Last year I was very interested in business biographies
because I enjoy learning about the history and culture of various companies. As
an investor, it is important to read a lot and absorb as much quality
information as you can. Unfortunately, we don’t have a position in any of the
companies in these books. But, I would love to own many of them at the right
price.
What was most interesting to me about this group of books
wasn't the business strategy reasons for why these companies were successful or
not, but rather the morals behind the people. It is amazing what people can create with good
morals and a lot of hard work. And on the other side of that coin, how destructive
people can be without the right morals. The first book does a great job of
exploring that moral cliff that we all face at times in our life. Below, I give
a short synopsis and some thoughts on the 10 favorite books I read in 2014.
1. The Education of a Value Investor-Guy Spier
This was by far the
best book I read about investing and life in 2014, in part, because I find my
story very similar to his. It is pretty rare that you see someone do such a
good job at analyzing themselves and correcting errors in their life and
thinking. Guy started out working as an Investment Banker and he found himself
questioning the morals of himself and the business. He was very unhappy and
seemed lost in life for a brief time.
Fortunately, he stumbled across Warren Buffett’s
writings and it was like a light switched on! Here was someone whose morals
were unquestioned and created tremendous value for people in the world of
finance. Not long after, Guy started an Investment Partnership similar to
Buffett’s early ones and it has been extremely successful.
Guy explains his investing
and life journey wonderfully. In the end it has made him a great investor and
an even better person. I can attest to this from some correspondence with him
in which he has sent me some very nice notes, a Garmin GPS for cycling, and
some tasty chocolates for the Holidays. And I haven’t even met him! In
addition, Guy is such a great “guy” that he sent me one of my favorite books of
the year and the next one on my list.
2. The Art of Thinking Clearly-Rolf Debelli
In this book Rolf
Debelli explains what he calls cognitive biases or simple errors that all of us
make in day-to-day thinking. The book was arranged in short three to five page
chapters that all told stories and provided examples of errors in our thinking.
For example, Chapter 91 talked about the Planning Fallacy. Most people make
some sort of to-do list each morning or week. But, how often do those lists get
completely finished or checked off? If you are like most people, you will
finish the list only very rarely. That is just an example of us not being able
to complete as much as we think we can. As an investor I have to try and deal
with many of these biases each day, but since I recognize that, I think I am
better equipped to deal with them. It can only help to understand the errors in
your thinking and I can’t suggest this book enough!
3. Sam Walton- Made in America-Sam Walton
This is just such a
wonderful autobiography where Sam and some of his friends and family really let
you into his thinking in business. We all know what Wal-Mart has become, but
the story of how it has become the biggest retailer is absolutely
incredible.
I’ve never heard of someone
experimenting, making mistakes, and improving day in and day out like Sam did.
Surprisingly, Sam didn’t open his first Wal-Mart until he was 44 years old.
Pretty amazing, seeing that most super wealthy people come across their big
idea much earlier in life. Think of Bill Gates, Mark Zuckerburg, or Warren Buffett
for instance. But, by the time Sam started his first Wal-Mart he had 20 years
of experience learning the craft of retailing. He was constantly experimenting
with new things, such as “self-service” shopping, new products, and store
sizes. He just kept failing and keeping what worked.
When he opened his
first Wal-Mart he was the largest independent variety store owner in the US
(Ben Franklin type stores). While most people would consider this quite a
success and rest on their laurels, Sam could not. From his numerous trips
around the country he noticed that the large discount store was the wave of the
future. So he borrowed everything he could and started his first Wal-Mart
store. Obviously it was successful and he just kept doing it over and
over. He crushed his much larger
competitors like Woolworths and Sears. It seems so unlikely that some guy from
Northwest Arkansas would be so successful, considering all of the advantages the
larger established stores had against him. But, this book shows that it was no
fluke, and by working hard you truly do create your own luck.
4. The Everything Store: Jeff Bezos and the Age of Amazon-Brad
Stone
Even though Jeff Bezos
and Amazon did not cooperate in the writing of the book, the author did a
tremendous job finding other sources to help create it. I read The
Everything Store just
after Sam Walton’s book and I could help but be reminded of Sam (maybe that is
just a cognitive bias). Like Sam, Jeff started Amazon and just focused on what
worked, books. But he was not satisfied with that so he kept experimenting,
failing, and keeping what worked. Also, like Wal-Mart and Sam, Amazon has found
a formula for success in retailing. Provide great customer service and deliver
tremendous value to the customer and then just keep doing it again and again.
