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 15 June 2025:
1. How Countries Go Broke: The Big Cycle In a 5-Minute Read – Ray Dalio
If credit is used effectively, it creates productivity and income that can pay back the debt and interest on the debt, which is healthy. However, if it isn’t used well so it doesn’t produce enough income to pay back the debt and the interest on the debt, debt service will build up like plaque that squeezes out other spending. When debt service payments become very large, that creates a debt service problem and eventually a debt rollover problem as holders of the debt don’t want to roll it over and want to sell it. Naturally that creates a shortage of demand for debt instruments like bonds and the selling of them, and naturally when there is a shortage of demand relative to supply that either leads to a) interest rates rising, which drives markets and the economy lower, or b) the central banks “printing money” and buying debt which lowers the value of money which raises inflation from what it would have been. Printing money also artificially lowers interest rates, which hurts the lenders’ returns…
…To describe it more specifically, one can see debts and debt service payments rising relative to incomes, the supply of debt being larger than the demand for it and central banks dealing with these things happening by being stimulative at first by cutting short term interest rates and then by printing money and buying debt, and eventually the central bank losing money and then having a negative net worth, and both the central government and taking on more debt to pay the debt service and the central bank monetizing the debt. All these things lead toward a government debt crisis which produces the equivalent of an economic heart attack that comes when the constriction of debt-financed spending shuts down the normal flow of the circulatory system.
Early in the final stage of this big debt cycle, the market action reflects this dynamic via interest rates rising led by long term rates, the currency declining especially relative to gold, and the central government’s treasury department shortening the maturities of its debt offerings because of a shortage of the demand for long term debt. Typically, late in the process when this dynamic is most severe, a number of other seemingly extreme measures are put into place like establishing capital controls and exerting extraordinary pressures on creditors to buy and not sell debt…
…Imagine that you are running a big business called the U.S. government. That will give you a perspective that will help you understand the U.S. government’s finances and its leadership’s choices.
The total revenue this year will be about $5 trillion while the total expenses will be about $7 trillion, so there will be a budget shortfall of about $2 trillion. So, this year, your organization’s spending will be about 40 percent more than it is taking in. And there is very little ability to cut expenses because almost all the expenses are previously committed to or are essential expenses. Because your organization borrowed a lot over a long time, it has accumulated a big debt—approximately six times the amount that it is bringing in each year (about $30 trillion), which equals about $230,000 per household that you have to take care of. And the interest bill on the debt will be about $1 trillion which is about 20 percent of your enterprise’s revenue and half this year’s budget shortfall (deficit) that you will have to borrow to fund. But that $1 trillion is not all that you have to give your creditors, because in addition to the interest you have to pay on your debt, you have to have to pay back the principal that is coming due, which is around $9 trillion. You hope that your creditors, or some other rich entities, will either relend or lend it to you or some other rich entities. So, the debt service payments—in other words the paying back of principal and interest that you have to do to not default—is about $10 trillion, which is about 200 percent of the money coming in…
…I believe that this situation needs to be dealt with via what I call my 3 percent, 3-part solution. That would be to get the budget deficit down to 3 percent of GDP in a way that balances the three ways of reducing the deficit which are 1) cutting spending, 2) increasing tax revenue, and 3) lowering interest rates. All three need to happen concurrently so as to prevent any one from being too large, because if any one is too large, the adjustment will be traumatic. And these things need to come about through good fundamental adjustments rather than be forced (e.g., it would be very bad if the Federal Reserve unnaturally forced interest rates down). Based on my projections, spending cuts and tax revenue increases by about 4% each relative to current planning, and interest rates falling by about 1-1.5% in response, would lead to interest payments that are lower by 1-2% of GDP over the next decade and stimulate a rise in asset prices and economic activity which will bring in much more revenue…
…If this process happens repeatedly, why are the dynamics behind it not well understood?
