Notes on the Snowball - Warren Buffett and the Business of Life by Alice Schroeder
( The interesting thing about reading biography - particularly this one, is that you see that every decade is a crazy decade and everyone regardless of wealth has problems.)
The market is composed of relationships
Look for book - Philip K Fisher - find his book Common Stocks and Uncommon Profits
Buffet had learned the value of gathering as much as possible of something scarce.
Look for book - Investment Companies - Wiesenberger
You should never - when facing some unbelievable tragedy, let one tragedy increase into two or three through a failure of your will - charlie munger
When things went wrong, Munger would set out toward new goals rather than let himself dwell on the negative
Know what the deal is in advance
Valuing is not the same as predicting.
His first stock deal when he was a kid taught him three lessons;
In the short run the market is a voting machine, popularity wins, but in the long term it is a weighing machine, and substance matters
He loves Dale Carnegie - rule number one - Don't criticize, condemn, or complain
The key to handicapping is to have more information than the other guy
Rules of the race horse;
Benjamin Graham's investment method was not simply about buying stocks cheap, it was rooted in an understanding of psychology, enabling its followers to keep their emotions from influencing their decision making.
3 things Warren Buffett learned from Benjamin Graham;
1.a stock is a way to own a little bit of a company
2. always use a margin of safety
3. Mr. Market's moods are not your moods, he is your servant, not your master.
Those 3 principles are essential, commitments are sacred so should be rarely used, and grandstanding never gets anything done.
Every decision has an opportunity cost.
Charlie Munger was a lawyer, but every day saved one billable hour for himself as a client.
Be fearful when others are greedy, and be greedy when others are fearful.
The more sure money tends to be made on the obvious quantitative decisions.... but really big money tends to be made by investors who are right on the qualitative decisions.
Intensity is the price of excellence.
Do not go into a business you do not understand
Don't invest in operations with major human problems
Warren Buffett is not a simple person, but he does have simple tastes.
What Berkshire, Diversified, and Blue Chip had was a homeostatic model of grafting float into a holding company so that it could respond to changing environment and utilize the power of compounding as flow and investments double over time.
Although our form is corporate, our attitude is as a partnership. We don't play accounting games, we don't like a lot of debt, and we run our businesses for the best long term results. Profits should go to build the capacity of the organization - not the opulence of the owner. He who is earning more than he spends is building claim checks for the future.
Look for an article, "The Superstars of Graham-and-Doddsville - in Hermes, Columbia Business School publication.
They define risk as losing money - not as volatility.
Old military adage - to advance a general must expose his flanks
Both Warren Buffett and Bill Gates said that the most impotant factormto success in life is Focus.
To them intensity is the price of success and excellence - discipline and passionate perfectionism.
Warren Buffett's rules;
1. Don't lose money
2. Don't forget Rule 1
3. Don't go into debt
Buffett and Munger felt using mathematical models to invest was like driving a car on cruise control, you might think you are aware and in control and you have your head in the game, but if the road changed, it became winding, or slippery, or fuill of traffic, you would like differently.
You are not right or wrong because people agree with you. You are right because your facts and reasoning are right.
"People always ask me where they should go to work, and I always tell them to go to work for whom they admire the most. It is crazy to take little in between jobs just because they look good on a resume. That is like saving sex for your old age. Do what you love and work for who you admire the most, and you've given yourself the best chance in life you can." - Buffett
"you'd get very rich if you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision would cost a punch. You would resist temptation to dabble and you would make grand decisions, and you would make more big decisions." - Buffett
We do not attain the victory of life by selfishness. Victory is for those who give themselves to causes beyond themselves. - John Danforth
Cash combined with courage in a crisis is priceless.
Invert, always invert. - Carl Jacobi ( look at problems from various angles)
Be long term greedy, not short term greedy.
A man who tries to carry a cat by its tail will learn a lesson that can be learned in no other way. - Mark Twain
When a problem exists, whether in personal or business life, the time to act is now.
(Buffett wanted new places to invest so learned the ins and outs of the Korean stock market, including their unique accounting rules.)
The ideal business is one that earns very high revenues mon capital and that keeps using lots of capital at those high returns. That business becomes a compounding machine.
I have this complicated procedure I go through every morning, which is I look in the mirror and decide what I am going to do. And I feel at that point, everybody's had their say.
