The backstory on Obama’s JOBS Act – WSJ Opinion Story
For those of you following the news on Apple’s main Chinese supplier, Foxconn, reportedly engaging in all sorts of labor and human rights violations, the following article is worth reading closely (read here).
It provides plenty food for thought. And while I strongly favor any sort of activism, ideologically speaking, that promotes humane conditions across the supply chains of large multinational companies – I often am skeptical on the effectiveness of these campaigns and often question if these do more harm than good?
In the 1990s, when the anti-sweatshop movement was going strong, Paul Krugman, before he became a columnist for The New York Times, wrote that “as long as you have no realistic alternative to industrialization based on low wages, to oppose it means that you are willing to deny desperately poor people the best chance they have of progress for the sake of what amounts to an aesthetic standard — that is, the fact that you don’t like the idea of workers being paid a pittance to supply rich Westerners with fashion items.”
Today, globalization has a decidedly better track record than its alternative. Countries that receive lots of multinational investment have grown faster. They report less poverty and less use of child labor.
It is clear that global capitalism and the resulting development and progress it brings to poor countries (along with all of its externalities), takes place along a very bumpy road fraught with ethical and moral dilemmas. It is a messy process with plenty of good, bad and ugly, and is too ambiguous to simply come up with a one size fits all solution. Sadly tragedies happen, and there are plenty of powerful, and emotional, arguments that assign blame to pretty much any and all constituents – employers, governments and consumers.
I am interested in seeing how Apple approaches this problem – hopefully balancing its responsibility as a global corporate citizen with its profit motive. Creativity and innovation here is sorely needed.
Jeremy Grantham’s 10 Investment Lessons:
(thanks to Cullen Thompson for forwarding)
1. Believe in history: “history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away.”
2. Neither a lender nor a borrower be: “Unleveraged portfolios cannot be stopped out, leveraged portfolios can. Leverage reduces the investor’s critical asset: patience.”
3. Don’t put all your treasure in one boat: “This is about as obvious as any investment advice could be … Several different investments, the more the merrier, will give your portfolio resilience, the ability to withstand shocks.”
4. Be patient and focus on the long term: Wait for the good cards. If you’ve waited and waited some more until finally a very cheap market appears, this will be your margin of safety.”
5. Recognize your advantages over the professionals: “The individual is far better-positioned to wait patiently for the right pitch while paying no regard to what others are doing, which is almost impossible for professionals.”
6. Try to contain natural optimism: “optimism comes with a downside, especially for investors: optimists don’t like to hear bad news.”
7. But on rare occasions, try hard to be brave: “You can make bigger bets than professionals can when extreme opportunities present themselves because, for them, the biggest risk that comes from temporary setbacks – extreme loss of clients and business – does not exist for you.”
8. Resist the crowd, cherish numbers only: “this is the hardest advice to take: the enthusiasm of a crowd is hard to resist. The best way to resist is to do your own simple measurements of value, or find a reliable source (and check their calculations from time to time) … and try to ignore everything else.”
9. In the end it’s quite simple, really: “GMO predicts asset class returns in a simple and apparently robust way: we assume profit margins and price earnings ratios will move back to long-term average in 7 years from whatever level they are today. We have done this since 1994 and have completed 40 quarterly forecasts … Well, we have won all 40.”
10. This above all, to thine own self be true: “To be at all effective investing as an individual, it is utterly imperative that you know your limitations as well as your strengths and weaknesses … you must know your pain and patience thresholds accurately and not play over your head. If you cannot resist temptation, you absolutely must not manage your own money.”
New research from the Stanford Graduate School of Business warns about the pitfalls of too much information, also known as TMI, on negotiations.
“To the extent that people rely on information that’s easily available, they may rely on it to the exclusion of doing the hard work necessary to create value in a negotiation,” says Margaret Neale, the John G. McCoy–Banc One Corporation Professor of Organizations and Dispute Resolution at the business school, who conducted the research with Scott Wiltermuth, PhD ’09, now an assistant professor at USC’s Marshall School of Business.
Distraction and an overall lack of focus on what truly is important seems to be the primary culprit.