You’re right that it’s not well understood. Interestingly, I couldn’t find any studies about how this happens. I theorize that it is not well understood because it typically happens only about once a lifetime in reserve currency countries—when their monetary orders break down—and when it happens in non-reserve currency countries, this dynamic is presumed to be a problem that reserve currency countries are immune to. The only reason I discovered this process is that I saw it happening in my sovereign bond market investing, which led me to study many cases of it happening throughout history so I that I could navigate them well (such as navigating the 2008 global financial crisis and the 2010-15 European debt crisis)…
…Do you know of any analogous cases of the budget deficit being cut so much in the way you describe and good outcomes happening?
Yes. I know of several. My plan would lead to a cut in the budget deficit of about four percent of GDP. The most analogous case of that happening with a good outcome was in the United States from 1991 to 1998 when the budget deficit was cut by five percent of GDP. In my book, I list several similar cases that happened in several countries…
…Japan—whose 215% debt-to-GDP ratio is the highest of any advanced economy—has often served as the poster child for the argument that a country can live with consistently high debt levels without experiencing a debt crisis. Why don’t you take much comfort from Japan’s experience?
The Japanese case exemplifies and will continue to exemplify the problem I describe, and it demonstrates in practice my theory. More specifically, because of the high level of the Japanese government’s over-indebtedness, Japanese bonds and debt have been terrible investments. To make up for a shortage of demand for Japanese debt assets at low enough interest rates to be good for the country, the BoJ printed a lot of money and bought a lot of Japanese government debt which led to holders of Japanese bonds having losses of 45% relative to holding US dollar debt since 2013 and losses of 60% relative to holding gold since 2013. The typical wages of a Japanese worker have fallen 58% since 2013 in common currency terms relative to the wages of an American worker. I have a whole chapter on the Japanese case in my book that explains it in depth…
…Are there any other areas of the world that look particularly problematic from a fiscal standpoint that people may be underappreciating?
Most countries have similar debt and deficit problems. The UK, EU, China, and Japan all do. That is why I expect a similar debt and currency devaluation adjustment process in most countries, which is why I expect non-government produced monies like gold and bitcoin to do relatively well.
2. From Bankruptcy to 1,000 Bagger – Joe Raymond and Turtle Bay
Toys R Us was founded in 1948 by Charles Lazarus.
Lazarus was one of the most accomplished retailers of the 1970-1990 period, yet his name is virtually unknown to both entrepreneurs and investors today. His track record rivals those of Sol Price, Sam Walton, and pretty much any other revered retail entrepreneur you can think of…
…Charles was energetic and ambitious. His initial store was profitable, but he wanted more. He saw the potential of large-scale discount stores and decided to move in that direction…
…By 1966, Lazarus had grown his store count to four. Annual revenues were $12 million ($118 million in 2025 dollars).
Like many young entrepreneurs who achieve early success, Charles wanted some liquidity. He wanted to take some chips off the table. He decided to sell Toys R Us to Interstate Stores—a publicly traded retail conglomerate.
Interstate paid $6.0 million cash plus a $1.5 million earnout ($74 million in total comp in 2025 dollars). This equated to 0.62x sales…
…More importantly, Charles was to be given complete autonomy to continue to run and expand Toys R Us…
…At its peak in 1969, Interstate was producing revenues of $589 million with $11 million of net income. But by the early 1970s, discount stores were starting to crack. Over expansion and increased competition, coupled with a sharp and sudden recession, caused many locations to turn unprofitable. Topps and White Front weren’t immune to this. Both started bleeding red ink and pushing Interstate into financial trouble…
…A business that had earned more than $11 million pre-tax in 1970 was now losing more than $25 million each year.
In late 1973, Interstate decided to shutter the discount division and restructure its department stores.
In May 1974, the company filed for Chapter 10 bankruptcy.
Meanwhile, while the discount department stores were hemorrhaging cash, Charles’ toy division was performing beautifully…
…The appeal of Toys R Us in the mid-1970s wasn’t a secret. A number of smart investors had the insight and participated in the bankruptcy.
