Vaclav Smil digs through the history of invention to focus on the failures — the innovations that started out promising but ended disastrously, that were the next big thing but fell far short of the hype, or have been overhyped for decades but are still more science fiction than reality — and the lessons that can be learned from it.
Weekend Reads – 3/8/24
Quote for the Week
Psychologists tell us, and I fear with more truth than most of us realize, or would willingly admit, that human conduct in general is influenced more by emotion than by reason, and that this is true even when we rationalize most successfully, or in other words, fool ourselves into believing that we are logically thinking things out. On the side of emotional appeal, as applied to our present problem, it is hardly necessary to dwell on the well-known gambling instinct, so generally implanted in human nature, and currently evidenced in so many different ways, from the operation of “bingo” games to help out the church budget to the spread of legalized betting on horse races. I will add only that the gambling instinct is perhaps most insidious in its appeal when the victim can persuade himself, as wishful thinking apparently makes it easy to do, that he is engaged in legitimate investment transactions.
Closely related, though not identical, is the seductive lure of easy money—big profits, the thought of which too easily blinds the eyes to the accompanying risks; and this perhaps, even more than the gambling instinct, lends itself to the powerful and dangerous influence of wishful thinking. — Henry Dunn (source)
Surviving the “Averages”
There are averages but relying too much on the “average” can lead to ruin. And uncertainty is behind it all.
A good example of this was laid out in an old book about making investment decisions on drilling oil wells. It turns out, wildcatting is a risky endeavor.
A wildcatter can gather every bit of information possible but they’ll never be certain if there is oil under the ground until they drill. The key to successfully drilling oil wells is to not bet so much money on any single well that a string of bad bets ruins you. Continue Reading…
Weekend Reads – 3/1/24
Quote for the Week
My general idea is, there’s no point in fretting too much about what you can’t fix. It’s a big mistake to fill yourself with resentments and hatreds and so on. And it’s such a simple idea but so many people ruin their lives unnecessarily. It’s like — envy is such a stupid thing to have because you can’t possibly have any fun with that particular sin. Who in the hell ever had any fun in envy? What good could envy possibly do for you? And somebody is always going to be doing better than you are. It’s really stupid. My system in life is to figure out what’s really stupid and then avoid it. It doesn’t make me popular, but it prevents a lot of trouble. — Charlie Munger (source)
Lessons from the 2023 Berkshire Letter
Berkshire Hathaway released its annual letter this past weekend. Warren Buffett began the letter with a nice tribute to Charlie Munger.
The tribute may be the first lesson from the letter on humility and the importance of having a great partner, which I urge you to read (find a link at the end). The rest of the lesson from this year’s letter can be found below. Let’s dive in.
Markets and Fundamentals Fluctuate
I can’t remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good. The Dow Jones Industrial Average fell below 100 on that fateful day in 1942 when I “pulled the trigger.” I was down about $5 by the time school was out. Soon, things turned around and now that index hovers around 38,000. America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one.
It is more than silly, however, to make judgments about Berkshire’s investment value based on “earnings” that incorporate the capricious day-by-day and, yes, even year-by-year movements of the stock market. As Ben Graham taught me, “In the short run the market acts as a voting machine; in the long run it becomes a weighing machine.”
What the market does over days, weeks, and months often diverges from how it performs over decades. The contrast becomes obvious when you zoom out. As Buffett explains, the solution is often best to ignore the short-term swings that cause investors to act against their long-term best interests. Continue Reading…
Weekend Reads – 2/23/24
Quote for the Week
The key is to save as much as you can, as early as you can. And if you’re willing to put money into tax-deferred savings accounts, like a 401k or your own IRA, you can build up a sizable nest egg for your retirement. Savings is the key to creating wealth. If you do a mediocre job with lots of savings, it’s better than doing a very good job with a small amount of savings. — Peter Lynch (source)
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