Gustavo Ballvé on February 2nd, 2017
Food for thought, Home, Mental models, Science, Signal or Noise

Analyzing an equity investment for the long term is, or at least many of us would like to consider it, analogous to establishing hypotheses and searching for evidence or data that either supports or contradicts them. It is an iterative process, with more, better data begetting better questions and eventually and occasionally the sum of “small truths” coming out of this process becomes an actionable, high-conviction idea. Many have linked this process to that of investigative journalists, criminal investigators and, when we are feeling pretentious, to laboratory/empirical scientists.

There is a certain beauty and corresponding reverence to the scientific method, as well there should be; don’t worry, I’m not about to disagree with Richard Feynman on how hard it is to know things (disregard the specific example of organic food, focus on his distinction between science and pseudoscience). By the way, this other video with him has a perfect introduction about the scientific method.

The “problem” with the method is that humans are using it. As we know, subject to biases and, most importantly, incentive systems. It is not that easy to invest a career in a certain “hypotheses path” and have the data insist in disagreeing with it, or at least with a significant enough part of it that might make the experiment or the very hypothesis not valid. Analysts know what I am talking about: brushing away data points that seem “incoherent” with a theme, weighting independent factors disproportionately… We have all been there, no matter how hard we fight to be 100% rational and intellectually honest.

After this long introduction, I hope it’s clear why it was important to highlight this Wired article about a young billionaire who has declared, in the words of the magazine, “a war on bad science”. His foundation’s work apparently seeks to shed light on the instances of bad use of the scientific method, when data was perhaps ignored and corners perhaps cut. It would appear quite relevant to make science a bit less of a black box and bring even more accountability to it, and the call for increased openness to stimulate replication is particularly brilliant. Combine this with a long-term potential move to “open-source” scientific journals and the costs of scientific discovery could decrease.

I have no knowledge of the foundation beyond what I read in this article, so in line with staying “true” to the data, my compliments are based on a sample of one!

Related links on

I have posted about a similar theme in a 2012 post called “The boundaries of knowledge“.

Also read my first post mentioning Richard Feynman, which has a link to a 50-minute special called “The Pleasure of Finding Things Out” that is a real gem.


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Gustavo Ballvé on November 3rd, 2016
Food for thought, Home, Mental models

Booz & Co.’s Strategy + Business publication has a story with their top-3 management books of 2016. It is part of a larger story on the best Business books that they broke down in the following categories: Management (as I mentioned), Technology, Talent & Leadership, Marketing, Strategy, Economy and Narratives.

Back to the Management list, long-time readers of this blog should be at least a little bit enticed by two of those books: one is by Robert “Persuasion” Cialdini and the other has a title to die for (“The Process Matters: Engaging and Equipping People for Success”).

Mental Models, Biases and Traps / Process vs Outcome are two recurring themes here (then again so are reading lists).

Update: Just found a small video by Columbia GSB Professor Joel Brockner, author of The Process Matters book mentioned above.

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Gustavo Ballvé on September 21st, 2016
Food for thought, Home, Mental models, Quotes

I know, it’s been almost a month and I haven’t commented on Buffett being the target of an unfavorable Economist article – never mind the whole Wells Fargo imbroglio – but this is too good to miss. From the comic strip in the beginning and the poem in the end, and right through the writing and the amazing Cognitive Bias Codex, this is a can’t-miss post on biases. Congrats to Better Humans’ Buster Benson.

I also know that this is maybe the third post I’ve been inspired to write (in this case, just “re-blog”) by this great source, fellow PLDer Boris Tsimerinov. Probably the best LinkedIn posts in my network! Thank you again.

You can find other posts on biases by clicking here.

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Gustavo Ballvé on August 25th, 2016
Corporate Governance, Food for thought, Home, Investment Themes, Mental models, Portfolio Management, Risk management, Signal or Noise

It was my birthday yesterday and I want to share a great information source with my readers: the Valor Intrínseco blog (translation: Intrinsic Value), which joins our blogroll.

The blog posts are only in Portuguese, but its subject matter is Value Investing and the material they source is, 99% of the time, in English. The posts with material in Portuguese are usually those with the quarterly letters of great Brazilian investors, so it could be interesting for my Brazilian readers as well.

I know one of the owners personally and he’s an incredibly dedicated Value Investing “geek”. His ability to find great material puts this editor’s to shame! He also posts much more regularly than I do. I am, however, more than glad to help this “competitor” out because great work always deserves praise – and because there is so much noise in the investment world, we need all the help we can get to hone in on the good stuff.


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Gustavo Ballvé on August 3rd, 2016
Corporate Governance, Food for thought, Home, Signal or Noise

It is impossible not to be criticized when you are in the spotlight. Case in point: Warren Buffett. In the space of two weeks he has been criticized for supporting Hillary Clinton in the US presidential race, for a Corporate Governance “manifesto” co-signed by several CEOs (I’ll adress that in a separate post), and now for being increasingly “relentless” in his search for efficiency.

Take this last part:  The most usual criticism in the last 15 years or so had been his hands-off approach, especially in his large stock positions such as Coca-Cola. Critics said his tendency to avoid conflicts and “aw-shucks” brand of management did not root out the inefficiencies that other management teams were capable of doing. He seemed “out of touch with the times” – again.

