Today we have a must listen with GMO’s Jeremy Grantham, Bethany McLean on the difficulty in deciphering the difference between visionaries and fraudsters, why companies can deliver on both profits and purpose, life lessons from Naval Ravikant, and NBA Coach Doc Rivers on the current situation in America.
- ***Must Listen*** Invest Like The Best: Jeremy Grantham — An Uncertain Crisis. A phenomenal episode that covers a lot, so excuse the long summary. Grantham is the CEO of legendary asset management firm GMO. He begins the episode by covering the origination of the firm, which used standard Graham and Dodd techniques that worked great until around 2000 when academics and those who had an aversion to cheap stocks finally came around to the idea. The game changed so the work became both labor and risk intensive. His firm has not been afraid to look radically different, as shown by their stance in the late 1990’s away from high soaring technology stocks. Grantham says his firm lost about half of its assets as a result, but ended up being right in the end and made a lot of money in REITs. He then moves to current day, which he says is the fourth big event of his career, and the virus comes to us when we have massive buybacks and high corporate and sovereign debt levels. He touches on the high-flying technology FANG names and says they are unlike any company ever and are able to create value without tangible assets. The conversation changes to his focus on natural resources and the environment — he talks about the change in oil exploration and impact of fracking, and he thinks oil may have reached their all-time peak demand and if not, will in a few years. He also expresses concern for the levels of chemicals in our body and the low fertility rate for Americans, and notes that the sperm count is one third of what it was years ago and shows no signs of decelerating (he wrote a paper on the topic here). He finishes the episode talking about why he is bullish on venture capital, and if he had to give advice to a young person entering the business, he’d suggest joining a VC firm because they’re changing the world. [June 9, 2020–1 hour, 8 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
“The number of people employed in new enterprises in America that are one or two years old has halved since the late 1970s, halved. We’re simply not as aggressive a capitalist system as we were. Everything has changed.”
- The Long View: Jon Stein: ‘Free Trading Is Actually Going to Cost You.’ Really insightful episode with Betterment founder and CEO Jon Stein. He talks about how their average client, a 37 year old earning over $100,000 and can’t access an advisor, held up over the past few months. He says a lot of clients had $1,200 deposits into their account, showing people are saving their stimulus checks. He discusses good financial hygiene for clients which is their priority — focusing on ways to nudge clients to have an emergency savings account and increase their savings rate since that has more of an impact than trying to achieve alpha. He explains some behavior nudges that have had success: showing the clients account size and not whether the market is up or down that day, which prevents clients from making knee-jerk trades, and showing the tax impact of any stock sales, which also prevents clients from over trading. Speaking of — as the title says, he thinks while $0 trading fees are good to save clients money, it also encourages them to trade more which has shown to negative impact their accounts. He also discusses where advisors can and can’t add value (portfolio construction for the latter), why they focus so much on assisting clients with saving due to taxes, and their interaction with advisors, some of which they have in-house and others who manage their clients on Betterment. [June 10, 2020–47 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
- The Knowledge Project: #85 — Bethany McLean: Crafting a Narrative. Best-selling author of The Smartest Guys in the Room and All the Devils Are Here, Bethany McLean, discusses the character traits and differences between visionaries and fraudsters, and why it’s so difficult to decipher the difference. Based on her knowledge covering Enron and Valeant and monitoring other controversial CEO’s like Elon Musk of Tesla and Elizabeth Holmes of Theranos, she explains how they are all typically charismatic, have the ability to make people believe their story over the numbers, and take advantage of our disposition to seek beliefs that confirm our underlying opinions. I couldn’t help but think of Malcolm Gladwell’s recent book, Talking to Strangers, which is based on humans default to truth when listening to others, which makes us susceptible to fraudsters. She also talks about her evolution as a writer after transitioning from investment banking, the issues in the media industry, and why she’s starting to take interest in the fracking industry.[June 9, 2020–1 hour, 34 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
There’s this idea that the business world is hard and cold and rational and it’s not. It’s incredibly emotional and everyone’s biased towards belief because most people stand to make money if a stock goes up
- The Meb Faber Show: #228 — Danilo Santiago, Rational Investment Methodology — The Market Will Tend To Overpay When Earnings Are Good And Underpay When The Company Gets In Some Kind Of Trouble. Danilo Santiago is founding partner of Rational Investment Methodology and manages the firm’s “fundamental-quant” equity strategy. After talking about his career path, which included stints in banking, corporate finance, and hedge funds, he decided to launch his own fund in 2008, which uses on a “quantimental” strategy. The episode focuses on what he learned modeling companies — he focuses on finding fair value based on earnings and goes either short or long based on that. He will not short based on a fraud — only on valuation. He emphasizes staying in his circle of competence and ignoring young technology companies and others that are difficult to value. He discusses valuing cyclical companies over time, such as Thor (RV company) and motorcycle companies and how he doesn’t stay attached to a position in a company over time (i.e. feels fine to switch from being long to short based on a change in valuation). He finishes the episode discussing how work has been during 2020, which has required 14 hour days to update valuation models. [June 10, 2020–1 hour, 9 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
