Multi-Disciplinary Reading - Book Reviews

[shardhr]

Nice work Arjun. . Brilliantly summarised.

Just 1 correction needed :- No insight is required on qualitative side, “the figures
should hit you over the head with a baseball bat”.

This should be No insight is required on QUANTITATIVE side.

[phreakv6]

Flash Boys, Michael Lewis, 2014 - The author has a penchant for taking a technical topic and weaving a narrative bordering on qualities of fiction around it (of having a protagonist, rooting for the underdog, heroism, 3rd act and climax sort). Here too he does the same but the book was lot less readable in the second half, compared to something like liar’s poker. He does however simplify dark pools, frontrunning, how milliseconds matter, US exchange regulations, at a high level for the lay reader and that is very commendable even if its at the cost of accuracy in parts.

Bulk of the book is about the origin and ideology of IEX which was a lot less relevant and interesting. As far as the relevance of the book goes to Indian markets - I think its very relevant although dark pools may be irrelevant in the Indian context. However, HFTs and riskless front-running (risk-free arbitrage) has a definite existence in the Indian markets (Read about the NSE co-location scam). This may also be prevalent when your broker has a trading desk of their own - The broker essentially has knowledge of your orders be it limit or market, your stops and at least theoretically can have an edge to front-run.

As an aside, I had ordered this on Amazon as the hardcover price was a steal but turns out seller listed it as New by mistake and it was Used. The seller, an old man from Rajasthan called up before dispatch to apologize profusely at his fault in a very thick Rajasthani accent (Could tell, having lived a while in Pilani). I told him it was alright and to go ahead and send it as the price was good even for a Used hardcover at Rs.250. He sent a note and another free book in the dispatch - Such old-world charm. This is an average book but if you are interested in the technical nuances of what happens (or can happen) when you transact, this book can be engaging, at least in the first half - 7/10

[phreakv6]

How to fail at almost everything and still win big, Scott Adams, 2013 - This is one of the best self-help books you can find since its filled with actionable advice rather than banal generalities. This book also has a vast range and depth although it tries to pretend otherwise. The author (of Dilbert fame) has an uncanny ability to simplify complex behavior and that is just the sort of thing that works so well here.

My notes on the book here (paraphrased) -

• have a cozy relationship with failure. invite it. survive it. appreciate it and then mug the shit out of it

• success causes passion more than passion causes success. in other words, passion in bullshit. passion is simply knowing you will be good at something.

• timing is biggest contributor to success and you can’t get it right. trick is to try various things until luck finds you (Adams has a boatload of failed ventures listed with pride)

• goals are for losers, use systems. (losing 20 pounds is a goal, eating right is a system)

• your job is not your job, your job is to find a better job (example of above-mentioned simplification)

• selfish people are a net benefit to society (not the grab the last doughnut variety of selfishness)

• focus more on the energy levels of foods, activities (avoid foods that bring your energy level down and do more activities that keep your energy level up)

• physical environment as a user-interface to the brain (this is very useful way of thinking in terms of sitting right, avoiding tv before bed etc.)

• do lots and lots of flash research (1 min google searches)

• have a realistic understanding of what it takes to be good at something (most people give up because they don’t have realistic expectations on the effort)

• be good at something and let that feeling propel you to new and better victories. success is habit-forming

• author thinks affirmations work and thinks its a way of managing your illusions wisely.

• where there is a tolerance for risk, there is often talent (author would draw comics at a young age making fun of teachers and friends, risking physical harm)

• things that will work out someday start out well. things that will never work start badly and stay that way (another one of author’s excess simplifications - he knows the base rates)

• quality of early products is a poor predictor of success. better predictor is that customers were clamoring for bad versions of a product.

• its naïve to expect the avg. person to embrace endless practice in search of long-term success. (people already with some talent, have the passion and hence practice - circular argument but is very true)

• every skill you acquire doubles your odds of success (no one has ever simplified it this well)

• the more you know, the more you can know

• life skills everyone must have - public speaking, psychology, business writing, accounting, design, conversation, overcoming shyness, second language, golf, proper grammar, persuasion, hobby level technology, proper voice technique

• if your view of the world is that people use reason for important decisions, you are setting yourself up for frustration

• we’re all born with a limited range of happiness and life can only jiggle us within that range (have always believed this)

• the feeling of progress stimulates your body to create chemicals that make you feel happy

• focus on fitness and eating right (have a system to be active everyday and make healthy foods tastier rather than punishing yourself)

The book also delves a bit into self-proclaimed quack theories of hypnotism and affirmations as the author only talks about what works for him and not try to decipher the why in an attempt to force it on others. Overall this is a very enjoyable and humorous book that I think everyone must read. 10/10

[phreakv6]

The Power of Habit, Charles Duhigg, 2012 - Have come across the topic of habit formation in several books but none dedicated to the subject in such immaculate depth. We get over the basic and most important concept of cue-routine-reward habit loop fairly early in the book. It was fascinating that a man with severe brain damage that he couldn’t form any new memories or recollect old ones could still find his way back home, purely due to the way habit works. Not everything we do requires conscious thought and in fact a bulk of what we do day-to-day is simply cue-routine-reward actions.

The habit loop has been successfully utilized by several businesses in the past few decades, for selling everything from toothpastes, fabric fresheners, sodas to burgers by engineering habit loops embedded with a craving component in the individual and in societies. Once you become conscious of what normally happens without thought, you are bound to discover that your life is just one huge mass of habits. It is however possible to engineer changes, especially if the habit is one that’s harmful. The idea is to find the cue which can vary from boredom, to time of day, to physiological craving to ads and keeping the reward same, changing the routine consciously (Alcoholics Anonymous being the poster boy of one such, is discussed in depth in the book to see why it works, despite lacking in conventional scientific evidence).

One of my favorite chapters in the book was on Paul O’Neil’s transformation of Alcoa (Aluminum company of America) by focusing on worker safety and how and why it transformed several metrics of the business from profitability to efficiency, although it appeared to its shareholders as counter-productive to the bottom-line when he took over. Keystone habits are one such where a small change in part of an organization/individual can impact several different parts by producing small gains that results in a gigantic whole (Exercise being one such - the endorphins could keep you away from nicotine and alcohol, eating right, sleeping right, waking early, focusing better and being productive etc.). In Alcoa, it turned out that to improve safety with zero casualties meant older equipment had to be phased out, safely working with molten metal needed efficient ways of doing things and handing over the reigns of plant shutdown in case employees were overworked to the workers, rather than management and so on - all of which improved productivity in different forms - being safe turned out to be a classic keystone habit for Alcoa.

The importance of change of environment (most habit changes occur when on vacation), or crises (very easy to break habits in a crisis) are also discussed with several useful examples. Starbucks and Target are also discussed in depth in terms of what habits are fostered on the employees (Starbucks) and what habits are exploited (Target) in the Customers in terms of predicting buying patterns and also nudging behavior towards products. At this point you are bound to wonder, if habits are so out of our control and are driving most of our decision-making, how much of a say do we even have as conscious human-beings? I think the most important thing is to acknowledge the destructive and manipulative power of habits and not be too harsh on ourselves, while striving to re-engineer ourselves consciously by removing bad routines when cues are unavoidable and also by engineering constructive habit loops - the ones that make becoming a better individual non-negotiable. This is a must read. 10/10.