In the last few years Buffett partnered with 3G Capital in a few deals, a group long known for its relentless cost-cutting. Now he has bought Precision Cast Parts, a company whose culture (and CEO) is described by this Bloomberg piece as “bullying” and “bruising”.

I have been studying Buffett, Munger and Berkshire Hathaway since 2001, and the inconsistencies between Mr. Buffett’s speech and actions are sometimes pretty obvious. He would not be human otherwise. Analytically speaking, it is also very important that we never grant anyone a free pass: we should always both judge actions for what they are AND keep in mind context and perspective. Has he failed sometimes? Yes, of course. Has his actions sometimes contradicted his words? Yes. For the most part, however, Buffett’s actions in the last 60+ years have lived up to most of his speech (and I alluded to that in a December 2009 post).

That is more than we can say of the majority of the CEOs, fund managers, government officials, journalists, amateur bloggers (!) and, well, people out there.

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Gustavo Ballvé on July 26th, 2016
Food for thought, Home, Mental models

An update to last week’s post with two reading lists can only mean one thing… more books!

The first list came from the always-cool tweets by Anand Raghavan, Senior Director of Product Management at ThoughtSpot. It’s a list compiled by TED by asking more than 40 of its speakers for their recommendations. Great stuff there from all ways to look at life.

The second list comes from our most reliably excellent source, The Farnam Street Blog (one of the first sources I listed in our blogroll). Shane and his partners at the blog asked its members for recommendations and, as expected, they are amazing. If you haven’t considered becoming a member of the Farnam St. community yet, make sure you check it out (and this advice is freely given: I am in no way, shape or form receiving any compensation or barter from any source).

In summary, these lists are wide-ranging in nature, coming from a multidisciplinarian crowd. Some books are classics, some new, and if we could only read them all… We can’t. Choose wisely, invest your time to reach your near-, mid- and long-term goals as they change in priority and urgency. Enjoy!

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Gustavo Ballvé on July 21st, 2016
Corporate Governance, Food for thought, Home

I wish I did not have to return to this subject so soon, but apparently in Brazil even very basic rights can be seen as debatable. One remembers that “24-hour” ATMs do not dispense more than 100 Reais from 10 PM to 6 AM due to robberies, or one notices the constant take-downs of the Whatsapp service: our country’s policymakers seem to combat (very rare) examples of people abusing rights by eliminating (or proposing to eliminate) them altogether!

Case in point: after an alleged abuse of data access rights by Board members in Saraiva, an entire debate about these rights is now taking place, as per this Valor Econômico article (in English, but here’s the original Portuguese version). Given that the Board member is personally liable for their decisions, he/she must have the right to obtain information – from management or consultants, for instance – in order to better form their judgement.

We can and should discuss the form of potential abuses and its punishments, as well as reasonable boundaries of access to management and data. But we should not seek to remove a basic right of the Board members – who represent shareholders but must, in the form of our Corporate Law, act in the company’s best interests.

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Gustavo Ballvé on July 19th, 2016
Food for thought, Home, Industries, Investment Themes, Portfolio Management

Shamelessly I return to reading lists (just follow the link to find other posts with this tag).

(As a reminder, I don’t make money from these links at all – nothing against it, I’m just being transparent).

One is from McKinsey Quarterly and compiles a list of books suggested by CEOs of varying backgrounds and sectors.

Another is from Harvard Business School and lists books its professors are reading.

If you don’t know whether to thank me or hate me (“I haven’t finished the last books I bought and here comes an interesting list…”), I completely understand you.

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Gustavo Ballvé on July 7th, 2016
Corporate Governance, Food for thought, Home

Two noteworthy articles and one notable initiative in Brazilian CG practices nowadays.

One already-missed opportunity: the recent law concerning state-owned companies divides opinions. The article is in Portuguese and Valor hasn’t published an English version, but here goes a two-sentence summary: “Most specialists agree that the law makes it easy for companies to look good “on paper” while failing in practice. In fact, some experts say that the existing Corporate law would suffice if properly enforced…”

(In Brazil, as the reader may know, some laws “catch on” and others don’t, with little difference in practical consequences. This is changing somewhat, but CG is a “soft” enough field to make it more vulnerable to this effect.)

One ongoing discussion: the possibility of reforming Novo Mercado (Bovespa’s highest CG listing segment) requirements. A great artible by AMEC president Mauro Cunha highlights the opportunities and risks in these discussions.

Finally, one interesting initiative: the discussion of a voluntary Stewardship Code, inspired by (among others) the UK’s.

Disclosure: I have worked with, and admire, both Mauro Cunha and Isabella Saboya, who are linked to these and past initiatives regarding the improvement of the Brazilian capital markets. As friends we may not agree 100% of the time, but they are Good – and the capital G isn’t a typo.

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Gustavo Ballvé on July 6th, 2016
Food for thought, Home, Mental models

Bill Gates wrote a very touching note on the 25th anniversary of his friendship with Warren Buffett (make sure you watch the VR video!).

It is obvious that they are both immensely intelligent and curious, but it is true that they seemed like very different people when they first met. Buffett was already very successful and wealthy, and Gates was definitely “on his way” to what he (and Microsoft) later became, so there was the risk of ego playing out in their initial interaction. It wasn’t easy at all to guess that they would become such friends.

The lesson here, if there is any, is to be truly humble – intellectually and personally.


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