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Compounding Knowledge

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Re: Compounding Knowledge

#151

Post by hyperpallium »

jboneal wrote: post #74
iambateman wrote: post #30

Buffet’s approach to life is interesting for the same reason an Olympic gymnast is interesting. He has specialized to an extreme and is taking advantage of the rewards of that specialization and natural talent in a unique way. It’s easy for me to feel shame that I don’t read 8 hours per day, as Warren and Charlie do. Buffett is a phenomenal investor but by all accounts, rather odd. He eats like crap, doesn’t exercise…

Controversial take: Buffett is actually not a great investor in the way people think. Via the float in his insurance companies, he receives a 0% infinite maturity loan to plow into the market. That financial leverage gives him the ability to beat the market year after year - not his own stockpicking prowess. If you were to start with $1B, then get an extra $2B that you never had to pay back, you too would do quite we…

Sure, today. But he had greater returns before he set up the float. (He's said they were greater because it's easier to find small overlooked bargains than big overlooked bargains - and when you're BH size, only huge investments will move the needle).

He made clever investments like buying American Express when others sold. (Other investors believed they'd lost trust due to fraud involving salad oil; but Warren verified that consumers still trusted their CCs).

He had a head-start: although he protrays himself as folksy, his father was a US Representative.

Re: Compounding Knowledge

#152

Post by yourapostasy »

JoeSmithson wrote: post #43
pasta wrote: post #34

I strongly believe that compunding knowledge is also helping to create good software. And I think software companies should give a team the opportunity to invest time to know more about the subject. For example when you write WMS software you should go to a warehouse and see what is going on, talk to the people who work there and understand why things are the way they are. Because there is a huge difference between k…

You're right but I think it actually needs so much more than that. I've worked on both sides of enterprise software, firstly building and deploying Incredible Feats of Engineering in the face of Ludicrous Requests from the Idiot Clients, and then secondly as an actual front line worker, doing Work That Actually Matters in the face of ill-designed Utterly Broken Tools produced by Arrogant Engineers. It's convinced me…

Human psychology, common social hierarchies, and management culture works against your ideal: ultra-rare is the manager who will humbly claim they do not know what their direct reports are doing in sufficient detail to adequetly convey requirements to an engineer.

I suspect a swing back towards in-house software development might become more attractive to decision makers, as big companies' boards of directors cotton onto the "Software Eats the World" trend, then panic-build before they're eaten by a competitor who got there first. AWS is just the beginning of what I suspect will turn out to be a marathon we're entering that even our great-grandchildren will run.

Re: Compounding Knowledge

#153

Post by majormajor »

pathseeker wrote: post #146
aabeshou wrote: post #105

Earlier quoted context omitted.

I would agree that wealth shouldn't negate his accomplishments. I think a lot of people who point out Gates' family wealth are reacting to the current political/ideological climate which would say "look, Bill Gates is self-made, so anyone can be!" neglecting the ridiculous enabling impact that enormous family wealth has, and shaming poor people for not being able to pull themselves up by their bootstraps.

>are reacting to the current political/ideological climate Which climate are you referring to? The current climate in the US on the left is being dominated by the narrative that rich people are only successful because of their environment so they don't have the claim to their money that they think they do. "Every billionaire is a policy failure" https://www.mediaite.com/uncategorized/alexandria-ocasio-cor... This vie…

I don't see talk of deserving things in your link, or of reasons for success. Someone could be both completely "deserving" of having received the income and "guilty" of "hoarding" it at the same time.

"The acquisition of that much wealth has bad consequences. A moral society needs guardrails against it."

"Moral society" isn't explored in that article, but "has bad consequences" is pretty far away from "isn't deserved." You can make a lot of policy-based arguments against extreme concentration - whether in a monopolistic company, a huge government, or in a billionaire - is a bad thing, overall, from various angles. And lots of people are making those different arguments. The "people are just lucky" argument is one, but I'm not seeing that one dominate my magazine and newspaper RSS feeds at the expense of any others.

Re: Compounding Knowledge

#154

Post by rbavocadotree »

throwawaymath wrote: post #97
bgroat wrote: post #55

Earlier quoted context omitted.

Funnily enough, Buffett actually calculated this in his essay "The Super Investors of Graham and Doddsville" Basically, advocates of the Free Market Hypotheses believed that it was impossible for anyone to deliberately, repeatedly generate alpha. The market was rational, and success was probabilistically distributed. With a large enough population, you will get Buffett level returns - therefor Buffett is a fluke. How…

It's worth noting that Fama has since then walked back on the strong statement of the Efficient Market Hypothesis. I don't know that he ever intended to say beating the market is impossible; rather that beating the market must be impossible, under the rigorously definition of an idealized, "efficient" market. Unfortunately a lot of proponents of the EMH (especially non-academics) have taken this concept and run with…

He definitely never said that beating the market is impossible. He said you can beat the market long term by taking on more risk, but not by market timing and stock selection. Everyone leaves out risk when talking about the EMH.