Let’s start with Larry Goldstein…
…Larry wrote a report for Barron’s in 1975 titled “Revolution in Toy Retailing.” The report came out early in the bankruptcy and outlined the attractive prospects for Toys R Us…
…In 1974 (Year end February 2, 1975) the chain recorded sales of $141.6 million and operated 51 toy supermarket stores. Only five years earlier, Toys-R-Us had sales of $47 million…
…Reportedly, the firm has a three-year goal of $350 million in sales, i.e., roughly a doubling of this year’s expected revenue…
…Toys-R-Us appears to be by far, the most successful and thriving bankrupt company of all time…
…Shortly after writing his report, Larry started buying Interstate Stores convertible debentures and creditor claims with the idea that they would eventually turn into new common stock post-bankruptcy…
…All told, Larry cobbled together the equivalent of 2 million shares of new, post-bankruptcy Toys R Us stock. He paid between $0.25 and $2.50 per share, and his average cost came out to about $1.00…
…At $1.00, Toys common stock was being created for about 1x EBIT—an attractive price for any business, let alone one with a skilled entrepreneur and long runway ahead of it…
…What happened next is one of the best retail runs in American history.
Free from the burden of bankruptcy and the loss-making discount division, Interstate was renamed Toys R Us and Charles Lazarus was made CEO.
From 1978 to 1994, Toys grew its revenues from $274 million to just shy of $8 billion—good for a CAGR of 23%. EPS did even better, compounding at 26%.
The P/E ratio, which started the period around 5x, ended 1994 above 25x…
…Toys R Us dominated toy retailing by providing the widest selection of goods all under one roof at prices lower than the alternatives. As Charles used to say, “If the toy exists, we have it and the price is right.” Their scale and efficient distribution gave them a cost advantage, which was passed along to customers in the form of lower prices…
…Toys’ success was the product of a bunch of little “common sense” things working together well. They surfed the retail wave as good as anyone in my view from the mid-70s to mid-90s…
…Norman Ricken, the President of Toys R Us and long-time partner to Lazarus, stepped down in 1989. Norm saw the trend in competition and decided to move on. Walmart was the biggest threat at the time, and the internet wasn’t far off either.
Larry had gotten to know Norm over the years, and they were close friends. A couple years after Norm’s departure, Larry decided to start selling his stock.
Those shares he was buying in bankruptcy for $1 had an adjusted cost basis of $0.04 after multiple stock splits. He started selling shares around $40 in 1992, good for a 1,000-bagger…
…The mid-90s was the peak for Toys R Us. Sales and profitability started to level off and eventually decline. Private equity came in and leveraged the business. Things proceeded to unravel.
The fate of Toys R Us shows the power of retail competition. You have to ride the wave, or the wave will consume you. This can happen incredibly fast.
3. Google CEO Sundar Pichai on the future of search, AI agents, and selling Chrome – Nilay Patel and Sundar Pichai
One of the reasons I’m asking this, and I’m pushing on this, is that the huge investment in the capability from Google and others has to pay off in some products that return on that investment. NotebookLM is great. I don’t think it’s going to fully return on Google’s data center investment, let alone the investment in pure AI research. Do you see a product that can return on that investment at scale?
Do you think in 2004 if you had looked at Gmail, which was a 20% project, which people were internally using as an email service, how would we be able to think about Gmail as what led us to do workspace, or get into the enterprise? I made a big bet on Google Cloud, which is tens of billions of dollars in revenue today. And so my point is that things build out over time. Think about the journey we have been on with Waymo. I think one of the mistakes people often make in a period of rapid innovation is thinking about the next big business versus looking at the underlying innovation and saying, “Can you build something and put out something which people love and use?” And out of which you do the next thing, and create value out of it.
So when I look at it, AI is such a horizontal piece of technology across our entire business. It’s why it impacts not just Google search, but YouTube, Cloud, and all of Android. You saw XR, etc., Google Play, things like Waymo, and Isomorphic Labs, which is based on AlphaFold. So I’ve never seen one piece of technology that can impact and help us create so many businesses. AI is going to be so useful as an assistant. I think that people will be willing to pay for it, too. We are introducing subscription plans, and so there’s a lot of headroom ahead, I think. And obviously, that’s why we are investing, because we see that opportunity. Some of it will take time, and it may not always be immediately obvious.
