25iq

My views on the market, tech, and everything else

A Dozen Things I’ve Learned From Michael Mauboussin About Investing

1.      “The only certainty is that there is no certainty… With uncertainty, the underlying distribution of outcomes is undefined, while with risk we know what that distribution looks like. Corporate undulation is uncertain; roulette is risky…” There is no single number which can be used to predict the future price of an investment because the future is not only risky (like roulette) but uncertain (unknown unknowns). There are known future […]

Continue Reading →

A DOZEN THINGS I HAVE LEARNED ABOUT VENTURE CAPITAL

1.  “The problem is that extraordinary performance comes only from correct non-consensus forecasts, but non-consensus forecasts are hard to make, hard to make correctly and hard to act on.”  Howard Marks.  http://www.go2cio.com/quote/index.php?page=50   Humans are terrible forecasters for many reasons explained by behavioral economics, not the least of which is that we often see false patterns and ascribe false meaning to them.   Having great pattern recognition skill is critical in venture […]

Continue Reading →

A Dozen Things I’ve Learned About the Psychology of Investing

“The best example of narrow framing that I can think of is the use of pro forma earnings. Essentially this is a company turning up and saying, hello I’m lying to you, these are the earnings I didn’t make, but I’d be jolly grateful if we could all just pretend I did.”  (Framing bias) James Montier  http://www.investmentpostcards.com/2010/03/11/interview-james-montier-on-value-investing/  Our brains only have so much cognitive capacity so humans suffer from in-attentional […]

Continue Reading →

A DOZEN THINGS I’VE LEARNED ABOUT INVESTING

1. “[At a horse racing track people make] bets and the odds change based on what’s bet. That’s what happens in the stock market.” Charlie Munger.  http://www.ritholtz.com/blog/2012/02/a-lesson-on-elementary-worldly-wisdom-as-it-relates-to-investment-management-business/    Betting on a horse which is the favorite or a longshot may or not be a good bet. What matters is whether the bet is *mispriced* in your favor. Stocks are exactly the same.  The stock market is *often* efficient, but it is not […]

Continue Reading →

A DOZEN THINGS I’VE LEARNED ABOUT BUSINESS

1.“If you play [your competitor’s] game, you lose every time.” Allan Benton. http://www.esquire.com/features/what-ive-learned/allan-benton-interview-0909 This quotation to me is all about moats and sustainable differentiation.  If you haven’t read Warren Buffett, Michael Porter and Michael Mauboussin about “moats/sustainable competitive advantage,” well, you are missing out in a huge way. 2.“Listen, business is easy. If you’ve got a low downside and a big upside, you go do it. If you’ve got a big […]

Continue Reading →

“Wholesale Transfer Pricing” and the “Free Parking” Business Model

As part of the discussion of my previous post on the “free parking” business model, a reader asked for a blog post on “wholesale transfer pricing.” The rise of free parking as a business model has made wholesale transfer pricing more important than ever. Wholesale transfer pricing power is a term I heard John Malone use in a conference room circa 1995.  You won’t find the term in textbooks.  Simply put: Wholesale transfer pricing =  the bargaining […]

Continue Reading →

The “Free Parking” Business Model

This blog post is on what I call the “free parking” business model, which in my view is a different way of describing the “attach” business model.  @cdixon tweeted a suggestion that I follow up our exchange of tweets with a longer blog post. The right way to look at almost any business question is to start with the customer. Unfortunately, sorting out who the customer is may not always […]

Continue Reading →

Asset Allocation for Muppets with a 401(k)

A few people have recently asked me to write a post on asset allocation.   I decided to focus the post on the situation facing so-called “muppets” since they have greatest need for the advice.  A term like “muppet” which can be used in a derogatory way can be argued to be a badge of honor for some people.  In other words, the sooner you “get to acceptance” if you are indeed […]

Continue Reading →

BUSINESS CONFIDENTIAL – HEART OF DARKNESS

                                                      I had attended a very important conference the previous month during which we needed the support of a delegation of Africans. To cement that support I promised to attend another conference a few weeks later in the city of Kinshasa in a country that is now called the Democratic Republic of Congo.  The story begins in London on  December 3, 1995 when I called a friend from the hotel. He knew I was about to leave on a […]

Continue Reading →

Investment vs. Speculation

Jason Zweig makes an interesting point about the difference between investment and speculation. http://blogs.wsj.com/totalreturn/2013/02/28/are-you-an-investor-or-a-speculator-part-one/?mod=WSJ_Business_LatestHeadlines He raises the idea that the distinction should perhaps have a time element, which in my view is not helpful. Seth Klarman has written: “The line I draw in the sand is that if an asset has cash flow or the likelihood of cash flow in the near term and is not purely dependent on what a […]

Continue Reading →