- Macro Hive Conversations With Bilal Hafeez: Professor Alex Edmans on How Great Companies Deliver Both Purpose and Profit. Professor Alex Edmans from the London Business School and author of the new book, Grow the Pie: How Great Companies Deliver Both Purpose and Profit. As his book is titled, he argues that companies are able to both make a profit while doing good for the world and uses this as evidence: the top 100 ranked companies who treat their workers well outperformed the market by 2.3–3.8% annually. Most people assume there’s a fixed pie between purpose and profit but there isn’t a cap on financial and social value. He uses Disney and Bob Iger as an example — Iger made $66 million last year which is a ton, but over the time he’s been CEO, the stock has gone up 600% while the markets increased 150%, and he’s created 70,000 jobs along the way. He also has some interest data on activists making firms more profitable and efficient without firing employees, on why employees serving on boards actually hurts low level employees more than if no employees were on the board, and why share buybacks are actually good because they ensure CEO’s are investing in low ROI projects.[June 5, 2020–49 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
- The Meb Faber Show: #227 — Alex Smereczniak, 2U Laundry — Quality Has to Be At The Forefront of Everything That We’re Doing. Alex Smereczniak is Co-Founder and CEO of 2ULaundry, a startup tackling the laundry and dry-cleaning business. He originally got involved in the industry in college, running a laundry business which he eventually sold. He then went to work for EY but decided that wasn’t what he loved and got back into the laundry business with 2ULaundry. He took lessons from failed Silicon Valley start-ups that took the wrong approach. After hustling to get the company off the ground and gaining some traction, he vertically integrated with a large company in Charlotte. He also talks about what he’s seen during COVID-19, which was actually positive for business and led him to come to the conclusion that he wants to franchise the model to other cities besides Charlotte. [June 8, 2020–53 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
- Tools of Titans: The Tactics, Routines, and Habits of: Naval Ravikant. The ROI on listening to these 16 minutes is through the roof. Naval is the founder of Angel List and is widely known for being one of the top philosophers of leaders of our generation. The episode shares a lot of short-takes on different topics, the majority of which are centered around finding happiness in life. One major theme throughout all his ideas is who you surround yourself with has a major impact on your life. He also talks about anger, the importance of honesty, the importance of assessing your thoughts over time, what success means to you, and how to improve your decision making. If you enjoy this episode, I highly recommended his appearance on The Knowledge Project podcast. [June 4, 2020–16 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker
“What you choose to work on and who you choose to work with are far more important than how hard you work.”
- Jon Gordon’s Positive University Podcast: Doc Rivers | Conflict and Communication. Doc Rivers is the coach of the L.A. Clippers. In this episode he talks about why he’s disappointed in the abuse of power in the country, what his thoughts are on the current protests, and how he is handling being at home right now. Then he talks more leadership and coaching — how and what he communicated to his team during the Donald Sterling saga, why Pat Riley inspired him to start coaching, why he focuses on being a good one-on-one communicator with his players, why he emphasizes learning, and why he told his players there are no excuses going into the end of this unusual NBA season. [June 3, 2020–33 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
“2020 isn’t over yet. It’s June. It’s halftime. We still got another half. We can still win it.”
- HBR IdeaCast: To Built Strategy, Start with the Future. While it is easy to get boggled down in day-to-day issues, this episode reminds us that leaders should at least be spending ~15% of their time thinking about big picture future issues. They suggest going “forward-back,” meaning think about the future and work backwards to today, and think about how prepared your organization is for that future. Doing so requires vision, which is defined as an impressionist painting instead of a guaranteed outcome, and is meant to be more of a band of possible outcomes you can imagine. If your company isn’t prepared, what can you do as a leader to adjust today? He also wrote an article on the topic you can read here. [May 12, 2020–25 minutes] iTunes Podcast | Spotify | Overcast | Google | Breaker | Website Link
Satya Nadella, in transforming Microsoft when he took over. The first thing he said was, ‘We need to switch from a culture of know it alls to learn it alls.’ ”
Steve Juretson (Venture Capitalist, Board Member, Tesla):
- The Scientist in the Crib: What Early Learning Tells Us About the Mind by Alison Gopnik — This is the most gifted book from him to others. He gives the book to any geek friend of his who is about to have their first child.
- Out of Control: The New Biology of Machines, Social Systems, & the Economic World by Kevin Kelly — The most influential book he’s read and has guided many of his investment thesis in the last twenty years in technology and development. It basically covers the dawn of the age of biology.
Seth Godin (Founder, Alt-MBA):
- Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers by Geoffrey Moore — Helps us understand that it is an incorrect myth to believe we can start with an idea for a few people and ride it from adopter to early adopter to early majority to late majority to adopter.
- Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke — The first chapter alone will change your life. The book helps us understand what it actually means to make a decision, because decision and outcomes are different things. And a good decision may very well lead to a lousy outcome, but that doesn’t necessarily mean it wasn’t a good decision.
- The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World by Jacqueline Novogratz — The true story of how one woman has decided to change philanthropy, capitalism, development, and the way 2 billion poor people engage with markets, the privileged part of the world, and each other.
Esther Perel (Psychologist, Relational Expert):
- Can Love Last?: The Fate of Romance over Time by Stephen Mitchell — He highlights the inherent tension of how we try to reconcile, in one relationship, two fundamental sets of human needs: the need for stability, safety and security with the need for change passion novelty and mystery.
- Liquid Life by Zygmunt Bauman — His description of nomadism gave me a whole new path of thinking because he looks at it is a trait of our liquid life. What he highlights is how we have dismantled the traditional structures and networks that used to give us support, and now we live in a precarious life under conditions of constant uncertainty where the burdens of the self have never been heavier