Re: Compounding Knowledge

#155

Post by diego898 »

bgroat wrote: post #58
dna_polymerase wrote: post #47

(Slightly Off-Topic) Question to those who subscribe to Farnam Street: Would you recommend it? Does it add value to your life?

I loved it for about 18 months than I figured that I'd learned everything I needed from it. The quality remained stellar, I just didn't need it anymore

@bgroat - I'm also very curious about the fs community. Is it anything like LW? What are the main things that make it worth the yearly fee? Thanks!

Re: Compounding Knowledge

#156

Post by foobiekr »

jodrellblank wrote: post #134
foobiekr wrote: post #104

Earlier quoted context omitted.

How basic is required to qualify as self-made in a meaningful sense? I’m not talking about “Should he have grounded up sand and made his own chips and boards?” stuff, I mean lots of people have similar circumstances to Gates and made nothing of themselves. As it happens the high school I went to, as a kid from a mostly lower middle class family with severe issues being able to pay attention in school in the eighties,…

You're claiming that 100 people in his position, would not do as well. Therefore he was different. If it was simply a matter of self-made difference, all his peers could do that too. Which means whatever it is, is something he was born with. Why does he get credit for being born different? Does he get credit for being male as well? Either it's something any of his peers could do, and he's not special, so why praise h…

Most of the people I was referring to most likely had opportunities and backing exceeding young Gates, yes. But I don't think your point is reasonable. In your model, there appears to be nothing anyone can take credit for, effort or not.

Re: Compounding Knowledge

#158

Post by adamlett »

boombust wrote: post #112
adamlett wrote: post #38

Earlier quoted context omitted.

Warren Buffet would be the first to tell you that how the market prices an investment on any given day, has very little to do with the intrinsic value of that investment. Just because Apple went down relative to when he invested, that doesn't mean it was a bad investment. Markets go up and down in unpredictable ways. As they say, in the short term the market is a voting machine, in the long run it's a weighing machin…

I am not an active investor. I do not claim to know as much as someone like WB. However, what you have just explained is all pretty obvious. To buy Apple's explanation that most of their disappointing quarterly earnings were as a result of Chinese macroeconomic conditions is frankly being generous to them. Just focusing on the iPhone, it is a muddled offering where successive iterations don't stand out from the next…

However, what you have just explained is all pretty obvious.

I was just addressing your notion that the investment was "terrible".

To buy Apple's explanation that most of their disappointing quarterly earnings were as a result of Chinese macroeconomic conditions is frankly being generous to them…

But we don't have to "buy" their explanation, because we can just look at numbers. Apple has released their quarterly results, and the iPhone grew in every region except China. Yes, growth has slowed, but this is not a new trend and is not the reason that this quarter has disappointed investors.

until Apple shows that they can successfully increase their service offering

But they have shown that! Service revenue grew by a very healthy 19% last quarter (relative to the same quarter yesteryear).

when I see that apple is increasing credit on trade ins for newer iPhones a few months back. . .I take that as a sign that consumers see little value in upgrading

Why would you look to signs, when you can look at the numbers? There is no reason to speculate when Apple has released the results.

Six Colors has a lot of pretty graphs and numbers if you're interested: https://sixcolors.com/post/2019/01/apples-dramatic-q1-2019-r...

Re: Compounding Knowledge

#159

Post by niklasd »

SteveCoast wrote: post #78
iambateman wrote: post #30

Buffet’s approach to life is interesting for the same reason an Olympic gymnast is interesting. He has specialized to an extreme and is taking advantage of the rewards of that specialization and natural talent in a unique way. It’s easy for me to feel shame that I don’t read 8 hours per day, as Warren and Charlie do. Buffett is a phenomenal investor but by all accounts, rather odd. He eats like crap, doesn’t exercise…

And, you can get a lot of the benefit "for free" by just buying BRK.B shares, without all the pain of drinking cherry coke all day and reading SEC filings.

I'm not so sure thats true from a financial perspective, at least if you mean him being an outlier. The financial market should have priced in these benefits, that means you can expect only normal "market" returns from these shares. So you won't get them for free.

Re: Compounding Knowledge

#160

Post by sireat »

pan_peter wrote: post #6

Information arbitrage is also a factor. Here's an interesting case study using the Jan 3rd $75B Celgene acquisition 'Generating Alpha from Information Arbitrage in the Financial Markets with NLP Datasets: 水涨船高' https://hackernoon.com/profiting-from-information-arbitrage-...

Those findings while interesting need more work:

The clusters were from back-tested stock data. Ie we knew ahead of the time that there were profits to be made. Was this akin to p-hacking? That is where there more stocks selected with some sort of correlation without the profit potential.

The article alludes that there were more stocks without the raise in stock price after Celgene acquisition.

So the real 'show me the money', 'skin in the game' for this kind of research would be to make predictions on a real time event(merger, acquisition etc).

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