I gave the Waymo example. The sentiment on Waymo was quite negative three years ago. But actually, as a company, we increased our investment in Waymo at that time, right? Because you’re betting on the underlying technology and you’re seeing the progress of where it’s going. But these are good questions. In some ways, if you don’t realize the opportunities, that may constrain the pace of investment in this area, but I’m optimistic we’ll be able to unlock new opportunities…
…A lot of what’s going on with search has downstream effects on the web, and downstream effects on information providers broadly. Last year, we spent a lot of time talking about those effects. Are you seeing that play out the way that you thought it would?
It depends. I think people are consuming a lot more information, and the web is one specific format. We should talk about the web, but zooming back out, there are new platforms like YouTube and others. I think people are just consuming a lot more information, right? It feels like an expansionary moment.
I think there are more creators, and people are putting out more content. And so people are generally doing a lot more. Maybe people have a little extra time on their hands, and so it’s a combination of all that. On the web, look, things that have been interesting and… We’ve had these conversations for a while. Obviously, in 2015, there was this famous meme, “The web is dead.” I always have it somewhere around, and I look at it once in a while. Predictions… It has existed for a while. I think the web is evolving pretty profoundly. I think that is true. When we crawl and look at the number of web pages available to us, that number has gone up by 45% in the last two years alone, right? That’s a staggering thing to think of.
Can you detect if that volume increase is because more pages are generated by AI or not? This is the thing I may be worried about the most, right?
It’s a good question. We generally have many techniques in search to try and understand the quality of a page, including whether it was machine-generated, etc. That doesn’t explain the trend we are seeing…
…Let me just broaden that out to agents. I watched Demis Hassabis yesterday. He was on stage with Sergey Brin and Alex Kantrowitz asked him, “What does the web look like in 10 years?” And Demis said, “I don’t know that an agent-first web looks anything like the web that we have today. I don’t know that we have to render web pages for agents the way that we have to see them.”
That kind of implies that the web will turn into a series of databases for various agents to go and ask questions to, and then return those answers. And I’ve been thinking about this in the context of services like Uber, DoorDash, and Airbnb. Why would they want to participate in that and be abstracted away for agents to use the services they’ve spent a lot of time and money building?
Two things, though. First, there’s a lot to unpack, a fascinating topic. The web is a series of databases, etc. We build a UI on top of it for all of us to conceive.
This is exactly what I wanted, “the web is a series of databases.”
It is. But I think I listened to the Demis and Sergey conversation yesterday. I enjoyed it. I think he’s saying for an agent-first web, for a web that is interacting with agents, you would think about how to make that process more efficient. Today, you’re running a restaurant, people are coming, dining and eating, and people are ordering takeout and delivery. Obviously, for you to service the takeout, you would think about it differently than all the tables, the clothing, and the furniture. But both are important to you.
You could be a restaurant that decides not to participate in the takeout business. I’m only going to focus on the dining experience. You’re going to have some people that are vice versa. I’m going to say, I’m going to go all in on this and run a different experience. So, to your question on agents… I think of agents as a new powerful format. I do think it’ll happen in enterprises faster than in consumer. In the context of an enterprise, you have a CIO who’s able to go and say, “I really don’t know why these two things don’t talk to each other. I am not going to buy more of this unless you interoperate with this.” I think it’s part of why you see, on the enterprise side, a lot more agentic experiences. On the consumer side, I think what you’re saying is a good point. People have to think about and say, “What is the value for me to participate in this world?” And it could come in many ways. It could be because I participated in it, and overall, my business grows.
Some people may feel that it’s disintermediating, and doesn’t make sense. I think all of that can happen, but users may work with their feet. You may find some people are supporting the agent experience, and your life is better because of it. And so you’re going to have all these dynamics, and I think they’re going to try and find an equilibrium somewhere. That’s how everything evolves.
