Booz & Co.’s Strategy + Business publication has a story with their top-3 management books of 2016 – part of a larger story on the best Business books overall. 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”).
Interesting post on LinkedIn’s Pulse in which Mr. John Taft highlights the power of Buffett’s punch card analogy for investments, then he takes it to another, more personal level, and reminds us that the analogy applies to (even) bigger life decisions as well: you will probably make 10-20 life-changing / -defining decisions in your lifetime, so make sure you have the resources/ processes/ mental models to make the best possible decision at each time.
Great timing by this article, called “Why Investment Performance Is a Distraction”, highlighted with “Quote of the Day” honors at Abnormal Returns. It’s always great to be reminded to NOT keep our eyes on some performance “goal”, but rather to focus on processes. That said, the article tries to expand the investment-related dangers of setting specific goals to general management situations – and I partially disagree.
These are very exciting times in Brazil – forget the protests and the soccer action, I’m talking about the current decline in Brazilian equity prices – somewhat selective, yes, but it is starting to generate interesting opportunities. In times like these we are always reminded of the power of Cash, that benevolent King, and this post about Seth Klarman’s 2010 letter has great tidbits on the subject. But I’d like to highlight a longer post called Don’t Panic.
Two recent blog posts (and a funny chart) about the subject of portfolio management and cycles make for good, quick reading and a timeless warning: emotions and portfolio management don’t mix, and that’s easier said than done.
We did this when MF Global collapsed, so we now have the damning 307-page report on JP Morgan’s “disastrous Whale trades” (and the 600-page annex). Before you say “when will we ever learn?”, say “we’re only human” (or sing it if you’re a Billy Joel fan) and strive to 1) be as aware of your own mental traps as you can be and 2) create and ruthlessly enforce policies that mitigate such issues in your firm/ unit/ practice.
Less than 24h after publishing our rant on Economic models, we get John Kay’s brilliant piece in our inbox – “A wise man knows one thing – the limits of his knowledge”. It is the ultimate summary of the many dangers of modelling in general, not just in economics – among which dangers we count over-complicating things, but most importantly over-estimating a model’s value as predictive/forecasting tool. In fact, as the article argues and as we’ve seen countless times, we tend to over-estimate models even in their ability to analyze the past, especially if one is asking the wrong questions. We also cite a few quotes by Taleb and an article on Edge.org by Emanuel Derman.
It’s a holiday in Brazil, our Proclamation of the Republic day, so we thought we would go “light” today. It’s been a while since our last “humor” post… Two funny, yet very serious, cartoons inside. Brush them aside at your own peril! (there goes the “light” touch…)
While researching for a future post about one of his Goldman Sachs’ “alumni”, we’ve had the pleasure to re-read Bob Rubin’s excellent commencement speech at Harvard in 2001. We’ve alluded to it in a previous Buysiders post: “No one would listen”, in March 2010. A bit over ten years have passed since his speech, but these are timeless concepts.
Yardsticks are only so good as the thought one puts into creating them. Judging money managers on their “nominal” (as in “not adjusted for risk”) performance in short periods of time is downright dangerous…