[arjunbadola]

To contribute to the thread here are my notes on the book “The Thoughtful Investor” by Basant Maheshwari.

I feel even though book is designed in such a way that it should be for beginners but I would not recommend it to a beginner. There will be a lot of things you won’t agree on in this book.

Notes_on_The_Thoughtful_Investor_by_Basant_Maheshwari.pdf (139.6 KB)

[phreakv6]

The Goal, Eliyahu M. Goldratt, 1984 - What a weird book. This is supposed to be a novel but its about running a manufacturing plant efficiently. This is aimed at managements of businesses that run manufacturing plants. However, anyone who loves reading balance sheets, especially at working capital trends is bound to love this book (so yeah, not for everyone). The primary concept behind the book is one of “lean manufacturing” which in turn is based on the theory of constraints. Toyota Production System (TPS) made this quite famous with their just-in-time manufacturing and they were so proud of it that they would invite competitors to visit their plants to learn from them.

The book is very harsh on Cost Accounting and rightfully so, since it promotes local efficiencies, rather than that of the entire business. The primary takeaway is that businesses must focus on bottlenecks, and focus on throughput (not as a measure of what a factory can produce, but in terms of aligning output to market demand). This would avoid piling up of inventory, in terms of producing something just to keep the machines running and people busy, all in the name of efficiency. This locks up a lot of firm’s resources in working capital. So the author views Inventory not as an asset but as a liability. This inversion in thought produces some very counter-intuitive moves like allowing large parts of the plant to be idle, selling below cost, reducing batch sizes despite local inefficiencies and so on. These were the parts I thoroughly enjoyed, along with the part where Rogo goes on a hike with boy scouts and figures out the dependencies and statistical fluctuations in the way the group was moving on a hike (phenomenal analogue).

This is probably one of the hardest books to recommend since its probably the worst fiction I have ever read, as it has zero character development - the characters are just inner voices of the author playing the Socratic method (collaboratively asking questions and finding answers) and its relevance is very limited to people that run manufacturing plants or people who have never run one but invest in some and hence would like to visualize the relationship between inventory, sales and operating margins (Anil Lamba’s Romancing the Balance Sheet does a phenomenal job on these as well) or if you loved this subject called “Operations Research” in college. This is good content written in a clunky, repetitive and tedious fashion. 8/10

[bhavveshh]

Its a good book- i liked it. However, on habits, I think Atomic Habits by James Clear is a class apart.

[lingalarahul7]

The Moonshot Game.
Read back in June, just revising.

Notes:

TheMoonshotGame.pdf (74.2 KB)

Review:

Started with low expectations but enjoyed a lot and completed it in just three sittings!

Positives:

The book has lots of Indian startup stories starting from 2006. The range of these stories is very wide. Some examples include:

1. Smooth investment without too much of a bumpy ride and the company going public (MakeMyTrip)
2. CEO getting arrested after three months of funding (ShopClues)
3. VC investors throwing a spanner in the works and making the life of founder very tough (Spandhana Spoorthy)
4. Merging startups due to unprofitable competition and unexpected outcomes (Hoopos+BabyOye=FirstCry; LetsBuy+Flipkart=Flipkart)
5. Political interference in mass businesses (Micro-finance crisis in 2010)

These kind of wide possibilities suggest how risky venture capital is.

Appreciate the author has covered the cycles of venture investing, especially the years of 2013-16.
Sad to know that the author’s fund (Helion) is now closed. Having said that, the author experienced good success through Helion’s three funds.

Negatives:

The book has very low coverage on valuations. I still don’t understand why Indian startups are so ultra-valued, even after the venture business’ down-cycle of 2015-16.

For example, I’m still unable to comprehend PayTM’s valuation of $15 billion with its revenue less than $0.5 billion, its growth flattening and losses more than doubling in FY19. For a comparison, India’s largest private bank (HDFC Bank) is valued by the stock market in the range of $75 billion whose revenue is $15+ billion, growing at 20% per year on average and profitable with 20%+ Net Profit Margins.

As an outsider, I may have limited understanding on PayTM’s business, but the valuation numbers in the startup space don’t even pass the common sense filter! PayTM is not alone. So I was hoping some coverage on valuation reasoning in the book.

[biju_john]

This is a book recommended for folks specializing in operations while doing their MBA. Good book if you are in the manufacturing sector

[Ansh_Gupta]

Recently re-read this book, have found it really useful as a beginner book to understand the concept of money/investing/being “rich”

The book is an easy read and is based on the author’s (Robert Kiyosaki) early life where he has his real dad (often called the “poor dad”, a normal salaried individual who always complains about money) and his friend’s dad (often called the “rich dad”, who is a businessman).

The book talks about 6 lessons that the “rich” follow, below is the summary of points that I found interesting:

Lesson #1- The Rich Don’t Work for Money, (Poor and Middle Class Do)

• When Robert was a kid, his Rich dad first offers him to teach about money by paying him 10 cents an hour (a very low amount), every Saturday for three hours for dusting and stocking shelves at his grocery store

• After three weeks, Robert grows tired and decides to quit or ask for a raise and that’s when his rich dad explains to him about paychecks, taxes, financial struggle people do all their lives with paycheck

• Rich dad offers him to teach about money, now working for 0 cents an hour, because more money would still not have solved any problem because of lack of understanding of how money really works

• Rich dad offers the kids (Robert and his friend) $5/hour and the kids get really excited but say “no”, then the rich dad emphasizes the need to control ‘fear’ and ‘greed’. The ‘fear’ of not having enough money and the ‘desire’ of having a large paycheck that would solve all financial problems.

• The kids start working for free and of the used comic books at their store, they start a reading library and generate money. Work for free (or don’t count your paycheck as the sole source of your income) so your mind is forced to think how to generate money.

Lesson #2- Financial Literacy

• The rich buy assets, the poor and middle class buy liabilities thinking they’re assets

• An asset is simply that puts money in your pocket and liability draws money out of your pocket

• A house is a liability and the bigger it is, the more monthly expense you occur. Also missed are the opportunities to invest in other money making assets

• The rich get richer because their assets (balance sheet) generate income (P&L)

• Poor’s expenses increase in equal increments as their wages, hence ‘rat race’

• Wealth can be defined as ‘how many days can I survive if I stopped working today’, it is a more useful concept than being ‘rich’

Lesson #3- Mind Your Own business

• Understand the difference between ‘business’ and ‘profession’, business is how you generate money from assets and profession is how you generate income

• McDonalds is in the profession of selling burgers and the business of real estate

• The reason ‘net worth’ is not accurate is because you are taxed on your asset gains and also because many personal assets sell for less value

• The Rich buy luxuries only after they’ve generated money from their assets to pay for it, unlike the poor and middle class that buy on credit

Lesson #4- The History of Taxes and the Power of Corporations

• When the tax system began, the Rich started using the power of ‘corporations’ , like the income tax of corporations was much lower than personal income tax

• Rich look for financial instruments/policies to minimize their tax burden, eg 1031