The results, Amazon is crushing the brick and mortar retail store competition
and seems to only get better year after year. I believe that Amazon will be
tremendously huge company 10 years from now and this book will definitely help
you understand why.
5. Delivering Happiness -Tony Hsieh
Tony Hsieh started the
wildly successful advertising network company LinkExchange. The great thing
about the book is not about becoming wealthy but about enjoying work and your
life. LinkExchange was a lot of fun for Tony in the beginning, but near the end
he didn’t know a lot of people that he worked with and the culture seemed lost.
He resented going to work and he hated the situation he was in. So, he and his
team decided to sell to Microsoft for $265 Million! Tony was just 26 and very
wealthy but the whole experience of hating going to work bothered him.
After he sold
LinkExchange he helped form the even more wildly successful company Zappos.com
in his image to deliver happiness to all stakeholders. Tony has implemented so
many fantastic things for his employees, customers, and vendors to create his
image of what a company should be, and it is truly amazing. Surprisingly, Tony sold Zappos.com to Amazon!
But, he sold with an agreement that Zappos would be left alone to have their
own culture and it has worked tremendously well for both Zappos and Amazon.
6. Cable Cowboys- Mark Robichaux
There must be
something to making onto the Forbes 400 list and Cable Cowboys explains
John Malone’s life journey in the Cable and Media Industry. In 1972, John started as CEO of Tele-Communications
(TCI), a cable company with about $2 Million in revenues and on the verge of bankruptcy.
By 1981, after an absolutely incredible amount of deals, he had created the
largest cable company in the US! In 1998, he finally sold TCI to AT&T for
$32 Billion in stock.
Now it appears Malone
is pulling out the old TCI playbook again and consolidating the Cable Industry
in Europe with his company Liberty Global. Cable Cowboys does a
wonderful job of explaining the TCI playbook. What I find interesting is that the TCI
strategy is very similar to what Amazon does!
Malone does not concern himself with
Net Income, but rather Cash Flows and avoiding taxes in every legal way
possible. His business deals are known for being some of the most complex, but compared
to other large companies his have paid some of the least amount of income taxes
in the last 40 years.
7. The Partnership: The Making of Goldman Sachs- Charles
D. Ellis
The Partnership gives
the complete history of the most respected investment bank, Goldman Sachs. It
was very interesting to learn how the small partnership started out, struggled
at times and then grew into the behemoth investment bank that it is today. The
most interesting part for me was learning about how the leaders of the firm
acted when it was a partnership and how things gradually changed once it became
a public company and mostly owned by outside investors. If Goldman stayed a
partnership it would be interesting to see how they would have behaved in the
08-09 financial crisis compared to other public investment banks.
8. Flash Boys- Michael Lewis
This was one of the
most controversial books of 2014, authored by who I think is the best financial
industry author. Michael Lewis always tells a good story and explains complex
subjects extremely well to his readers. Flash Boys addresses the issue
of High Frequency Trading firms front-running other investors orders. By using
a variety of questionable techniques HFT firms and their algorithms are able to
glimpse orders of other investors and then react to them. This allows them to
make a slim profit, and when this is done millions of times it adds up to
serious money. The book explains how Brad Katsuyama, a trader with the Royal
Bank of Canada, pieced together the HFT world and sought to fix it. His
solution was starting the Investor’s Marketplace (IEX), which Delphi Value
Investments happily routes its trades through. I can’t recommend this book
enough.
9. The Frackers- Greg Zuckerman
The oil revolution
happening in the US has been incredible and The Frackers explores the
stories of the executives and companies involved in these unconventional oil
plays. Zuckerman explains how it took years and tons of experimenting for George
Mitchell to perfect hydraulic fracturing in the Barnett Shale in North Texas. Following
his success, a whole cast of other oil companies, led by some eccentric CEO’s, used
these techniques on new formations all around the US. Since 2008 this has increased
US oil production from 5 Million Barrels per day in 2008 to 9 Million in 2009! This
is by far the most interesting book I have read about the oil industry.
10. Final Accounting: Ambition, Greed, and the Fall of Arthur
Anderson- Barbara Ley
I still remember
watching the news of Arthur Anderson and Enron collapsing. I was just a kid and
didn't really know what it meant, but I noticed the utter shock and horror from
people. So of course, I was intrigued to hear the story of how the most
respected accounting firm slowly changed into the worst. The book really shows
how the power of incentives, bad leadership, and greed can lead to terrible
outcomes. I think that one can learn many lessons from this book.
