My neighbour and friend at Harvard, who was training to be a priest, recently gave me a book on David Jones. Jones’ poems In Parenthesis and Anathemata are great works I come back to time and again. They are not easy first reading but very rewarding.
From In Parenthesis, part 7
And to Private Ball it came as if a rigid beam of great weight
flailed about his calves, caught from behind by ballista-baulk
let fly or aft-beam slewed to clout gunnel-walker
below below below.
When golden vanities make about,
you’ve got no legs to stand on.
He thought it disproportionate in its violence considering
the fragility of us.
The warm fluid percolates between his toes and his left boot
fills, as when you tread in a puddle–he crawled away in the
Turning to economic woes, I’ve only just been made aware of my friend, Leigh Caldwell’s blog on economic and related subjects, called Know and Making. He runs his own business and comments from the front lines, so to speak.
In the tide of reading a lot of commentary on the current state of the economy I rediscovered a poem from Ecclesiastes and with my recent correspondence with my priest friend on transubstantiation I thought appropriate for these times. (I amalgamate the translations somewhat).
To everything – a season, and a time to every delight under the heavens:
A time to be born, and a time to die. A time to plant, and a time to pluck the planted.
A time to slay, and a time to heal. A time to break down, and a time to build up.
A time to cry, and a time to laugh. A time to mourn, and a time to dance.
A time to scatter away stones, and a time to pile up stones. A time to embrace, and a time to be far from embracing.
A time to seek, and a time to destroy. A time to keep, and a time to throw away.
A time to rend, and a time to sew. A time to be silent, and a time to speak.
A time to love, and a time to hate. A time of war, and a time of peace.
Ecclesiastes 3. [Young’s literal / King James / Yeoh translation]
Only invest what you can afford to lose and for most people (9/10, I think) a low cost tracker fund is probably the best vehicle for them. For others who want to invest for the long term themselves, Warren Buffett is a very good guide. He writes in his 2007 shareholder letter:
“Charlie [Munger] and I [Warrren Buffett] look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag. We like to buy the whole business or, if management is our partner, at least 80%. When control-type purchases of quality aren’t available, though, we are also happy to simply buy small portions of great businesses by way of stock-market purchases. It’s better to have a part interest in the Hope Diamond than to own all of a rhinestone.
A truly great business must have an enduring “moat” that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business “castle” that is earning high returns. Therefore a formidable barrier such as a company’s being the low-cost producer (GEICO, Costco) or possessing a powerful world-wide brand (Coca-Cola, Gillette, American Express) is essential for sustained success. Business history is filled with “Roman Candles,” companies whose moats proved illusory and were soon crossed.
Our criterion of “enduring” causes us to rule out companies in industries prone to rapid and continuous change. Though capitalism’s “creative destruction” is highly beneficial for society, it precludes investment certainty. A moat that must be continuously rebuilt will eventually be no moat at all.
Additionally, this criterion eliminates the business whose success depends on having a great manager. Of course, a terrific CEO is a huge asset for any enterprise, and at Berkshire we have an abundance of these managers. Their abilities have created billions of dollars of value that would never have materialized if typical CEOs had been running their businesses.
But if a business requires a superstar to produce great results, the business itself cannot be deemed great. A medical partnership led by your area’s premier brain surgeon may enjoy outsized and growing earnings, but that tells little about its future. The partnership’s moat will go when the surgeon goes. You can count, though, on the moat of the Mayo Clinic to endure, even though you can’t name its CEO.
Long-term competitive advantage in a stable industry is what we seek in a business. If that comes with rapid organic growth, great. But even without organic growth, such a business is rewarding. We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere. There’s no rule that you have to invest money where you’ve earned it. Indeed, it’s often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can’t for any extended period reinvest a large portion of their earnings internally at high rates of return. …”
Strangely (although perhaps not so strangely if you look at incentive structures in the industry) few money managers who purport to invest for the long term, actually manage to or manage money anything close to what Buffett advises…
As an analyst I’m always intrigued by measures of “value”.
Investors will pay different multiples on the profits of different companies, depending on the risk/reward prospects.
Higher profits one year does not necessarily mean a higher value for investors for all myriad of reasons.
Therefore, I find this human development index – HDI – fascinating.
It shows that while the US is the richest country overall in terms of, say, absolute GDP. It is not by some way the best in measures that could be claimed to measure human development (and by proxy perhaps, happiness?) such as life expectancy and infant mortality.
In the words of Nobel laureate economist Amartya Sen, who developed the HDI in 1990: “Human development is concerned with what I take to be the basic development idea: namely, advancing the richness of human life, rather than the richness of the economy in which human beings live, which is only a part of it”
I think some of this philosophy applies to funding and benefits from creative arts, which are generally intangible in nature; although Gates’ main focus are more basic necessities such as clean water, enough food or Malaria prevention.
From his 2008 Davos Speech:
“… I like to call this new system creative capitalism – an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities.
Some people might object to this kind of “market-based social change” – arguing that if we combine sentiment with self-interest, we will not expand the reach of the market, but reduce it. Yet Adam Smith – the father of capitalism and the author of Wealth of Nations, who believed strongly in the value of self-interest for society – opened his first book with the following lines:
“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”
Creative capitalism takes this interest in the fortunes of others and ties it to our interest in our own fortunes – in ways that help advance both. This hybrid engine of self-interest and concern for others serves a much wider circle of people than can be reached by self-interest or caring alone…”
Reading about Eliot Spitzer, New York Governor, being caught using a high class escort ring leads me to thoughts about humbleness that I have been having over the years.
The FT writes “Spitzer was educated at Horace Mann preparatory school in Manhattan, at Princeton University and at Harvard Law School, which encouraged arrogance and self-righteousness. These qualities led him to become a client of a vice ring although he had prosecuted such outfits before and knew the risks involved. Whether or not he committed a crime, he acted so recklessly that it beggars belief.”