I mean, I think the idea that the web is a series of databases and we change the interface… First of all, this is the most Decoder conversation that we’ve ever had. I’m very happy with it. But I had Dara [Khosrowshahi] from Uber on the show. I asked him this question from his perspective, and his answer attracts yours broadly. He said, first, we’ll do it because it’s cool and we’ll see if there’s value there. And if there is, he’s going to charge a big fee for the agent to come and use Uber.
Because losing the customer for him, or losing the ability to upsell or sell a subscription, none of that is great. The same is true for Airbnb. I keep calling it the DoorDash problem. DoorDash should not be a dumb pipe for sandwiches. They’re actually trying to run a business, and they want the customer relationship. And so if the agents are going across the web and they’re looking at all these databases and saying, okay, this is where I get food from, and this is where I get cars from, and this is where I book… I think the demo was booking a vacation home in Spanish, and I’m going to connect you to that travel agent.
Is it just going to be tolls that everyone pays to let the agents work? The CIO gets to just spend money to solve the problem. He says, “I want this capability from you. I’m just going to pay you to do it.” The market, the consumer market, doesn’t have that capability, right?
Well, look, all kinds of models may emerge, right? I can literally envision 20 different ways this could work. Consumers could pay a subscription for agents, and the agents could revenue share back. So that is the CIO-like use case you are talking about, that’s possible. We can’t rule that out. I don’t think we should underestimate… People may actually see more value in participating in it. I think this is… It’s tough to predict, but I do think that over time, if you’re removing friction and improving user experience, it’s tough to bet against those in the long run. And so I think if you are lowering friction for it and then people are enjoying using it, somebody’s going to want to participate in it and grow their business. And would brands want to be in retailers? Why don’t they sell directly today? Why won’t they do that?
Because retailers provide value in the middle. And why do merchants take credit cards? Why… I’m just saying. So there are many parts, and you find equilibrium because merchants take credit cards so they see more business as part of taking credit cards than not, which justifies the increased cost of taking credit cards. It may not be the perfect analogy, but I think there are all these kinds of effects going around, and so… But what you’re saying is true. Some of this will slow progress in agents just because we all are excited about Agent2Agent (A2A) and Model Context Protocol (MCP)… And we think no, some of it will slow progress, but I think it’ll be very dynamic. Yeah…
…As you synthesize more of the answers, do you think you’re going to have to take more responsibility for the results?
We are giving context around it, but we’re still anchoring it in the sources we find. But we’ve always felt a high bar at Google. I mean, last year when we launched AI Overviews, I think people were adversarially querying to find errors, and the error rate was one in 7 million for adversarial queries, and so… But that’s the bar we’ve always operated at as a company. And so I think to me, nothing has changed. Google operates at a very high bar. That’s the bar we strive to meet, and our search page results are there for everyone to see. With that comes natural accountability, and we have to constantly earn people’s trust. So that’s how I would approach it…
…What are you looking for as the next marker?
I think the real thing about AI, which I think is why I’ve always called it more profound, is self-improving technology. Having watched AlphaGo start from scratch, not knowing how to play Go, and within a couple of hours or four hours, be better than top-level human players, and in eight hours, no human can ever aspire to play against it. And that’s the essence of the technology, obviously in a deep way.
I think there’s so much ahead on the opportunity side. I’m blown away by the ability to discover new drugs, completely change how we treat diseases like cancer over time, etc. The opportunity is there. The creative power, which I talked about, which we’re putting in everyone’s hands, the next generation of kids, everyone can program and will… If you think of something, you can create it. I don’t think we have comprehended what that means, but that’s going to be true. The part where the next phase of the shift is going to be really meaningful is when this translates into the physical world through robotics.
So that aha moment of robotics, I think, when it happens, that’s going to be the next big thing we will all grapple with. Today they’re all online and you’re doing things with it, but on one hand… Today, I think of Waymo as a robot. So we are running around driving a robot, but I’m talking about a more general-purpose robot. And when AI creates that magical moment with robotics, I think that’ll be a big platform shift as well.