Stocks are the things to own over time. Productivity will increase and stocks will increase with it. There are only a few things you can do wrong. One is to buy or sell at the wrong time. Paying high fees is another way to get killed. The best way to avoid both of these is to buy a low-cost index fund, and buy it over time. Be greedy when others are fearful and fearful when others are greedy, but I don't think you can outsmart the market.....very few people should be active investors. - Buffett
This is a letter Hunter S Thompson wrote in 1958, and it kills me. I laughed so hard when I first read it, because I can just imagine him sitting at a table typing the long winded rant at some random bill collector, and him literally believing that the bill collectors are crazy. Aren’t we all. The letter seems appropriate in this economic climate.
“Say man, what is all this? I just got back from New Orleans and the first thing I find is a threat from you people – some wild yap about jail and court and lawyers and such: what do you think I am – some kind of moneybag? Here I am trying to sell my short story trilogy, and you people hound me at every turn – howling and moaning about some idiotic debts! Who are you anyway? I never bought a damn thing from you people. What kind of rotten business are you in – that you have to hound people all over the country? I get a bunch of mail about every two or three months, and every damn time I get some, I find a threat from you!
What the hell are you trying to do, anyway? Don’t you realize that I can’t work with all this war going on us? ………….. You don’t understand the strain I am under: I am not the saem man I was a year ago. EWorrying about my work and money and jobs all the time is driving me crazy! I have to get my work published! Why don’t you talk to some publishers you know and get me an advance so I can write a novel? Then I’ll have money….then I’ll have it……..I won’t get these threats! I got a disease of some kind over in New Orleans and I can’t even go to a doctor! Everybody thinks it’s funny, but I have to get a job. ………Everybody wants to steal and drink and sex and take everybody’s money away from people who don’t even sell anything nd there’s atomic fallout everywhere and war is coming on. The whole is crazy and I don’t even have a job. You’ve got to stop threatening me! I’m not well – I have a blister on my leg and that damn disease on my stomach. I can’t even think what I want to say anymore…..this worry is driving me crazy………..Sincerely, Hunter S Thompson”
Valuing New Ventures - Notes
How do VC's, or anyone determine whether to invest in a startup.
Valuing New Ventures
Stages of Venture Capital
Startup/ Concept (prd dev.) 1st round – 100% return
Expansion and mezzanine/ prototype – mkt dev. 2nd and 3rd round – 50 to 60% return
IPO/ working product and happy customers – 25 to 40% return
3 ways to get your money out of the Start Up;
or, stay in, why get in a business you wouldn't want to be in.
Among the writings Jack Kerouac set down specifically about his Spontaneous Prose method, the most concise would be Belief and Technique for Modern Prose, a list of thirty “essentials”.
1. Scribbled secret notebooks, and wild typewritten pages, for your own joy
2. Submissive to everything, open, listening
3. Try never get drunk outside your own house
4. Be in love with your life
5. Something that you feel will find its own form
6. Be crazy dumbsaint of the mind
7. Blow as deep as you want to blow
8. Write what you want bottomless from bottom of the mind
9. The unspeakable visions of the individual
10. No time for poetry but exactly what is
11. Visionary tics shivering in the chest
12. In tranced fixation dreaming upon object before you
13. Remove literary, grammatical and syntactical inhibition
14. Like Proust be an old teahead of time
15. Telling the true story of the world in interior monolog
16. The jewel center of interest is the eye within the eye
17. Write in recollection and amazement for yourself
18. Work from pithy middle eye out, swimming in language sea
19. Accept loss forever
20. Believe in the holy contour of life
21. Struggle to sketch the flow that already exists intact in mind
22. Don’t think of words when you stop but to see picture better
23. Keep track of every day the date emblazoned in yr morning
24. No fear or shame in the dignity of your experience, language & knowledge
25. Write for the world to read and see your exact pictures of it
26. Bookmovie is the movie in words, the visual American form
27. In praise of Character in the Bleak inhuman Loneliness
28. Composing wild, undisciplined, pure, coming in from under, crazier the better
29. You’re a Genius all the time
30. Writer-Director of Earthly movies Sponsored & Angeled in Heaven
7 tenets of Plasticity ( From the brain Fitness Program)
1. Change can only occur when the brain is alert and engaged.
2. Positive Change strengthens connections between neurons engaged at the same time towards a model of perfection.
3. Neurons that fire together wire together.
4. Initial changes are just tempoary. Incremental engaged steps, bit by bit produce lasting knowledge.
5. Brain plasticity can be positive or negative (bad habits)
6. Memory is crucial for learning and can be improved.
7. Motivation is key. (Engaged)
Be in good shape, healthy heart means a healthy brain.