• Financial IQ is made up of knowledge from four broad areas of expertise:

1. Accounting

• Left brain side

• It is the ability to read and understand financial statements, which helps in identifying strengths and weaknesses of any business

2. Investing

• Right brain side or the creative side

• It is the science of money making money, involves strategies and formulas

3. Understanding Markets

• It is the science of supply and demand

4. Law

• Tax advantages, like an individual is taxed on his/her earning and a corporation first pays expenses and is taxed on whatever profit is left

• The book ‘inc and grow rich’ explains the power of personal corporations

Lesson #5- The Rich Invent Money

• It is excessive fear and self-doubt that are the greatest detractors of personal wealth

• So many people know the answer but lack the courage to act on it and in the real world, it’s not the smart that get ahead but the bold

Investors can be categorized into two types:

• Investor 1- The person who buys packed instruments like mutual funds, reit etc
• Investor 2- The person who creates investments, like buying the overlooked house/stock which is actually a bargain

While being investor 1 is fine, investor category 2 is actually where huge gains are and it takes time to become type 2

Lesson #6- Work to Learn- Don’t Work For Money

• Learn how to sell your work, only good skills are not enough. Books have ‘best SELLING authors’ not ‘best WRITING authors’

• School’s popular opinion of ‘specialization’, like the reason why doctors run after PG to earn more money. Instead, Rich Dad’s opinion was to know a LITTLE about EVERYTHING.

• There are many talented poor people in the world because they focus on specializing in say, making hamburgers instead of learning how to sell and deliver the hamburger. Eg, McDonalds does not make the best burger but is best at selling and delivering a basic average burger

A few other interesting quotes mentioned by the author (maybe on a philosophical/spiritual level):

• Texans have a saying, “If you’re going to go broke, go big”
• “Most people are so afraid of losing that they lose”
• “Cynics criticize and winners analyze”
• “Whenever you feel short/in need of something, give it first. Be it money, love or friendship”

Overall, really interesting book (although the author basis his examples heavily on real estate), would rate it 8/10

[phreakv6]

Genome, Matt Ridley, 1999 - My knowledge of genetics/human genome is very rudimentary (high-school biology), so had got this book to get bit better on the subject. This is a fun read to dabble on the subject (although it could be very dated as its couple of decades old in a fast-growing field). The primer at the beginning of the book was very useful in getting to terms with the terminology.

Essentially, human genome is a book with 23 chapters (chromosomes) and each chapter has several thousand stories (genes), each story is made of several paragraphs (exons), interrupted by ads and nonsense (introns), each paragraph is made of words (codons) and words is composed of letters (bases Adenine, Cytosine, Guanine, Thymine & - ACGT). The genome, unlike a normal book can also photocopy (Replication) and read (Translation) itself. The replication happens through a mechanism where A pairs with T and G with C → so ACGT become TGCA and that in-turn becomes ACGT, thus creating a new copy of ACGT.

The translation or going with the analogy of interpreting the meaning of the text, happens using mRNA (messenger RNA) which copies the exons of the DNA (spliced together) without the introns (excised) and using ribosome in the cell, is interpreted in a different language with the help of tRNA (transfer RNA) where 3 letters codons correspond to 1 amino acid (20 in all) and these amino acids fold onto themselves based on the sequence, forming a protein.

The rest of the book is an ode to the human genome with each chapter picking one chromosome (so there are 22 chapters - X&Y treated as one pair) and telling the story through a gene expressed from that chromosome, dictating a particular trait, although things get quite nebulous because of the interdependencies between different genes that affect perceivable behavior, and the nature vs nurture debate runs almost throughout the rest of the book, along with complex philosophical questions like self, eugenics, personality, immortality, freewill and so on. This was a very enjoyable and informative read where we get a grasp of the decentralized way in which life as we know it works. 9/10

[lingalarahul7]

Backstage - The Story Behind India’s High Growth Years.

Notes:

Backstage.pdf (93.8 KB)

Review:

If you are a millennial and interested in political / economic history of India, this is a must read for you. The book covers history from the mid 1960s to 2019, with a lot more focus on the period from 1980 to 2014.

Mentioning a few topics covered in the book below:

1. India’s slow economic growth vs other emerging markets in the 1960s-1970s
2. Absurd difficulties faced by Corporate India and its consumers due to license raj. There are short example stories of Maruti’s R.C. Bhargava and Infosys’ Narayana Murthy.
3. Balance Of Payments crisis in 1990 and steps taken to address it
4. Loads of reforms announced in the 1990s
5. India being recognized among fast growing emerging market countries in 2000s
6. Deep-dive into scams in 2012-13
   … lot more

Overall, the book gave me a lot of mixed feelings.
Feeling good to see the progress made by the country over the past three decades since the BoP crisis but also feeling sad that the GDP growth was very poor until the 1990s.

If there is one thing I want to pick against the book, it would be Montek’s bias towards Dr Manmohan Singh and against NDA government.

[Ranjit_Singh]

Good book on habits science. More on habits of individuals, organizations and societies less on formations of habits. On formation of Habit, Atomic habits by James clear is best

[somenath_gangopadhya]

This book an Insider story and soft on weakness of government. “A lost decade” by Puja Mehra will complement this book especially MMS period of governance

[Ansh_Gupta]

One Up On Wall Street

I strongly feel that this is a perfect beginner’s book, the way Peter Lynch has put this book in such simple and interesting way is truly commendable, would definitely give the book 10/10.
Below is the summary/points I found to be interesting. Pardon for the long write-up, if it clutters the thread and it’d be better to post the future long summaries in the form of pdf, please do let me know

Chapter: Intro

• Peter Lynch follows the old-fashioned way of investing: Results depend on ancient fundamentals; A successful company comes to the market → earnings rise → stock price follows

• It takes a typical of 3-10 years for a big winner to play out

• Stock price is the least useful method of tracking stocks but the most widely used

• If you have only one metric to follow, let that be earnings; what the stock price does today, tomorrow or next week is only a distraction

• Avoid overvalued stocks - P/E is a quick metric to judge if a stock is overvalued. For example, if there is company called xyz.com which was 100M outstanding shares with share price of $100 each, its market cap = $10B
  If we want this stock to be 10-bagger, its market cap must increase 10-fold i.e $100B.
  For a fast growing enterprise, see the P/E, say 40, which concludes that its earnings must be $2.5B every year to support that figure. Then we analyze if the earnings are realistic.

• There are many good companies but are just overvalued with a P/E of 100 or even 500 !!

• Liking a store, food item is a good reason to get interested in the business but not a sufficient reason to buy its stock

• As stock prices rise, dividend yield naturally falls. Example, for a $50 stock with $5 dividend, it yields 10% but if stock price increases to $100, dividend is still $5 and yield is 5%

• Everyone is advised to think long term but most keep short term focus by reading too much into daily ups and downs of stock market

• Corrections = 10% or more, Bear = 20% or more

Intro: The Advantage of Dumb Money

• There are 2 good reasons as to why people should not buy stocks which are purchased by famous investors like Peter Lynch and Warren Buffet:

  1. They might be wrong (40% times even big investors are wrong)
  2. Even if they’re right, maybe they changed their mind and sold the shares

• If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall and long before Wall Street discovers them.

