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.