Training should be incremental
Training needs to be taxing and systematically improving
It needs to be interesting to motivate
Haruki Murakami (What I Talk About When I Talk About Running
"People sometimes sneer at those who run every day, claiming they'll go to any length to live longer. But don't think that's the reason most people run. Most runners run not because they want to live longer, but because they want to live life to the fullest. If you're going to while away the years, it's far better to live them with clear goals and fully alive then in a fog, and I believe running helps you to do that. Exerting yourself to the fullest within your individual limits: that's the essence of running, and a metaphor for life — and for me, for writing as whole. I believe many runners would agree"
— Haruki Murakami (What I Talk About When I Talk About Running
"You make what you measure...Merely measuring something has an uncanny tendency to improve it. If you want to make your user numbers go up, put a big piece of paper on your wall and every day plot the number of users. You'll be delighted when it goes up and disappointed when it goes down. Pretty soon you'll start noticing what makes the number go up, and you'll start to do more of that. Corollary: be careful what you measure."
Black Swan - by Nassim Taleb - Notes Part 1
Nassim Taleb is much funnier than he is given credit for, it is hard to read this book with out smiling. ( For ex. We know if someone has killed someone they are a killer, but if meet someone we do not truly know one way or the other that they are not killers.)
Taleb is setting up the problem of a practical framework around the philosophical problems around the fact that we know much less than we think we do, and that the past should not be used naively to predict the future.
Knowledge, even when it is exact, does not often lead to appropriate actions because we tend to forget what we know, we forget how to process it properly if we do not pay attention.
In beginner's mind we have many possibilities, but in expert mind there is not much possibility.
People say, "To study Zen is difficult," but there is some misunderstanding why it is difficult. It is not difficult because to sit in cross-legged position is hard, or to attain enlightenment is hard, but it is hard to keep our mind pure, and to keep our practice pure in original way. Zen become more and more impure, and after Zen school established in China it is development of Zen, but at the same time it become impure. But I don't want to talk about Chinese Zen or history of Zen this morning, but why I say I want to talk about why it is difficult is because just you came here this morning, getting up early is very valuable experience for you. Just you want to come is very valuable. We say, "Sho shin." "Sho shin" means "Beginner's mind." If we can keep beginner's mind always, that is the goal of our practice. We recited Prajna Paramita Sutra this morning only once. I think we recited very well, but what will happen to us if we recite twice, three times, four time, and more? Then we will easily lose our attitude in reciting -- original attitude in reciting -- the sutra. Same thing will happen to us. For awhile we will keep our beginner's mind in your Zen practice but if we continue to practice one year, two years, three years, or more, we will have some improvement, and we will lose the limitless meaning of the original mind. In beginner's mind we have many possibilities, but in expert mind there is not much possibility. So in our practice it is important to resume to our original mind, or inmost mind, which we, ourselves -- even we, ourselves do not know what it is. This is the most important thing for us. The founder of our school emphasized this point. We have to remain always beginner's mind. This is the secret of Zen, and secret of various practices -- practice of flower arrangement, practice of Japanese singing, and various art. If we keep our beginner's mind we keep our precepts. When we lose our beginner's mind we will lose all the precepts.
And for Zen students the most important thing is not to be dualistic. We should not lose our self-satisfied state of mind. We should not be too demanding, or we should not be too greedy. Our mind should be always rich, and self-satisfied. When our mind become demanding -- when we become longing for something, we will violate our precepts, not to kill, not to be immoral, not to steal, or not to tell lie, and so on. Those are based on our greedy mind. When our mind is self-satisfied we will keep our precepts. When we ourselves is always self-satisfied, we have our original mind, and we can practice good, and we are always true to ourselves. So, the most difficult thing is to keep our beginner's mind in our practice. So, if you can keep your beginner's mind forever, you are Buddha. In this point, our practice should be constant. We should practice our way with beginner's mind always. There is no need to have deep understanding about Zen. Even though you read Zen literature you have to keep this beginner's mind. You have to read it with fresh mind. We shouldn't say, "I know what is Zen," or "I have attained enlightenment." We should be always big enough. This is very important. And we should be very, very careful about this point.
