalike.

9/ New plan! Peloton’s bike would be scratch-built. But that’s expensive. They needed more money. Foley was in his mid-40s. Had two kids. He hit the fundraising trail to keep his business afloat.

10/ NO! From 2011-14 Foley pitched 3,000 angels & 400 firms. Almost everyone said no. Eventually, he raised $10M from 100 angels. Tiger Global was the first institutional investor earning $1.4B at IPO.

11/ Kickstarter!? Far from a sure thing, Peloton launched a Kickstarter. It flopped. 200 people bought bikes. 100 were investors. And they raised $300K. The price? $1500. Everyone thought it was too expensive.

12/ The price is right! Post-Kickstarter, $PTON launched a website. The bike was priced at $1200. Now, the product looked cheap. They increased the price and sales increased!

13/ Momentum builds. Peloton landed Robin Arzon, an instructor who has come to define the brand. They began selling $2000 bikes at a mall kiosk in NJ. Filming classes in their office, they grew the workout library. It was working.

3. Brain-Computer Interfaces Are Coming. Will We Be Ready?– Marissa Norris

Three drones lift off, filling the air with their telltale buzz. They slowly sail upward as a fleet—evenly spaced and level—and then hover aloft.

On the ground, the pilot isn’t holding a remote control. In fact, he isn’t holding anything. He’s just sitting there calmly, controlling the drones with his mind.

This isn’t science fiction. This is a YouTube video from 2016.

In the clip, a mechanical engineering Ph.D. candidate at Arizona State University (ASU) sports an odd piece of headwear. It looks a bit like a swim cap, but with nearly 130 colorful sensors that detect the student’s brain waves. These devices let him move the drones simply by thinking directional commands: up, down, left, right.

Today, this type of brain-computer interface (BCI) technology is still being developed in labs like the one at ASU in 2016, which has since moved to the University of Delaware. In the future, all kinds of BCI tech could be sold to consumers or deployed on the battlefield.

The fleet of mind-controlled drones is just one real-life example of BCI explored in an initial assessment of BCI by RAND Corporation researchers. They examined current and future developments in the world of BCI and evaluated the practical applications and potential risks of various technologies. Their study is part of RAND’s Security 2040 initiative, which looks over the horizon and explores new technologies and trends that are shaping the future of global security.

4. Negativity Is Not an Investment Strategy – Ben Carlson

Any position you take in regards to your portfolio involves risk. Investing in stocks is risky. Bonds are also risky. Crypto, private equity, hedge funds, real estate and every other financial asset involve risk-taking to make (or lose) money.

But guess what else involves risk — doing nothing!

In fact, doing nothing with your money is the biggest risk of all.

There are no guarantees when investing your money in risk assets. Maybe you’ll lose a boatload of money investing in risk assets. In fact, you almost certainly will at times. There is no way to completely hedge risk out of the equation when trying to grow your capital.

There is a way to guarantee awful outcomes with your savings — complain about the markets and don’t do anything with your money.

If you never take any risk, you will never have enough saved for retirement. Being pessimistic and sitting on the sidelines at all times guarantees you will lose money to inflation over the long-term.

5. Is It Insane to Start a Business During Coronavirus? Millions of Americans Don’t Think So –  Gwynn Guilford and Charity L. Scott

Americans are starting new businesses at the fastest rate in more than a decade, according to government data, seizing on pent-up demand and new opportunities after the pandemic shut down and reshaped the economy.

Applications for the employer identification numbers that entrepreneurs need to start a business have passed 3.2 million so far this year, compared with 2.7 million at the same point in 2019, according to the U.S. Census Bureau. That group includes gig-economy workers and other independent contractors who may have struck out on their own after being laid off.

Even excluding those applicants, new filings among a subset of business owners who tend to employ other workers reached 1.1 million through mid-September, a 12% increase over the same period last year and the most since 2007, the data show.

“This pandemic is actually inducing a surge in employer business startups that takes us back to the days before the decline in the Great Recession,” said John Haltiwanger, an economist at the University of Maryland who studies the data.

6. Satya Nadella Rewrites Microsoft’s Code – Harry McCracken

When I ask Nadella for his own account of working with his predecessors, he’s blunt. “Bill’s not the kind of guy who walks into your office and says, ‘Hey, great job,’ ” he tells me. “It’s like, ‘Let me start by telling you the 20 things that are wrong with you today.’ ” Ballmer’s technique, Nadella adds, is similar. He chuckles at the images he’s conjured and emphasizes that he finds such directness “refreshing.” (Upon becoming CEO, Nadella even asked Gates, who remains a technology adviser to the company, to increase the hours he devotes to giving feedback to product teams.)

Nadella’s approach is gentler. He believes human beings are wired to have empathy, and that’s essential not only for creating harmony at work but also for making products that will resonate. “You have to be able to say, ‘Where is this person coming from?’” he says. “‘What makes them tick? Why are they excited or frustrated by something that is happening, whether it’s about computing or beyond computing?’”

His philosophy stems from one of the principal events of his personal life. In 1996, his first child, Zain, was born with severe cerebral palsy, permanently altering what had been a pretty carefree lifestyle for him and his wife, Anu. For two or three years, Nadella felt sorry for himself. And then—nudged along by Anu, who had given up her career as an architect to care for Zain—his perspective changed. “If anything,” he remembers thinking, “I should be doing everything to put myself in [Zain’s] shoes, given the privilege I have to be able to help him.” Nadella says that this empathy—though he cautions that the word is sometimes overused—”is a massive part of who I am today. . . . I distinctly remember who I was as a person before and after,” he says. “I won’t say I was narrow or selfish or anything, but there was something that was missing.”

7. Common Causes of Very Bad Decisions – Morgan Housel

Ignoring or underestimating the full range of potential consequences, especially tail events that seem rare but have catastrophic effects. The most comfortable way to think about risk is to imagine a range of potential consequences that don’t seem like a big deal. Then you feel responsible, like you’re paying attention to risk, but in a way that lets you remain 100% confident and optimistic. The problem with low-probability tail risks is that they’re so rare you can get away with ignoring them 99% of the time. The other 1% of the time they change your life.

Lots of little errors compound into something huge. And the power compounding is never intuitive. So it’s hard to see how being a little bit of an occasional jerk grows into a completely poisoned work culture. Or how a handful of small lapses, none of which seem bad on their own, ruins your reputation. The Great Depression happened because a bunch of things that weren’t surprising (a stock crash, a banking panic, a bad farm year) occurred at the same time and fed on each other until they grew into a catastrophe. It’s easy to ignore small mistakes, and even easier to miss how they morph into huge ones. So huge ones are what we get.

An innocent denial of your own flaws, caused by the ability to justify your mistakes in your own head in a way you can’t do for others. When other people’s flaws are easier to spot than your own it’s easy to assume you have no/few flaws, which makes the ones you have more likely to cause problems.

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. We currently have a vested interest in the shares of Microsoft. Holdings are subject to change at any time.