• You may have thought that a tenbagger can only happen with some wild penny stock but it can also happen in recognized companies like Toys R Us, Dunkin Donuts etc

• Peter Lynch gets many of his stock ideas talking to people-relatives, wife, children etc instead of some fancy meetings with industry experts

• The nice thing about investing in familiar companies is that you are already doing the kind of fundamental analysis analysts do- check if the product is good (donuts), how is the customer service etc

• Finding a promising company is only the first step. The second step is doing research and that is what separates Toys R Us from Coleco and Apple from Televideo

Part 1: Preparing to Invest

Chapter 1: The Making of a Stock Picker

Chapter 2: The Wall Street Oxymorons

• An amateur investor is at a huge advantage to fund managers because of various factors like the huge fund sizes, various rules of the fund about which stocks they can buy etc
• There’s an unwritten rule on Wall Street: “You’ll never lose your job losing your client’s money in IBM”
• Peter Lynch continues to think like an amateur as frequently as possible
• You can easily find tenbaggers in the neighbourhood or the workplace, months or even years before the news has reached the analysts and the fund managers they advise

Chapter 3: Is this Gambling, or what?

• Consistent winners also resign themselves to the fact that they’ll occasionally be dealt three aces and bet the limit, only to lose to a hidden royal flush. They accept their fate and go on to the next hand, confident that the basic method will reward them over time. Same is applicable to great stock investors.
• Six out of ten is all it takes to produce an enviable record on Wall Street
• With buying overpriced shares, even McDonalds will be a bad investment

Chapter 4: Passing the Mirror Test

• Most important qualities in an investor is not statistics/mathematics but patience and common sense

Chapter 5: Is This a Good Market? Please Don’t Ask

• There’s no point in predicting whether there will be a recession, how interest rates will change. The important thing is to pick good stocks and study the fundamentals.
• Sure, there is an overvalued market and you’ll know it when you can’t even pick a single stock which is underpriced

Part 2: Picking the Winners

Chapter 6: Stalking the Tenbagger

Chapter 7: I’ve got it, I’ve got it- What is it?

• However a stock comes to your attention, via the office/shopping mall/relative etc, it doesn’t mean that you should own the stock. It is just a lead to your story that needs to be developed.
• Investing without research is like playing stud poker and never looking at the cards
• If you’re considering a stock on the strength of some specific product that a company makes, the first thing to find out is what effect will the success of the product have on the company’s bottom line.
• For a big company like GE, for it to give a 5-bagger, the math is impossible
• ’Growth’ simply means that a company will do ‘more’ of what it did last year

Six Categories of Stocks:

1. Slow Growers
   • Grow in line with nation’s GNP, 3% in USA’s case
   • They started out as fast growers but then the industry matured, like Telecom in India
   • Slow growers generally pay a generous and regular dividend
     eg. Beer industry, hotel industry
2. Stalwarts (Medium Growers)
   • Companies like Coca Cola, P&G, which are faster than slow growers
   • 50% profit is good enough for these
   • They act as friend in time of recessions because people will never stop eating cornflakes and buying dog food
3. Fast Growers
   • Grow 20-25% a year, doesn’t necessarily belong to fast-growing industry
4. Cyclicals
   • A company whose sales and profits rise and fall in regular if not completely predictable fashion. Eg. autos, airlines, steel, chemicals, tyres
   • Caveat: One mistake that people make is to think that since many cyclicals are big blue chip companies (Ford), they assume it will behave similar to other blue chip companies but the fluctuations are huge during recessions between these 2.
5. Turnarounds
   • Different types: bail-us-out-or else kind of turnaround, examples are Chrysler and Lockheed
   • Perfectly-good-company inside a bankrupt company like Toys R Us
   • Restructuring kind of turnaround
6. The Asset Plays
   • Where people realize that the business might not be so good but some piece of business is extremely valuable like Land (McDonalds, Marriott)
   • Companies don’t stay in the same category forever
   • It is very important to identify which category does the stock lie in so that we know what to expect from it

Chapter 8: The Perfect Stock, What a deal

• Invest in a business which you understand. It’s better if it is a simple business like panty hose instead of microprocessors

Few favourable attributes:

1. It sounds dull- Boring names don’t attract much attention of hotshot analysts, so better chance of underpricing
2. It does something dull- Something like making plastic forks/waste management etc
3. It is a spinoff- Parent companies generally spinoff the ones which can handle themselves, otherwise it’ll be a disaster for the parent company. Also, the spinoff has more authority to work on its own term
4. The Institutions don’t own it and the analysts don’t follow it- (this data is available online)
5. The rumours around that it’s involved with toxic waste/mafia- Something like waste management or maybe casinos, which were rumoured to be sponsored by mafias- because they are hard to pitch to clients, so more chance of underpricing/ less visibility of stock
6. It’s a no-growth industry: Peter Lynch prefers to invest in a no-growth industry because there is nothing thrilling about them and is often overlooked by Wall Street.
   For high-growth industries like computers, for every single product, there are a 1000 MIT Graduates trying to manufacture it for a low price in Taiwan. This doesn’t happen with bottle caps/spoons.
7. It’s got a niche- Better to own a local rock pit (because it is monopoly) than it is to own 21st century fox (because it is competing with other big studios)
8. People have to keep buying it- Like razor blades, medicines instead of toys
9. User of technology- Instead of investing in a company that makes bar-code scanners, invest in a supermarket that uses these to cut costs
10. Insiders are buyers- Info available online
11. Company is buying back shares

Chapter 9: Stocks I’d avoid

• The most talked about stocks are the ones to be avoided because of overpricing
• Philip Morris performed strongly in a negative growth industry
• Avoid diworsification because :

1. The acquisition is overpriced
2. The acquirer might not understand the business

Chapter 10: Earnings, Earnings, Earnings

• P/E ratio can be simply defined as “the number of years it will take for you to get back your investment”, so beware of extremely high P/E ratios like 100
• High P/E also means that investors are ready to gamble on certain stocks in hope of high future earnings and vice versa
• For a huge company like Avon, P/E of 64 is too much, because how many perfumes and colognes can you sell?
• If you can’t predict future earnings, at least check how they plan to increase it and see time by time if they are following like increasing prices, reducing costs, expanding to new markets, revitalizing old markets, disinvest unprofitable ventures

Chapter 11: The Two-Minute Drill

• Before buying a stock, prepare a 2-minute speech regarding why you’re buying that stock and the potential pitfalls
• Ask about the competition, if a company says their rival is doing good, it is a huge positive sign for the rival company
• Hotel and Motel customers generally pay 1/1000th of the room per night. Eg, if a room costs 10 Lakh rupees, the rent will be 1000 rupees per night
• Make sure the idea works elsewhere, for example if the company did well in Texas, wait until you find out it can do the same in Maine (there might be a shortage of skilled workers, limited financial resources etc)

Chapter 12: Getting the Facts

• When talking to Investor Relations, your main goal should be to see if ‘your story’ makes sense

• (Cash Position): Quick check to see how much money the company has-> Consol BS → CASH AND CASH ITEMS + MARKETABLE SECURITIES - LONG TERM DEBT = NET CASH

• If net cash is large, it is a favorable position since the company won’t be going bankrupt anytime soon and (netcash/#shares) is the lower limit of the stock and many times is associated with the ‘extra money’ one can gain when buying a stock
  Eg. if net cash/#shares = $5 then this is the lowest value that can be of a share thus providing a cushion

Chapter 13: Some Famous Numbers

1. Percent of Sales-If there is a particular product which is doing well, check this metric to see if this item is contributing a large % of sales and profits. If it is small, you can check to see which other company makes this product

2. P/E Ratio- The P/E ratio of a fairly priced company equals its growth rate of earnings (PAT)

3. Cash Position- As discussed earlier

4. The Debt Factor- How much does the company owe, and how much does it own? A normal corporate balance sheet has 75% equity, 25% debt. Also check short-term debt % vs long-term.

