Gustavo Loyola, a former Brazilian Central Bank chief, writes an op-ed today about the increasingly irresponsible legislative pieces enacted or proposed by our Congress. He goes back to the ages-proven concept that success breeds failure and vice-versa and applies it to Brazil’s current situation. We’ve been mentioning these risks in our latest reports and it’s part of our reasoning to keep a relatively high cash stake. While it has been somewhat tempered since our last report, some prices still imply a “blue-sky” scenario that we’re not comfortable with.
Read more about Brazilian Congress vs. fiscal responsibility
Three WSJ articles related to consumers in emerging markets and how CG companies are adapting. The 1st one highlights the bullish comments on emerging markets in NestlĂ©’s Investor Day, with some detail on the capex plans and the goals they intend to achieve through these investments. The 2nd story is about India and the P&G vs. Unilever battles over there. Finally, a 3rd story (weaker) highlights 3 chinese companies supposedly exposed to China’s increasing “consumerism” – the stock analysis is superficial and the trend is far from “new news”, but it complements the other two articles.
A 1952 executive-education course serves as a reminder that now, more than ever, we need leaders who can think for themselves. “A well-trained man knows how to answer questions, (…) an educated man knows what questions are worth asking.” Without talk of incentives, this is more a proof of the benefits of a diverse and continuous education than it is a valid “diagnosis” of today’s leaders’ conduct. Still, that is a worthy enough point.
Warren Buffett’s article at Fortune, but most importantly his, Bill & Melinda Gates’ challenge to billionaires to give away 50% of their wealth have people all over the world discussing philanthropy. We already liked his approach to giving – since he didn’t know how to do it, he trusted his buddy Bill Gates’s foundation with the money – but now it’s WOW all over again.
Gadgets that are increasingly online all the time help you multitask – but is that good? Scientists say a loud “no”, according to this New York Times article. There’s reason to be skeptical of either side of this debate, but it does recall one thing: One of Waren Buffett’s overlooked skills is that of saying no to things that would disrupt his schedule, or take time away from quiet reading and “just thinking”, as he says.
“Irony”: High-level corporate strategy consultants need to review their business models to survive. The Financial Times article may be just a sign of worldwide corporate spending cuts, so don’t read too much into it, but the fact remains that the downturn is driving consolidation in what is already a relatively concentrated market (useful chart in the story).
McKinsey Quarterly recently had a series on strategic decision making called “Seeing Through Biases in Strategic Decisions”, of which we highlight two articles and link to one by Harvard Business Review. Taken together, it’s great food for thought when you try to apply this line of thinking to investing and even marketing and advertising.
It seems obvious but Dan Pink makes it interesting in this 2009 TED talk: extrinsic incentives work great for certain situations but poorly for others of higher complexity. His other point, that there’s a “mismatch between what science knows and what business does”, is also important… but trying to bridge this gap can lead to information overload if managers try to cover all the “buzzwords” for fear of missing out on the latest (supposedly) performance-enhancing method.
A LEX column reminds us that Buffett runs Berkshire and for over 50 years has taken calculated risks better than most; he has avoided and profited from most crises including the last one; and he has written and talked extensively about excessive risk-taking, the dangers of leverage and spendthrift economic policies and etc.. And yet he has been soundly ignored by most investors, CEOs, regulators and policy makers.
Munger’s classic speech in 1995 at the Harvard Law School is the quintessential example of the multitude of his mental models. In it Mr. Munger describes 24 “standard causes for human misjudgement” in separate, but then reminds us that these can combine to create potentially multiplied consequences. Since it can happen for good or bad, we’re better off informed and much smarter for the effort.