Insights

The book provides a collection of tools for minimizing bias, so decisions and forecasts are made in a rational fashion. The author catalogues frameworks developed over six decades of working with U.S. intelligence agencies where poor analysis can result in lost lives. While our decisions do not have fatal consequences, they can impact the financial lives of our clients, something we feel the utmost responsibility of protecting. This book aided us in our never-ending quest of improving the way we process and act upon information.

With the arrival of a bitcoin ETF this month, we thought we would share some of our favorite books and sites on the topic. Some of us find it particularly fascinating, especially as the daily bitcoin production will decline from 900 bitcoins per day (well below the 7,200 bitcoins per day when the illusive Satoshi Nakamoto developed Bitcoin during the GFC) to just 450 bitcoins per day in April 2024; dramatically increasing bitcoin mining breakeven costs. Macroeconomic analyst and electrical engineer by training, Lyn Alden, provides the most comprehensive deep dive into the topic with her Broken Money book, but we suspect many investors are looking for easier reads. We enjoyed these quick, but technical, reads from a software developer and an engineer to provide a basic understanding of how the network works. Many hard money advocates and Austrian economists suggest the financial world struggled through the Bretton Woods era (reads like a Russian spy novel), completely lost its mooring when the economy lost its connection to gold in 1971, and dream of a Bitcoin Standard. Professors, financial advisors, and entrepreneurs have written interesting books on the topic, tried to model its value, and develop helpful sites for potential investors.

One of our favorite investors, the recently deceased Charlie Munger, clearly appreciated Yew’s teachings as his home contains just two busts: one of Benjamin Franklin and the other of Lee Kuan Yew. In this podcast, Munger described him as “the greatest nation builder that ever existed, including Pericles and everybody in all history. ”For those of us that have yet to tackle the very well-regarded From Third World to First: The Singapore Story: 1965 - 2000, this book may serve as a handy 'warm-up.' Yew led a small island-nation in Southeast Asia in 1965 with a very diverse population into one of the economic centers of the world. This book presents his views on topics ranging from China’s ambitions to the United States’ superpower status and his preference for following 'what works.' Investors should be eager to study an individual that Henry Kissinger described as “a man of unmatched intelligence and judgment.”

We have invested in grocery stores for many years. We appreciate 'boring' but necessary businesses that generate consistent profits. The author brings the industry alive with exhaustive research and eye-opening examples. It begins with the story of legendary Trader Joe(Coulombe) and his historic impact on the business, particularly his obsession with private label. Readers learn about the difficulties of the truckers that serve the industry, the growing power of massive stores like Kroger overbrands, and how a once-considered delicacy, like shrimp, can become available to the masses. We enjoyed the book and walked away with more conviction in our grocery store investments.

As of mid-2023, the author’s fund has beaten the MSCI World index by ~300 bps per annum over the past 27 years. Seilern invests exclusively in ‘exceptional’ companies – “only the best is good enough,” he writes. There are only ~60 or so global companies that meet his strict quality requirements, which include strong balance sheets, high ROICs, market leadership in growing industries, and a sustainable competitive advantage. His portfolio then includes 25-30 “reasonably priced” quality companies.

As interest rates have staged a historic rise from 5,000-year lows over the past approximately 18 months, investors will be well served reading this book. The author traces the history of interest back to the ancient world and provides timely context as to what higher rates may mean in the future. For instance, noted English philosopher John Locke foreshadowed the past 15 years when he wrote in 1691 that low rates could lead to hoarding, declining money velocity and deflation, wealth distribution from savers to borrowers, and a misallocation of capital. The esteemed editor of The Economist, Walter Bagehot, seemed to sum up the past 15 years when he wrote in 1852 that “John Bull can stand many things, but he cannot stand two per cent.” Will higher rates lead to higher velocity, stronger productivity, and economic growth? Or will it follow the U-shaped curve of interest rates in ancient Babylon, Greece, and Rome that declined as each civilization prospered and then rose sharply during periods of decline and fall?

For those investors considering the energy sector and seeking a deeper understanding of the current status of the climate debate, we recommend several books. Perhaps the most balanced review was Unsettled, written by physicist Dr. Steven Koonin, President Barack Obama’s Undersecretary for Science in the Department of Energy. Dr. Koonin acknowledges that humans exert a growing, but small warming influence on the climate, but most climate models disagree/conflict with each other, and the media does a poor job of presenting the findings. Michael Shellenberger’s Apocalypse Never and Bjorn Lomborg’s False Alarm both push back on climate extremism and argue for a rational and thoughtful approach to the issue. We also enjoyed Meredith Angwin’s Shorting the Grid to learn more about what the transition means for our national grid. For a full-throttled bullish case for fossil fuels, we think most investors will learn something new in Alex Epstein’s The Moral Case for Fossil Fuels and his more recent Fossil Future.

The Pulitzer Prize-winning authors record Robert Oppenheimer’s remarkable life in fascinating detail with many subtle insights applicable to high-achieving investment teams. As the “father of the atomic bomb,” Oppenheimer’s historic success at Los Alamos began with a strong intellectual foundation and thirst for a wide range of knowledge. He was the most celebrated theoretical physicist of his time (and worked with Einstein, Feynman, Bohr, Dyson, etc.), but it was his ability as a charismatic leader to bring out the best in others that led to the Manhattan Project’s (MP) success. Perhaps it was his love for psychology that allowed him to successfully interact with difficult and/or different people such as the MP’s military leader General Leslie Groves. We think the best investment leaders often exhibit many of Oppenheimer’s best traits: raw intelligence, passion, ambition, and humility.