4. GenAI’s adoption puzzle – Benedict Evans
You could say that this is amazingly fast adoption, and much faster than PCs, the web or smartphones. 30% in two years!…
…But another reaction is say that even with those advantages, if this is a life-changing transformation in the possibilities of computing, why is the DAU/WAU ratio so bad? Something between 5% and 15% of people are finding a use for this every day, but at least twice as many people are familiar with it, and know how it works, and know how to use it… and yet only find it useful once a week…
…It’s also worth noting that when social media was a new thing we quickly realised that ‘weekly active’ and ‘monthly active’ numbers were bullshit. If someone was only using WhatsApp or Instagram once a month, it really wasn’t working for them. DAU is everything. Sam Altman knows this – he was trying to build a social media app at the time, and yet the traction number he always gives is, well, ‘weekly active users’. That’s a big number (the latest is 1bn globally)… but then, why is he giving us that number instead of DAUs? If you’re only using ChatGPT once a week, is it really working for you?…
…it’s important to remember that if you use five different LLMs every day, and haven’t done a Google search this year, and all your friends are the same… then you’re in a bubble, for now.
5. Postcard from China – Graham Rhodes
Despite its growth, China Inc. has not historically delivered good returns in aggregate for minority shareholders in publicly listed companies. That disconnect has been on my mind recently and was a frequent topic of conversation among our group. Why the gap? A few thoughts:
- Index construction is poor and does not include private firms or the wealth created pre-IPO.
- Managers often prioritise capacity-building over near-term earnings.
- 内卷 (involution, a.k.a. intense competition) creates lean survivors but depresses industry profitability.
- China has more asset-heavy businesses than elsewhere (manufacturing vs. software).
- Companies may intentionally avoid showing profits to pre-empt regulation and deter rivals…
…In contrast, many businesses in China execute extremely well and report high returns on capital, but face competition at every turn. This was tolerable while the economic pie was growing at breakneck speed. But competition has intensified as growth has slowed, making it significantly harder to underwrite long-term investments.
Investors used to come to China to ask, Where’s the most growth? Perhaps we are better off asking, Where’s the least competition?…
…Leap Motor is also growing fast.
It is a homegrown EV OEM founded by ex-employees of Dahua Technology, China’s second-largest surveillance firm. Not a bad background for an era where cars are turning into smartphones on wheels. Since 2015, Leap has grown from a standing start to USD 4.4 billion in sales in 2024. It only recently turned gross margin positive (!) but runs free cash flow positive thanks to its negative working capital – that is, its payables exceed both receivables and inventory, meaning its suppliers finance its growth.
This kind of financing lets firms scale faster than they could otherwise afford, but it also traps them in a grow-or-die dynamic…
….Leap plans to grow exponentially for the foreseeable future. The problem is, so do its peers…
…After four decades in the market, even Yum! China is finally getting serious about franchising, just like QSR operators in other countries. Why now? Because they finally believe they can maintain food safety and consistent quality at scale. Also… there’s AI. With CCTV everywhere, it’s trivial to monitor franchisees’ compliance with operating protocols around the clock…
…One of our group enjoyed asking each management team: If you had to bet your child’s university tuition on one of your competitors, who would it be? Sometimes the answers came quickly. Sometimes they squirmed.
At Leap Motor, after an uncomfortably long pause and much dissembling, the manager admitted he wouldn’t invest in any EV company long-term because consumers have no brand loyalty. At least he was honest!…
…Curiously, tariffs and geopolitics barely came up during our meetings. That may be because Shanghai isn’t as export-dependent as southern provinces like Guangdong, and most companies we met were domestically focused. Or perhaps the silence reflected fatigue and caution. In a more politically sensitive climate, executives may have been reluctant to engage in off-the-cuff discussion about geopolitics, especially with foreign investors.
Either way, this hot topic abroad was noticeable here for its absence.
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 Alphabet (parent of Google) and Meta Platforms (parent of WhatsApp and Instagram). Holdings are subject to change at any time.