Frederick Lewis Allen chronicles the rise of big business and financial markets in the United States from the 1890s to the 1930s and how it changed the country.
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Weekend Reads – 5/9/25
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Quote for the Week
Continue Reading…The money doesn’t go to the people with the highest I.Q. There would be a very poor correlation between I.Q. and investing and results. And you say to yourself why does somebody with a 500-horsepower motor only get 100-horsepower out of it? And I would say that if you look at the intellect as being the horsepower that’s available, but you look at the output as reflecting the efficiency of that motor, it is rationality that causes the capacity to be translated in output.
Now what interferes with rationality? It’s ego. It’s greed. It’s envy. It’s fear. It’s mindless imitation of other people. I mean, there are a variety of factors that cause that horsepower of the mind to get diminished dramatically before the output turns out. And I would say if Charlie and I have any advantage it’s not because we’re so smart, it is because we’re rational and we very seldom let extraneous factors interfere with our thoughts. We don’t let other people’s opinion interfere with it. We don’t get– we try to get fearful when others are greedy. We try to get greedy when others are fearful. We try to avoid any kind of imitation of other people’s behavior. And those are the factors that cause smart people to get bad results. — Warren Buffett (source)
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Lessons from the 2025 Berkshire Meeting
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The Berkshire annual meeting this past weekend came with one surprise announcement and a host of lessons. Buffett’s retirement as CEO at year’s end came as a surprise to many. He’ll remain as Chairman while Greg Abel takes the reins of Berkshire at the start of next year. So, it’s not over yet. Hopefully, there’s a few more years’ worth of lessons to come. Let’s dive in.
Downside of Success
Size is an enemy of performance at Berkshire. I don’t know any good way to solve that problem.
The downside of successful investing, at Buffett’s level, is that decades of outperformance grow your money so large that the odds of continued outperformance becomes less likely. Simply, the pool of available investments decreases as the size of your pot grows making it harder to outperform.
It’s a good problem to have. Invest long enough, and grow your money large enough, market returns become an eventuality.
Continue Reading…
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Weekend Reads – 5/2/25
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Quote for the Week
Continue Reading…Yes, investors are right to be serious students of the markets, particularly the extremes that entice and ensnare, but markets are only part of the recommended curriculum. Know thyself is even more important, and all investors will want to recognize the central lessons of behavioral finance:
- As investors, we overreact to good news and to bad news.
- We believe in hot hands and winning streaks, and that recent events matter, even in flipping coins.
- We are impressed by short-term success, as in mutual fund performance.
- We are confirmation-biased, looking for and overweighting the significance of data that support our initial impressions.
- We allow ourselves to use an initial idea or fact as a reference point for future decisions even when we know it is just a number.
- We distort our perceptions of our decisions, almost always in our favor, so that we believe we are better than we really are at making decisions. And we don’t learn; we stay overconfident.
- We confuse familiarity with knowledge and understanding…
Investors — like dieters and teenage drivers — will be wise not to expect too much of themselves, particularly when superior personal behavior would be vital to achieving superior results. — Charley Ellis (source)
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How John Patterson Played the Business Cycle
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John H. Patterson was ahead of his time. He’s the reason why a lot of business practices exist today. In 1884, he took control of what became the National Cash Register Company and the business world would never be the same.
But before that ever happened Patterson read a book that taught him an important lesson. Benner’s Prophecies of Future Ups and Downs in Prices is exactly like it sounds.
Samuel Benner wrote the first edition in 1875, followed by 15 more editions, each one updated with new predictions on the market. He played the role of market fortune teller well.
If you look past the prophecies, Benner pushed the idea that business and prices move in cycles. It’s obvious today, but it was a new idea at the time. Which is exactly what Patterson learned:
Continue Reading…
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Weekend Reads – 4/25/25
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Quote for the Week
Continue Reading…As usual after a recession there are many people in Wall Street who expect further weakness in security prices. But I would like to point out how minor this question is in the light of long-term investment policy. Suppose, a 10 or 15% decline in prices from this level is a fair possibility, what sense would there be for the true investor to take that into account? In the first place, there is still a substantial chance that it won’t happen at all, and, in the second place, if it does happen, there is a still greater chance that he will put his buying orders too low and miss his market. All my experience indicates that the proper method to buy stocks for a particular purpose is to buy them at once, unless you have a definite reason to believe that the price level is too high. — Benjamin Graham (source)