Links - 6/6/2021
“In the real world, you have to find something that you can understand that’s the best you have available. And once you’ve found the best thing, then you measure everything against that because it’s your opportunity cost. That’s the way small sums of money should be invested. And the trick, of course, is getting enough expertise that your opportunity cost — meaning your default option, which is still pretty good — is very high.... Most people aren’t going to find thousands of things that are equally good; they’re going to find a few things where one or two of them are way better than anything else they know. And the right way to think about investing is to act thinking about your best opportunity cost.” —Charlie Munger
Inflation, value investing, and coming up on the right side of the stock market with Bruce Greenwald (video) (LINK)
The Opposite of a Good Idea | Prof Sanjay Bakshi | #VIP4 | 1 Nov 2020 (video) [H/T Co/Report] (LINK)
A conversation between Sanjay Bakshi and Chris Mayer (video) (LINK)
Michael Lewis chats with Eric Topol about his latest book (Video and Transcript, Podcast)
Description, via Dr. Topol: “The extraordinary book, The Premonition, by Michael Lewis, is the subject of our conversation. It gets behinds the scenes of public health/CDC long before and during the pandemic. We spoke just days before the fatal car accident of his 19-year-old daughter. Our deep condolences. He had no hesitation for this discussion to be posted—he really wants the story to reach the medical community.”
AIC Conversations - Guy Spier (Founder and Managing Director, Aquamarine Capital) (video) [H/T @JMihaljevic] (LINK)
This Week in Intelligent Investing Podcast: Aggregation of Marginal Gains | A Study of Lifetime Value Creation (LINK)
Greensill: What have we learned? (LINK)
South Asia Should Pay Attention to Its Standout Star (LINK)
Half a century ago, in March 1971, Bangladesh’s founders declared their independence from richer and more powerful Pakistan. The country was born amid famine and war; millions fled to India or were killed by Pakistani soldiers. To the Pakistani military’s American backers, the new country seemed destined to fail: Henry Kissinger, then Secretary of State, famously called it a “basketcase.” George Harrison and Ravi Shankar organized the first-ever super-benefit to raise money for UNICEF relief work in the struggling country.
This month, Bangladesh’s Cabinet Secretary told reporters that GDP per capita had grown by 9% over the past year, rising to $2,227. Pakistan’s per capita income, meanwhile, is $1,543. In 1971, Pakistan was 70% richer than Bangladesh; today, Bangladesh is 45% richer than Pakistan. One Pakistani economist glumly pointed out that “it is in the realm of possibility that we could be seeking aid from Bangladesh in 2030.”
India — eternally confident about being the only South Asian economy that matters — now must grapple with the fact that it, too, is poorer than Bangladesh in per capita terms. India’s per capita income in 2020-21 was a mere $1,947.
Rosneft Warns of ‘Severe’ Oil Shortage Amid Hasty Energy Shift (LINK)
Russian oil giant Rosneft PJSC warned of an impending shortfall in supply as global producers increasingly channel funds into a “hasty” energy transition.
“The world risks a severe deficit of oil and gas,” Rosneft Chief Executive Officer Igor Sechin said Saturday at the St. Petersburg International Economic Forum. “The world consumes oil, but isn’t ready to invest in it.”
Video Dispatch: COVID's Last Stand? - by Peter Zeihan (LINK)
We’ll Probably Need Booster Shots for Covid-19. But When? And Which Ones? - by Carl Zimmer (LINK)
The delicate beauty of illuminated dust (LINK)
In the podcast with Michael Lewis above, this particular excerpt in regards to Todd Park and Dr. Charity Dean is something that I think applies to investing due diligence, as well as other kinds of due diligence:
Todd Park has a very interesting attitude toward big institutions — not just government institutions but also big private companies. His attitude is, if there's a crisis, there's usually someone in the institution who knows the answer to the crisis, but they're usually not where they need to be. The organizational chart is not designed for the crisis that happens. So when you get to a place, you root around and ask, "Who knows about this?" So Todd asked, "Who here knows about communicable diseases?" Everyone knew it was Charity Dean who could talk about the pandemic. They had seen her in action many times.
So Todd Park asks her questions about how she thinks about this thing: "What do you think is coming? Why do you think it's coming?" He picks her brain. After a couple of hours, he says, "You're why I'm here. I'm not here to build an abstract model for Gavin Newsom to analyze disease spread. My job is to get everything in your mind onto Gavin Newsom's desk." So they build a model. But the model is simply to get everything Charity Dean knows into the assumptions in the model, to scare the hell out of Gavin Newsom so he will shut down the state. And that's what happens. What Todd Park says is, "I've seen Charity Dean over and over and over again in various forums, and she's always six levels down from the top in the organization."
That why I call Charity the L6.
What I’ve found over years in looking at companies and potential investments is that, sometimes, talking to the right customer, supplier, or employee can give one a completely different picture of a business than one had from all of the previous hours of due diligence. And a lot of the most valuable form of investment scuttlebutt is trying to find that person—the L6.
That also reminds me of Peter Kaufman’s description of Frederick Taylor Gates in his essay “An Unsung Hero.” At the end of Peter’s essay, he includes several pages from Gates’ memoirs which he describes as:
In Chapter XXXVIII of his memoirs Chapters In My Life, Gates offers a masterful recounting of how cleverly he conducted his scrutiny of Rockefeller’s non-Standard Oil investments, as well as why he thought his upbringing had prepared him so well to do so. To follow is a copy of this chapter for you to take home this evening. I encourage you to examine it closely, as it is a primer on expertly conducting due diligence, “from the bottom up”.