I was educated at Westminster school, Cambridge University and Harvard University.
Do these places encourage arrogance and self-righteous? Or was it his own personal and family history (rich background) which led him down that path?
I would say first and foremost, with a bit of luck, the places I was educated at encouraged free and independent thinking and pitted that thinking against very high critical and intellectual standards. I wasn’t rich.
The other areas I ply my trade, as long term readers would know, are in theatre/arts, science (particularly medicine/pharmaceuticals) and the stock market.
I believe the true observer and participant in the markets would learn humbleness. No matter how good you are, you do not know if next day or next year you will have assessed the market wrong. Even the best, such as Victor Neiderhoffer in the trading arena have come unstuck and Warren Buffet will admit his investing mistakes too (read his shareholder letters). More often than not, the market “knows” best and if it does not then it can remain “irrational for longer than you can remain liquid” ie you will run out of money first before the market does.
That is part of the thrill and challenge for traders and stock market lovers.
I was good at Maths when I was growing up. I could probably say I was very good. However, I was good enough to know I was not a genius.
I liken it to being able to climb a hill in order to see that there are other mountains further ahead. There are lots of people who don’t climb that hill at all and I guess perhaps a hill or a mountain can look the same from further away.
There has been a lot of talk about critics in the arts. I think this has increased since the advent of blogs have given voices to more art goers.
From my point of view, I see a fair amount of modern art in all its forms and on many occasions, I don’t understand it. Some times, I don’t understand it but it still moves me – this happens to me in dance and some times I’m left blank.
Is this the artists problem or mine? That is probably the wrong question posed in the wrong binary form.
However, for most art I believe there is a compact between artist and audience/viewer/reader. Theatre is not complete without an audience. Not to the same extreme but towards the same effect: art needs a viewer, literature needs a reader, music needs a listener, architecture needs inhabitants; art forms have died when its audiences have been lost like gods die when believers fade.
Both the artist and the audience have a problem if they can’t communicate. Some times both will want to fix this problem, some times neither.
As a viewer of art, I like to take the humble approach first and assume that if I don’t understand some thing, it is a problem first with me and not with the art.
Some times I can solve this, I can find out more about where the piece is coming from, some times I can not and some times for various reasons, I will not – probably to my loss. The piece may well move others.
Science has an inbuilt mechanism in its process to rely on evidence, testing and re-testing that can somewhat diminish too much individual arrogance.
However, over the years, I can’t help thinking that the world would be a more peaceful, perhaps more productive place, if and when, we come up against something we don’t understand, we first ask ourselves what it is about ourselves which means we can’t understand it, and then try to understand it on its terms from its own place before we dismiss it as not our problem but the X’s problem. [Think theatre criticism, but also religion, Middle East, conflict etc.] Many of our greatest mountains pay respect to large matters – Stephen Hawking to the Universe, Warren Buffett to the markets, Monet to nature.
Some days, I think it would have been amazing to be a mountain, but when you are on the top of the world perhaps it is difficult to put matters in perspective.
Eliot Spitzer couldn’t. Why would I be better?
After my second plane in twenty four hours gets cancelled; and I am in for another 4 hour delay waiting in a Milan airport… there’s not much to do except read scraps of newspaper.
I am not sure this is verified but I read that parliament spent about 700 hours debating the fox hunting ban but only about 7 hours debating whether to go to war in Iraq. Article on how hunts are faring now here.
I guess one could argue that both matters are in a mess now.
I also read a rather moving plea from David Grossman (see here) for peace between Israel and Palestine. His son died in the recent conflict. I think if interested, you’ll have to read his whole speech yourself; but I leave his last paragraph in conclusion.
“From where I stand at this moment, I request, call out to all those listening – to young people who came back from the war who know that they are the ones who will have to pay the price of the next war; to Jewish and Arab citizens, to the people of the right and the people of the left – stop for a moment. Look over the edge of the abyss and consider how close we are to losing what we have created here. Ask yourselves if the time has not arrived for us to come to our senses, to break out of our paralysis, to demand for ourselves, finally, the lives we deserve to live …”
And finally, on a lighter note, but of importance to property obsessed Brits, John Kay gives some good advice about ignoring useless house price forecasts. See here.
“…Well located houses are what the economist Fred Hirsch called a positional good. House prices are consequently a product of sociology as well as economics. That combination explains why it is Britain, Ireland and Spain, not France, Italy and Germany, that have seen the fastest rises in European house prices and why Hawaii, California and New York, not Idaho, Mississippi and Nebraska, have been the hot spots in the US.
The aspirant rich do not displace the very rich from the best houses but they make the very rich pay more for them. This is the self-defeating character of the search for the symbols of status and affluence. So it goes on down the scale. The level of house prices depends not just on levels of income but on social mores and the distribution of wealth.
Successfully predicting house prices involves good economic models, an appreciation of the sociological dynamics of aspiration and a trader’s flair for the waves of market psychology. Not many people combine these skills. My files tell me I wrote about house prices in 2001 and 2004 and concluded that the only information anyone offering confident predictions about house prices gave was that you should not pay attention to them. It is still true…“
I was reading through some comments by Warren Buffet [major investment guru; I happen to know quite a lot about investing in another life] and one of the questions he asks managers of companies is
What keeps you up at night?
I think this is a good question to ask a director. What does he worry most about when putting on a production. I also think it’s pretty relevant for writer’s too not only in the work about to be staged but what worries them most in their writing currently.
He also asks, if you could get rid of one competitor with a silver bullet, who would it be and why? I don’t think this is so useful for directors but if they had an answer it would be intriguing….