5. Dividends- In case it is a slow grower or stalwart, if it has defaulted on any dividends in the past

6. Book Value- People invest in these on the theory that if the book value is $20 a share and the stock sells for $10, they are getting something for half price. The flaw is that the stated book value bears little resemblance to actual book value because things may be sold in a fire sale or in industries like electronics, what is worth $100M today might be worth only $20M tomorrow, or a textile company may have thousands of clothes that nobody might want tomorrow.

   • Unwritten Rule: The closer you get to a finished product, the less predictable the resale value. You know how much cotton is worth but can’t be sure of the value of an orange cotton shirt
   • Overvalued assets on the left side of a balance sheet are especially treacherous when there’s a lot of debt on the right side. Example, if there’s $300M assets and $200M debt, book value is $100M but the debt is very real and what if the assets are only sold for $100M? Results in the company being worthless

7. More Hidden Assets- Companies that own natural resources like land, timber, oil carry those assets on their book value at a fraction of true value. Also things like ‘goodwill’ for say, a patent- these have to be paid down in a few decades so the company reduced their earnings to do this and the actual value might be more than the earnings

8. Cash Flow- A lot of people use Cash Flow as a reason to buy the stock. For eg, a $20 stock which gives $2 per share cash flow (giving a ratio of 10:1 which is standard), but a $20 stock which gives $4 per share is even better. Always make sure that this CF is FCF (Free Cash Flow)

9. Inventories- Check when they are building up. A company might say that their sales are up 10% but their inventories might be up 30% which means they didn’t get rid of excess inventory which will be an increased problem next year and so on. Also, auto inventory isn’t as bad as say, that of a clothes retailer because a $35000 Jaguar won’t be marked down to $3500 but a $100 shirt might be marked down to $10

• If you find a business that gets away with increasing prices and people still buy it like cigarettes, you’ve got a great investment

Chapter 14: Rechecking the story

• Keep rechecking the story after every quarter or so and try to identify the ‘phase’ of the company: start-up phase, rapid expansion, mature

Chapter 15: The Final Checklist

Some general pointers:

1. Understand the nature of the companies you own and specific reason for holding the stock
2. By putting your stocks into categories, you’ll have a better idea of what to expect from them
3. Be suspicious of companies with growth rates of 50-100% YoY
4. Avoid hot stocks in hot industries
5. Invest in simple companies that appear dull and haven’t caught the fancy of Wall Street
6. Moderately fast growers (20-25%) in non growth industries are ideal investments
7. Companies that have no debt can’t go bankrupt
8. Managerial ability is important but quite difficult to assess. Base your purchase on the company’s prospects, not on the president’s resume or speaking ability
9. Look for companies with little or no institutional ownership
10. All else being equal, favor companies in which management has a significant personal investment over companies run by people that benefit only from their salaries
11. Devote at least an hour a week to investment research
12. Buying stocks based on stated book value alone is dangerous and illusory, it’s the real value that counts

Part 3: Long-Term View
Chapter 16: Designing a portfolio

1. Slow Growers are low-risk, low-gain because they’re not expected to do much and the stocks are usually priced accordingly
2. Stalwarts are low-risk, moderate gain. If you own coca-cola and everything goes right, you could gain 50% and if it goes wrong, you can lose 20%
3. Fast Growers/Turnarounds produce tenbaggers, high-risk high-gain
4. Cyclicals may be low-risk and high-gain or high-risk and low-gain, depending on how adept you are at anticipating cycles
5. Asset Plays are low-risk and high-gain if you’re sure of the value of the assets. If you are wrong, you probably won’t lose much and if you’re right, it may be a five bagger

• If a $50 stock goes to $1, the investor who bought at 50 loses 99% and the person who bought at $3 loses 83%, what’s the consolation in that? Don’t buy a stock just because it is cheap

Some other pointers:

1. Trying to predict the direction of the market over 1-2 years is impossible
2. The biggest winners are surprises to even Peter Lynch, and takeovers are even more surprising. It takes years, not months to produce big results
3. Stock prices often move in opposite directions from the fundamentals but long term, the direction and sustainability of profits will prevail
4. Buying a company with mediocre prospects just because it is selling at a discount is a losing technique
5. If you don’t think you can beat the market, then buy a mutual fund and save yourself a lot of extra work and money
6. There is always something to worry about- recession/war etc

[Ansh_Gupta]

Shoe Dog is written by Phil Knight, co-founder of Nike. The story feels really “complete”, starting from his early life as an athletics guy, who has this idea of importing Japanese shoes to the US because he feels so strongly about track, running and athletics as a whole.

He eventually goes to Japan after his MBA and pitches one of the companies his idea and that’s how he starts a company with his Track coach, Bill Bowerman- who loved to experiment with designing different kind of shoes and test it on his athletes.

Would rate the book 9/10. Below are some of the things/quotes I found to be really interesting (have provided context in bold wherever I felt necessary )

• Like it or not, life is a game. Whoever denies that truth, whoever simply refuses to play, gets left on the sidelines, and I didn’t want that. More than anything, that was the thing I did not want.

• My first real awareness was that not everyone in this world will like us, or accept us, that we’re often cast aside, at the very moment we most need to be included.

• I was a linear thinker, and according to Zen linear thinking is nothing but a delusion, one of the many that keep us unhappy. Reality is nonlinear, Zen says. No future, no past. All is now.

• I’d been unable to sell encyclopedias, and I’d despised it to boot. I’d been slightly better at selling mutual funds, but I’d felt dead inside. So why was selling shoes so different? Because, I realized, it wasn’t selling. I believed in running. I believed that if people got out and ran a few miles every day, the world would be a better place, and I believed these shoes were better to run in. People, sensing my belief, wanted some of that belief for themselves.

• People reflexively assume that competition is always a good thing, that it always brings out the best in people, but that’s only true of people who can forget the competition. The art of competing, I’d learned from track, was the art of forgetting, and I now reminded myself of that fact. You must forget your limits. You must forget your doubts, your pain, your past. You must forget that internal voice screaming, begging, “Not one more step!” And when it’s not possible to forget it, you must negotiate with it.

• (on a breakup with a girlfriend)
  She said she’d given it a lot of thought and she wasn’t sure we were right for each other. She wasn’t sure I was sophisticated enough for her. “Sophisticated,” that was the word she used. Before I could protest, before I could negotiate, she hung up. I took out a piece of paper and typed her a long letter, begging her to reconsider. She wrote back right away. No sale.

