Welcome to the end of the week! Just sit back, relax, and enjoy this weeks roundup in another edition of Happy Hour.
Lessons From Bezos
Business Insider did a great interview with Jeff Bezos, the CEO of Amazon. You can read the entire transcript. If you scroll down to the bottom, you can watch the 52 minute video. It’s a nice video for anyone interested in Amazon.
The video also had a few nuggets of great advice that can used toward investing.
Bold Bets – Amazon is built around bold bets that compensate for dozens of small failures. Bezos describes Amazon as a great lemonade stand (core business) which he uses to start new businesses – a hamburger stand, a hotdog stand, etc. Each new “stand” has the potential to become a big bet. At worst, it becomes a small failure.
The only reason bold bets work is because it’s never a “bet the company” bet. He understands none of it is possible without a solid core business.
A solid core investment strategy allows you to take a few small, bold bets that can turn into something big. If not, it’s only a small loss with a small impact on your core investment returns. But without a core investment strategy you’re always betting the farm.
Controllable Inputs – Focus on controllable inputs. Bezos knows he can’t control quarterly results since those results are due to actions made months or years ago. For Amazon, stock price, earnings, and cash flow are not controllable.
There are things Bezos can control, like lowering costs or reducing defects.
You can’t make stock prices move higher or force funds to give you better returns, but you can control your costs, your risks, and how you allocate across different funds, to give yourself the best chance of success months and years from now.
Friction – “If you want to do more of something, make the friction less. If you want to do less of something, make the friction more. If there’s a particular snack food that you like a lot, that’s making you fat, put it on the top shelf where its harder to get to. You’ll eat less of it. Don’t put it on your kitchen counter.”
Lower the friction on stuff that matter, like automating your monthly savings into IRAs and 401k’s, bill payments, and asset allocation and rebalance strategy, while adding more rules or steps to those things that hurt your finances and investment returns. If that doesn’t work, build a higher shelf.
Happy Holidays and New Year
Well, this is it. The last post of 2014. Hope you have a great holiday and a profitable new year!
I’ll be back in two weeks. See you in 2015!
- 122 Things Everyone Should Know About Investing and the Economy – M. Housel
- How to Save Money & Increase Your Happiness – A Wealth of Common Sense
- What To Expect When You’re Investing – Irrelevant Investor
- How to Build a Risk Factor Portfolio – Monevator
- Assessing an Allocation to Global Stocks – CFA Institute
- Busting the Myth About Size – Research Affiliates
- Russia Rule of Law Is Concern for Investors, Howard Marks Says (Video) – Bloomberg
- The Lessons of Oil (PDF) – H. Marks