These results, published in the Journal of Applied Psychology, should give pause to anyone who negotiates in the real world, which includes most of us. For one thing, the research suggests why negotiations between friends or other people who know each other well aren’t as likely to create value. “Because I think I know you well, I’m not going to be as attuned to the specifics of the negotiation,” Neale says. “I’m going to think I know what you care about, but I don’t test out those hypotheses.”
What’s more, the easy availability of information about others — think of LinkedIn profiles, Facebook pages, and Twitter feeds, for example — can lull us into a false sense of confidence even about strangers. That’s not to say that such information is always irrelevant, but since we’re poor at telling the useful from the useless, looking at social media for insights about our negotiation partners can harm us by shifting our focus from what’s truly important in the negotiation. “We feel like we’ve done our homework,” Neale says, “but we don’t know the issues.”
It is easy to apply these findings to investing by observing market behavior that is obsessed with short-term oriented results – often missing the forest from the trees. Read the full article here.
In an adaptation from his upcoming shareholder letter, the Oracle of Omaha explains why equities almost always beat the alternatives over time.
FORTUNE — Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.
From our definition there flows an important corollary: The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability — the reasoned probability — of that investment causing its owner a loss of purchasing power over his contemplated holding period. Assets can fluctuate greatly in price and not be risky as long as they are reasonably certain to deliver increased purchasing power over their holding period. And as we will see, a nonfluctuating asset can be laden with risk. Read the rest of the article here…
Southeastern Asset Management, advisor to the Longleaf funds, is a good source of investment ideas for long-term oriented investors interested in predictable businesses with great “owner-operators” at the helm.
Disclosure: I own positions in Lamar Advertising and DirecTV.
One of my favorite new blogs, Why We Reason, has a fascinating post on the strengths and weaknesses of working in teams. Here is an excerpt:
How To Generate A Good Idea
by sammcnerney on January 20, 2012
When it comes to getting work done Sartre was right, hell is other people. So was Picasso, who said that, “without great solitude, no serious work is possible.” And then there’s Steve Wosniak, who in his memoir explained that, “most inventors and engineers I’ve met are like me … they live in their heads. They’re almost like artists… And artists work best alone …. I’m going to give you some advice that might be hard to take. That advice is: Work alone… Not on a committee. Not on a team.” Read the rest here…
The Hacker Way
by Mark Zuckerberg
As part of building a strong company, we work hard at making Facebook the best place for great people to have a big impact on the world and learn from other great people. We have cultivated a unique culture and management approach that we call the Hacker Way.
The word “hacker” has an unfairly negative connotation from being portrayed in the media as people who break into computers. In reality, hacking just means building something quickly or testing the boundaries of what can be done. Like most things, it can be used for good or bad, but the vast majority of hackers I’ve met tend to be idealistic people who want to have a positive impact on the world.
The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete. They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo.
Hackers try to build the best services over the long term by quickly releasing and learning from smaller iterations rather than trying to get everything right all at once. To support this, we have built a testing framework that at any given time can try out thousands of versions of Facebook. We have the words “Done is better than perfect” painted on our walls to remind ourselves to always keep shipping.
Hacking is also an inherently hands-on and active discipline. Instead of debating for days whether a new idea is possible or what the best way to build something is, hackers would rather just prototype something and see what works. There’s a hacker mantra that you’ll hear a lot around Facebook offices: “Code wins arguments.”
Hacker culture is also extremely open and meritocratic. Hackers believe that the best idea and implementation should always win — not the person who is best at lobbying for an idea or the person who manages the most people.
To encourage this approach, every few months we have a hackathon, where everyone builds prototypes for new ideas they have. At the end, the whole team gets together and looks at everything that has been built. Many of our most successful products came out of hackathons, including Timeline, chat, video, our mobile development framework and some of our most important infrastructure like the HipHop compiler.
To make sure all our engineers share this approach, we require all new engineers — even managers whose primary job will not be to write code — to go through a program called Bootcamp where they learn our codebase, our tools and our approach. There are a lot of folks in the industry who manage engineers and don’t want to code themselves, but the type of hands-on people we’re looking for are willing and able to go through Bootcamp.