• (he was an accountant with PwC, on the partner track before he left to dedicate fully to Nike)
  As ever, the accountant in me saw the risk, the entrepreneur saw the possibility.

• Mr. Onitsuka (head of the Japanese company which partnered with Nike) also told Bowerman that the inspiration for the unique soles on Tigers (one of the early shoes sold by the company) had come to him while eating sushi. Looking down at his wooden platter, at the underside of an octopus’s leg, he thought a similar suction cup might work on the sole of a runner’s flat. Bowerman filed that away. Inspiration, he learned, can come from quotidian things. Things you might eat. Or find lying around the house.

• He continued to tear apart Tigers, continued to use the young men on his track teams as lab mice. During the autumn track season of 1965, every race had two results for Bowerman. There was the performance of his runners, and there was the performance of their shoes. Bowerman would note how the arches held up, how the soles gripped the cinders, how the toes pinched and the instep flexed. Then he’d airmail his notes and findings to Japan.

• Bowerman was forever griping that people make the mistake of thinking only elite Olympians are athletes. But everyone’s an athlete, he said. If you have a body, you’re an athlete.

• At the time I was reading everything I could get my hands on about generals, samurai, shoguns, along with biographies of my three main heroes—Churchill, Kennedy, and Tolstoy. I had no love of violence, but I was fascinated by leadership, or lack thereof, under extreme conditions. War is the most extreme of conditions. But business has its warlike parallels. Someone somewhere once said that business is war without bullets, and I tended to agree.

• (on their first Nike store opening)
  Each new customer got his or her own index card, and each index card contained that customer’s personal information, shoe size, and shoe preferences. This database enabled Johnson (one of the first salesmen hired by Phil Knight) to keep in touch with all his customers, at all times, and to keep them all feeling special. He sent them Christmas cards. He sent them birthday cards. He sent them notes of congratulation after they completed a big race or marathon. Whenever I got a letter from Johnson I knew it was one of dozens he’d carried down to the mailbox that day.

He then set about turning the store into a mecca, a holy of holies for runners. He bought the most comfortable chairs he could find, and afford (yard sales), and he created a beautiful space for runners to hang out and talk. He built shelves and filled them with books that every runner should read, many of them first editions from his own library. He covered the walls with photos of Tiger-shod runners, and laid in a supply of silk-screened T-shirts with Tiger across the front, which he handed out to his best customers. He also stuck Tigers to a black lacquered wall and illuminated them with a strip of can lights—very hip. Very mod. In all the world there had never been such a sanctuary for runners, a place that didn’t just sell them shoes but celebrated them and their shoes. Johnson, the aspiring cult leader of runners, finally had his church. Services were Monday through Saturday, nine to six.

• The basic rule of negotiation is to know what you want, what you need to walk away with in order to be whole.

• The single easiest way to find out how you feel about someone. Say goodbye.

• (after one of the meetings he had in Japan with his suppliers)
  The next day I returned to the United States, and one of the first things I did after landing was put fifty dollars in an envelope and airmail it to Fujimoto (one of the employees of Onitsuka who had lost everything in a tsunami). On the card I wrote: “For a new bicycle, my friend.” Weeks later an envelope arrived from Fujimoto. My fifty dollars, folded inside a note explaining that he’d asked his superiors if he could keep the money, and they’d said no. There was a PS: “If you send my house, I can keep.” So I did. And thus another life-altering partnership was born. (this guy actually became really faithful to Phil Knight in the future and helped when the partnership between Nike and Onitsuka became awry)

• Also, Bowerman was back from Mexico City, where he’d been an assistant coach on the U.S. Olympic team, meaning he’d played a pivotal role in the U.S. winning more gold medals than any team, from any nation, ever. My partner was more than famous; he was legendary.

• He told me about the scandalous behavior of Puma and Adidas throughout the Games. The world’s two biggest athletic shoe companies—run by two German brothers who despised each other—had chased each other like Keystone Kops around the Olympic Village, jockeying for all the athletes. Huge sums of cash, often stuffed in running shoes or manila envelopes, were passed around. One of Puma’s sales reps even got thrown in jail. There were rumors that Adidas had framed him. He was married to a female sprinter, and Bowerman joked that he’d only married her to secure her endorsement.

• Plenty of athletes were training in Tigers, Bowerman reported. We just didn’t have anybody actually competing in them. Part of the reason was quality; Tigers just weren’t good enough yet. The main reason, however, was money. We had not a penny for endorsement deals.

• (When Phil Knight felt that his Japanese partner was backstabbing him, he wrote this email within Nike)
  In Japan you couldn’t predict what either your competition or your partner might do. I’d given up trying. Instead, I wrote, “I’ve taken what I think is a big step to keep us informed. I’ve hired a spy. He works full-time in the Onitsuka Export Department. Without going into a lengthy discussion of why I will just tell you that I feel he is trustworthy. “This spy may seem somewhat unethical to you, but the spy system is ingrained and completely accepted in Japanese business circles. They actually have schools for industrial spies, much as we have schools for typists and stenographers.”

• Leaning back in my recliner each night, staring at the ceiling, I tried to settle myself. I told myself: Life is growth. You grow or you die.

• When I was growing up my sisters asked me several times what my dream house would look like, and one day they handed me a charcoal pencil and a pad and made me draw it. After Penny and I moved in, my sisters dug out the old charcoal sketch. It was an exact picture of our Beaverton house.

• (nostalgia from his early days with the company)
  I struggle to remember. I close my eyes and think back, but so many precious moments from those nights are gone forever. Numberless conversations, breathless laughing fits. Declarations, revelations, confidences. They’ve all fallen into the sofa cushions of time. I remember only that we always sat up half the night, cataloging the past, mapping out the future. I remember that we took turns describing what our little company was, and what it might be, and what it must never be. How I wish, on just one of those nights, I’d had a tape recorder. Or kept a journal, as I did on my trip around the world.

• (on deciding the name of the company, it was called ‘Blue Ribbon’ before)
  “N-I-K-E,” Woodell said (one of the senior people of the then startup, Nike). I wrote it on a yellow legal pad. The Greek goddess of victory.

First, Johnson had pointed out that seemingly all iconic brands—Clorox, Kleenex, Xerox—have short names. Two syllables or less. And they always have a strong sound in the name, a letter like “K” or “X,” that sticks in the mind. That all made sense. And that all described Nike. Also, I liked that Nike was the goddess of victory. What’s more important, I thought, than victory?

• Shoe dogs were people who devoted themselves wholly to the making, selling, buying, or designing of shoes.

