The Enormous Numbers Behind Amazon’s Market Reach. A nice overview of where Amazon stands in various industries with visuals. 42% of the book retailing market, 45% of the E-commerce space, 32% of the cloud computing market, 35% of the online apparel area. From a business strategy and execution standpoint, Amazon is a remarkable success.
Death by a Thousand Clicks: Where Electronic Health Records Went Wrong. An astonishing and remarkable (long) read on Electronic Health Records in America. I urge you to have a read if you stumble upon this post of mine. Despite throwing billions of dollars at the nationwide EHR effort since President Obama’s first tenure, America has had little to show for it. I’ll let the former Vice President – Joe Biden share his story: “I was stunned when my son for a year was battling Stage 4 glioblastoma,” said Biden. “I couldn’t get his records. I’m the Vice President of the United States of America … It was an absolute nightmare. It was ridiculous, absolutely ridiculous, that we’re in that circumstance.”
Digital India. A very interesting report by McKinsey on the digital landscape in India. Sneak peek below
After popping up 8% on the first day of its IPO last Friday, Lyft’s stock dropped by almost 12% today. That’s what I find baffling about the stock market. How much of the business could change in the span of 4 days? I haven’t encountered news that could justify the drop of that size. What changed? Will it go further down tomorrow? Or will it shoot back up again? And by how much? I literally have zero idea.
Charlie Munger once said that if you want to make money by buying low, you have to know when to sell high and it’s hard. Given what I have seen so hard, he is right. You don’t know when it is “high” enough to satisfy your own greed. Some may say that determining an intrinsic value of business by discounted cash flow (DCF) will be helpful in knowing when to buy and when to sell. That’s true, but DCF itself isn’t an easy and straightforward practice. It’s really hard. Here in this clip (around 6:50), Charle (not sure if he was 100% serious) mentioned that he never once saw Warren Buffett do a DCF. Plus, a renowned expert in valuation, Aswath Damodaran, admitted that he missed the mark way off when he tried to value Uber in 2014. I once participated in an M&A competition with three of my close friends. In the course leading up to the contest and the contest itself, we had to do quite a few valuation with DCFs. The method involves a lot of assumptions and it’s more art than science. Each company requires a different approach and almost no valuation is the same. If an expert such as Professor Damodaran struggled to get it right, what are the odds of ordinary folks nailing it? My money is on the “not very high” bet.
I don’t know a perfect method in investing, but I agree with Warren Buffett that buying or selling on prices is not investing. I’d recommend these two books if you are interested in life advice and investing. Poor Charlie’s Almanack and The Most Important Thing: Uncommon Sense for The Thoughtful Investor. If you have time, read more from Charlie Munger. He is really a wealth of wisdom. Plus, you can read financial reports (SEC filings of the companies) or S-1 if companies are filing to go public and subscribe to Seekingalpha.com or Yahoo.com to read the transcript of their earning calls. Plenty of useful information can be had from such sources.
I have my own reasons to invest in the companies in my small portfolio and if I go bust, at least I will learn a ton about business and go out on my own terms.
The Big Brexit Short. I really like this kind of investigative videos by Bloomberg. I honestly don’t follow Brexit enough. Hence, it’s good to know about this potential scheme. I highly recommend you check out Bloomberg’s Youtube channel. Treasure trove of good information.
What the hell is going on. A very long, yet informative study on how the switch from information scarcity to information abundance affects business, education and politics.
Inside AirBnb’s “Guerrilla War” against Local Governments. A very good article on how AirBnb fought local governments in the US to avoid taxes and restrictions that the local lawmakers sought to put on them. I am a believer in the fact that if the law allows you to avoid taxes, you have every right to not pay taxes and stay competitive. However, fighting hard to stop new laws (laws always play catch-up with the business world) intended to make AirBnb pay taxes is a bit too far. Loss of taxes strips a local government of necessary revenue to fund projects that will benefit citizens. If your business earns millions of dollars in revenue and profit, what’s the reason for not paying taxes? Simply by “being a platform”?
The stock markets are crashing now. For quite obvious reasons. Tariffs, trade wars, the government shutdown that has no signs of being abated soon. Markets don’t like uncertainty, chaos or unpredictability.
The S&P500 has gone down by 15% since October. Apple has lost 38% of its market capitalization in the same time frame. My phone has repeatedly received notifications on the 52-week lows of the stocks in my portfolio for the past few weeks.
The knives have started falling. Should you stand still and try to catch the falling knives?
Howard argued that it is only when the knives are falling are people terrified and do the bargains show up. If we wait till the dust settles, the bargain will be gone. But when should one start buying to take advantage of the downturn? It’s up to one’s skills. Howard also cautioned that buying during the downturn isn’t enough to guarantee returns. Investors have to be right first and if investors want to outperform the markets and everyone else, they must have insights that no one has or the 2nd layer of thoughts.
If you are interested in investing and business, it is a great interview with a lot of insights. Have a listen while driving or working out or cleaning your place. It’s worth your time.
I am in the middle of the book: The Most Important Thing: Uncommon Sense for The Thoughtful Investor by Howard Marks. It looks to be a short book, but 40% in the book, I have been delighted by the concise and thoughtful insights the author shares in his words. If you are a fan of value investing or the investing philosophy made famous by Ben Graham, Warren Buffett or Charlie Munger, this book should not surprise you as many topics touched upon by Howard Marks follow the same philosophy.
One of the best lessons I have learned so far from the book is the difference between first-level thinking and second-level thinking. The goal of investing is to outperform the market and other investors. It’s not easy as information is widely accessible now, making it highly challenging to gain some insights that few others know. Nonetheless, if gained, the contrarian thinking or unpopular but correct insights will enable superior returns compared to the returns of market or other investors.
First-level thinking can be done by almost everyone. It’s “simplistic and superficial”. First-level thinkers have an opinion about the future as in “the outlook for the company is favorable, meaning the stock will go up”. Second-level thinking is deep, convoluted and complex. Second-level thinkers arrive at conclusions and forecasts that are both correct and not thought of by the consensus. But it’s hard to do so.
There are many other lessons offered in the book. I highly recommend it if you are interested in investing. After all, we can’t get rich without making money while we are sleeping, can we?