I was very much impressed by your practice this morning. Although your posture was not perfect, the feeling you have here is wonderful. There is no comparison to it. At the same time we should make our effort to keep this feeling forever in your practice. This is very, very important. In Japanese art -- when you master some art -- when you become successor of your master, you will receive some paper on which something is written. No one know what it is. It is very difficult to figure out what it is -- to explain what it is. But if you have beginner's mind, it's all right. If you can say, "Thank you very much," that's enough. But this is very difficult. So by your practice we must make our beginner's mind more and more -- we should appreciate beginner's mind. This is the secret of practice. Zen practice.
Nonfiction Books that have rewired my Brain
Every once and a while we are lucky enough to come across a book that changes the way we live and the way we think. It seems to me that we are often searching for something, and synchronicity then steps in and throws that something to us, sometimes by us browsing in a book store, sometimes it is when someone lends us a book, or we are just plain lucky enough that the book or knowledge finds us.
The Black Swan - Nissim Nicholas Taleb
I had to read this in short bursts, as I would stop, make some notes, reread to make sure I understand, and then realize what I thought before I read this book was wrong. He writes of random events, those that change everything, and how we cannot predict them and how anyone who thinks they are predicting them is wrong. Basically we are predicting in a box with imperfect data. When I was getting my MBA, it used to bother when we would use forecasting models like Black-Scholes, and everyone acted as if it was fact, but it was so diluted and so many things were excluded that it was obvious to me that it was a model that functioned only in a vacuum. We don't live in a vacuum. This book made me realize I wasn't wrong. I will post some notes on this work later, but the short of it is, read it and think.
Out of Control - Kevin Kelly
This book is brilliant and hits artificial intelligence and life, networks, insects, swarms, you name it. and it has left me so that I see the world today as a series of networks making collections of networks all run by a few lines of rules or code. I see companies and its groups as connected network hubs, and when you realize that artificial life can be summed up in a few simple rules, you realize everything can be reduced to a simple form. You make the rules, and let the network run. The game is to find the rules.
The Four Hour Workweek - Tim Ferriss
This book did it and I didn't expect it at all. Sold as a productivity book, it really just takes some old business books, like Dan Kennedy's and Gerber's, and then takes Pareto's and Parkinson's law and updates them. It is good but not that unique. What threw me was the way he deconstructs everything, which is brilliant. He takes complicated scenarios or events and using Pareto's law and some grounded intelligence, and some basic good logic ( does anyone take logic anymore? Most useful class I ever took) and then finds a way to make it happen. He made me disbelieve the 10,000 hour rule. He also said something that made me change my career. We are all raised to think there is something out there we are supposed to be. "What are you going to be when you grow up?" is stated over and over, and most us don't ever really know, and as we get older we think we somehow missed it. He states what we do for money isn't the goal for our life, and we should minimize the intrusion, and then we live the rest of our life.
Walden - Henry David Thoreau
Read this twice as a High School student and at least twice as a college student, and then read it during the summer as a lark and now that I am older and I realize that I had just read the book before, but now I understand it and what he means. Thoreau understood simple basic true rules of life;
Own things, don't let them own you, most men let the world own them
Take care of the world, its our home
The world is just as fascinating in the mile from your house as it is one thousand miles away.
And there are more, many more.
It takes a few pages to get used to the way he writes but once you are in sync he is brilliant.
Enter the Steam - edited by Samuel Bercholz and Sherab Chodzin Kohn
A book of essays on Buddhism I picked up while in Las Vegas during one of those years when little goes right, and most things made no sense. It opened a new world for me. Not the best book I ever read on the subject, but the one that got me started.
To be clear right off, it is not a religion to me, and I don't believe Buddha was one of a thousand Buddhas or that light came out, that he levitated, or that nirvana is an actual place. He was just a man but that is what makes him special. he is just a very smart man who found a better way to live, and if he can do it, so can we.
I believe he was a brilliant man, who ignored the cultural binds of his time. Who understood that we are not stable consistent beings, and that we are all interconnected, and that we all strive to keep an ever changing world in stasis. And that makes us struggle and unhappy.
I will write more on the subject, but simply said, there is more to the world than the hours upon hours I have spent studying Western Philosophy and literature. The story about fish swimming about not knowing they are in water, they think that water is all there is, and that is exactly us, we forget how much our culture limits our world.
All five authors did the same thing, they showed the world was more than I thought, and they each showed the limit of my education and of the way my culture dictated my view of the world.
After each, it became a new paradigm, a new world.
“We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.
— Charles T. Munger”
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