• (when things went from bad to worse with Nike’s supplier in Japan)
  Without a word to me, Onitsuka gave the Japanese press an announcement trumpeting their “acquisition” of Blue Ribbon. The announcement set off shock waves everywhere, but especially at Nissho (this was one of the Japanese trading firms which helped Nike stay afloat). Sumeragi (employee of Nissho) wrote me, asking, in essence, “What the—?” In my impassioned two-page reply I told him that I had nothing to do with Onitsuka’s announcement. I assured him that Onitsuka was trying to bully us into selling, but they were our past, and Nissho, like Nike, was our future. In closing I confessed to Sumeragi that I hadn’t yet mentioned any of this to Onitsuka, so mum’s the word. “I ask that you keep the above information in strict confidence for obvious reasons. In order to maintain our present distribution system for future Nike sales, it’s important that we have about one or two more months of shipments from Onitsuka, and if these shipments were cut off it would be very harmful.” I felt like a married man caught in a tawdry love triangle. I was assuring my lover, Nissho, that it was only a matter of time before I divorced my spouse, Onitsuka.

• Meanwhile, I was encouraging Onitsuka to think of me as a loving and devoted husband. “I do not like this way of doing business,” I wrote Sumeragi, “but I feel it was thrust upon us by a company with the worst possible intentions.” We’ll be together soon, darling. Just have patience.

• In those days shoe boxes were either white or blue, period, but I’d wanted something that would stand out, that would pop on the shelves of sporting goods stores. So I’d asked Nippon Rubber for boxes of bright neon orange, figuring it was the boldest color in the rainbow. Johnson and Woodell loved the orange, and loved the lowercase “nike,” lettered in white on the side of the box.

(in one of the exhibitions where Nike was displaying their shoes and there were buyers, totally as a surprise to the company)

• “We show up with this new Nike, and it’s totally untested, and frankly it’s not even all that good—and you guys are buying it. What gives?”, said Johnson.
  The buyer laughed. “We’ve been doing business with you Blue Ribbon guys for years,” he said, “and we know that you guys tell the truth. Everyone else bullshits, you guys always shoot straight. So if you say this new shoe, this Nike, is worth a shot, we believe.”

Johnson came back to the booth, scratching his head. “Telling the truth,” he said. “Who knew?” Woodell laughed. Johnson laughed. I laughed and tried not to think about my many half truths and untruths with Onitsuka.

(Pre was one of the top athletes signed by Nike, who met with an accident that ended his life)

• Sometimes I thought the secret to Pre’s appeal was his passion. He didn’t care if he died crossing the finish line, so long as he crossed first. No matter what Bowerman told him, no matter what his body told him, Pre refused to slow down, ease off. He pushed himself to the brink and beyond. This was often a counterproductive strategy, and sometimes it was plainly stupid, and occasionally it was suicidal. But it was always uplifting for the crowd.
  No matter the sport—no matter the human endeavor, really—total effort will win people’s hearts.

We’d compete as if our lives depended on it.

• Supply and demand is always the root problem in business. It’s been true since Phoenician traders raced to bring Rome the coveted purple dye that colored the clothing of royals and rich people; there was never enough purple to go around. It’s hard enough to invent and manufacture and market a product, but then the logistics, the mechanics, the hydraulics of getting it to the people who want it, when they want it—this is how companies die, how ulcers are born.

• (Nike was always running in problems with their bankers because they had very less equity and were growing super fast, sometimes 100% YoY in revenue for years)
  Somebody may beat me, I told myself, some banker or creditor or competitor may stop me, but by God they’re going to have to bleed to do

(one of the top athletes they had signed, Shorter, refused to wear Nikes for the final race)

• I’m still not sure I know exactly what happened. Apparently, Shorter became convinced that his Nike shoes were fragile and wouldn’t hold up for the whole twenty-six miles. (Never mind that they’d performed perfectly well at the Olympic Trials.) Maybe it was nerves. Maybe it was superstition. He wanted to use what he’d always used.
  Runners are funny that way. In any case, at the last moment he switched back to the shoes that he wore when he won the gold in 1972.

• Despite our hijinks, despite our eccentricities, despite our physical limitations, I concluded in 1976 that we were a formidable team. Years later a famous Harvard business professor studying Nike came to the same conclusion. “Normally,” he said, “if one manager at a company can think tactically and strategically, that company has a good future. But boy are you lucky: More than half the Buttfaces (Nike employees called each other by this name) think that way!”

(info about his teammates)
Hayes couldn’t become a partner because he was too fat (he also worked for PwC). Johnson couldn’t cope in the so-called normal world of nine-to-five. Strasser was an insurance lawyer who hated insurance—and lawyers. Woodell lost all his youthful dreams in one fluke accident. I got cut from the baseball team. And I got my heart broken.
I identified with the born loser in each Buttface, and vice versa, and I knew that together we could become winners. I still didn’t know exactly what winning meant, other than not losing, but we seemed to be getting closer to a defining moment when that question would be settled, or at least more sharply defined.

• My fatherhood style, my management style. I was forever questioning, Is it good—or merely good enough?
  Time and again I’d vow to change. Time and again I’d tell myself: I will spend more time with the boys. Time and again I’d keep that promise—for a while. Then I’d fall back to my former routine, the only way I knew. Not hands-off. But not hands-on. This might have been the one problem I couldn’t solve by brainstorming with my fellow Buttfaces. Vastly trickier than how to get midsoles from Point A to Point B was the question of Son A and Son B, how to keep them happy, while keeping Son C, Nike, afloat.

• No other shoe company was trying new things, so our efforts, successful or not, were seen as noble. All innovation was hailed as progressive, forward-thinking. Just as failure didn’t deter us, it didn’t seem to diminish the loyalty of our customers.

• (Nike really got into trouble at a point in time, where they could’ve been bankrupt due to what their competitors did, involving some law loophole)
  Our American competitors, Converse and Keds, plus a few small factories—in other words, what was left of the American shoe industry—were all behind it. They’d lobbied Washington, in an effort to slow our momentum, and their lobbying had paid off, better than they’d ever dared hope. They’d managed to convince customs officials to effectively hobble us by enforcing this American Selling Price, an archaic law that dated back to the protectionist days, which preceded—some say prompted—the Great Depression.

• What we were doing felt like so much more.
  Each new day brought fifty new problems, fifty tough decisions that needed to be made, right now, and we were always acutely aware that one rash move, one wrong decision could be the end.

The margin for error was forever getting narrower, while the stakes were forever creeping higher—and none of us wavered in the belief that “stakes” didn’t mean “money.” For some, I realize, business is the all-out pursuit of profits, period, full stop, but for us business was no more about making money than being human is about making blood.

• The cowards never started and the weak died along the way. That leaves us, ladies and gentlemen. Us.

• Over dinner my father had a thousand questions about the public offering. My mother had none. She said she’d always known it would happen, ever since the day she bought a pair of seven-dollar Limber Ups.

• A company called Apple was also going public that same week, and selling for twenty-two dollars a share, and we were worth as much as them, I said to Hayes. If a bunch of Wall Street guys didn’t see it that way, I was ready to walk away from the deal. (and he did get the deal)

• After forty years I’ve stepped down as Nike CEO, leaving the company in good hands, I think, and good shape, I trust. Sales last year, 2006, were $16 billion. (Adidas was $10 billion, but who’s counting?)
  Our shoes and clothes are in five thousand stores worldwide, and we have ten thousand employees. Our Chinese operation in Shanghai alone has seven hundred. (And China, our second-largest market, is now our largest producer of shoes. I guess that 1980 trip paid off.)

• I think of the countless Nike offices around the world. At each one, no matter the country, the phone number ends in 6453, which spells out Nike on the keypad. But, by pure chance, from right to left it also spells out Pre’s best time in the mile, to the tenth of a second: 3:54.6.

I say by pure chance, but is it really? Am I allowed to think that some coincidences are more than coincidental?
Can I be forgiven for thinking, or hoping, that the universe, or some guiding daemon, has been nudging me, whispering to me? Or else just playing with me? Can it really be nothing but a fluke of geography that the oldest shoes ever discovered are a pair of nine-thousand-year-old sandals . . . salvaged from a cave in Oregon? Is there nothing to the fact that the sandals were discovered in 1938, the year I was born?

(Kudos to the author for addressing such a controversial topic)

• I felt a sense of betrayal when Nike came under attack for conditions in our overseas factories—the so-called sweatshop controversy. Whenever reporters said a factory was unsatisfactory, they never said how much better it was than the day we first went in. They never said how hard we’d worked with our factory partners to upgrade conditions, to make them safer and cleaner. They never said these factories weren’t ours, that we were renters, one among many tenants. They simply searched until they found a worker with complaints about conditions, and they used that worker to vilify us, and only us, knowing our name would generate maximum publicity.

• In one country, which shall be nameless, when we tried to raise wages, we found ourselves called on the carpet, summoned to the office of a top government official and ordered to stop. We were disrupting the nation’s entire economic system, he said. It’s simply not right, he insisted, or feasible, that a shoe worker makes more than a medical doctor.

(when the IPO actually happened)

• WHEN IT CAME rolling in, the money affected us all. Not much, and not for long, because none of us was ever driven by money. But that’s the nature of money. Whether you have it or not, whether you want it or not, whether you like it or not, it will try to define your days. Our task as human beings is not to let it.

• We give away $100 million each year, and when we’re gone we’ll give away most of what’s left.

(When Phil Knight was asked what advice would he like to give to the future generation)
I’d tell men and women in their midtwenties not to settle for a job or a profession or even a career. Seek a calling. Even if you don’t know what that means, seek it. If you’re following your calling, the fatigue will be easier to bear, the disappointments will be fuel, the highs will be like nothing you’ve ever felt.

I’d like to warn the best of them, the iconoclasts, the innovators, the rebels, that they will always have a bull’s-eye on their backs. The better they get, the bigger the bull’s-eye. It’s not one man’s opinion; it’s a law of nature. I’d like to remind them that America isn’t the entrepreneurial Shangri-La people think.
Free enterprise always irritates the kinds of trolls who live to block, to thwart, to say no, sorry, no. And it’s always been this way. Entrepreneurs have always been outgunned, outnumbered. They’ve always fought uphill, and the hill has never been steeper.

America is becoming less entrepreneurial, not more. A Harvard Business School study recently ranked all the countries of the world in terms of their entrepreneurial spirit. America ranked behind Peru. And those who urge entrepreneurs to never give up? Charlatans. Sometimes you have to give up. Sometimes knowing when to give up, when to try something else, is genius. Giving up doesn’t mean stopping. Don’t ever stop.

Luck plays a big role. Yes, I’d like to publicly acknowledge the power of luck. Athletes get lucky, poets get lucky, businesses get lucky. Hard work is critical, a good team is essential, brains and determination are invaluable, but luck may decide the outcome. Some people might not call it luck. They might call it Tao, or Logos, or Jñāna, or Dharma. Or Spirit. Or God. Put it this way. The harder you work, the better your Tao. And since no one has ever adequately defined Tao, I now try to go regularly to mass. I would tell them: Have faith in yourself, but also have faith in faith. Not faith as others define it. Faith as you define it. Faith as faith defines itself in your heart.

[lingalarahul7]

The Burger King.

My Notes:

TheBurgerKing.pdf (107.8 KB)

Review:

This book is an autobiography of Jim McLamore, founder and first CEO of Burger King.

People interested in the QSR industry will enjoy the book.
Some interesting learnings for me are:

1. Impact of QSR industry growth on FMCG food businesses, which eventually motivate them to takeover / acquire QSR businesses
2. McDonald’s highly leveraged real estate strategy which put the company on an explosive growth trajectory compared to Burger King
3. Challenges small companies (Burger King) face when acquired by large corporations (Pillsbury)

Burger King’s story has a lot of drama as compared to other 20th century American Corporate stories I have read about. From a start-up to being acquired to hostile takeover, all this while CXO offices continuously changed hands.

One special trait which stood out with respect to Jim McLamore is his Marketing Prowess. Felt a bit sad to see his regret of selling out Burger King to Pillsbury.

[Ansh_Gupta]

Factfulness is a straight 10/10 for me. The book talks about how “wrong” our perception is towards the world, how we (even top CEOs/world leaders etc.) don’t know much about basic trends of education, global poverty, healthcare etc. (for example, in the last 20 years, global poverty has reduced to half but when the Author asked this question to a very large sample, most of the people had the “perception” that poverty was only increasing).

The book starts with a basic set of 14 simple questions like the one above and how the average score was only 2 (he even argues that a chimpanzee has better odds of getting 1/3 questions right even when he has no idea about the questions), he delves deep into each question on why we think the way we think (yes, pick and choose news by the media is one big aspect).

One more interesting thing about the book is how the author says that we as humans, think only in binary terms (developing vs developed countries, rich vs poor), how there are only 2 levels.
The author then divides all the things in instead 4 levels (basically breaking down a large data set to gain more insights), to make us understand the “differences” in say, “levels of poverty”.

The book definitely makes for an interesting read, and really inspires positivity

Attaching a few of the graphs that are used by the Author to show a glimpse of what’s inside this book below:

[Deven]

Great Review @Ansh_Gupta. Is one of my favorite book.

In book author predicated Five global risks as Global Pandemic, Financial collapse, World war, Climate change and Extreme poverty.
Covid proved him right of putting pandemic as No.1 risk way back…

[phreakv6]

The Man who Solved the Market, Gregory Zuckerman, 2019 - Its not easy for a biography of a famous mathematician/scientist/investor to satisfy the general as well the technical audience. Very few books manage to walk the tight line of being satisfactory to the technically-minded while not alienating the lay reader. this one falls a bit flat on several fronts as its neither a biography of Simons, nor is it satisfactory as a book on Quant investing.

It meanders into mild character portraits of Laufer, Baum, Straus, Ax, Brown, Mercer and a myriad others who built the algorithms at Renaissance. Jim Simons himself is relegated to the sidelines for the most part. What was even more annoying for me was the number of pagers spent describing Mercers’ election funding and his impact on Trump election by involving Breitbart news and Bannon. Some of these are of course crucial to understanding the political tussle within the company but to me it came across as irrelevant.

What renaissance and its team of market outsiders have achieved is nothing short of mind-blowing. Some of the challenges they faced in terms of not having adequate clean data, not having enough computing power and facing the usual problem of impact costs are what quant firms face to this day and for them to have pioneered the earliest machine-learning and automatic portfolio rebalancing algorithms and to have done it at that time when Jim Simons was passing 50 and done it right with stunning returns is what makes the story interesting. This book however will teach you nothing more. 7/10