Tag: review

The Fish that Ate the Whale (Amazon,) is a biography of Sam Zemurray, the Banana Man. The author, Rich Cohen, tracks the rise and fall and rise and fall of the banana company that Sam built through the late 19th and early 20th century.

The sheer magnitude of the rags to riches story that starts with Sam trading discarded bananas and ends with him running the United Fruit Company is completely breathtaking. Oh, and it also involves overthrowing a Latin-American government that was about to turn hostile to the banana trade. Incredible.

The book could easily be about any business in the perishable commodities business. We now take American apples and Australian kiwis in our supermarket for granted. However, there was a time before cool chain and cold storage when most produce had to be sourced within a certain geographic radius. Ships had to be unloaded, by hand, onto steam-powered trains. Most of the produce would rot and go to waste. Hemmed-in by these constraints, businesses had to work with what they had. If it involved bribing bureaucrats or overthrowing governments to ensure zero taxes and union-free labor, then so be it.

The book is also the story about most corporations. Even though, technically, a company could live on forever, most have finite lifespans. Founders who know the business inside-out inevitably age. They are replaced by “professional management” who may keep things going for a while. But eventually, most companies that die end up being run by bureaucrats far removed from the ground with very little of the spirit that shaped the company at the beginning.

Sam Zemurray’s life could very well be an exemplification of the American dream but the banana company that he built ended up being an exemplar of the worst of American business’ colonial instincts.

Recommendation: Read it now!

In Dopesick: Dealers, Doctors and the Drug Company that Addicted America (Amazon,) Beth Macy paints a pretty grim picture of how high rates of persistent unemployment, lack of opportunities and drug companies looking for profit sparked a heroin addiction wildfire.

The scary part is that the heroin epidemic did not need a grand conspiracy or a big drug kingpin making moves. It started at the margins – doctors prescribing opioids for pain, kids passing around pills for thrills in parties, etc. But for most, the first high was all it took. Most of an addicts life is then spent seeking the feeling of the first high. Early stage addicts also ended up being the best recruits for the next set of junkies. The book outlines the rise of the “user-dealer” — junkies who fund their addition by dealing dope. This frustrated the typical law enforcement response of jailing dealers – most of them were not dealing for the money per se, but because they needed the next fix.

Addiction should be treated like a chronic disease. However, our society treats it like a moral failing. This is unfortunate because it prevents a policy response based on science.

Recommendation: read the book!

In Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts (Amazon,) Annie Duke uses probability theory to illustrate how one should go about making decisions.

Notable excerpt:

We can’t just “absorb” experiences and expect to learn. As novelist and philosopher Aldous Huxley recognized, “Experience is not what happens to a man; it is what a man does with what happens to him.” There is a big difference between getting experience and becoming an expert. That difference lies in the ability to identify when the outcomes of our decisions have something to teach us and what that lesson might be.

The point made above cannot be stressed enough for investors. Just because some “guru” or “adviser” has been at his job for a long time, it doesn’t necessarily follow that he is an expert. Expertise comes from applying a scientific mindset to decisions. Very few actually do it in practice and most are happy to be in their own comfortable filter bubble.

You can read the notes that I took here.

Recommendation: if you have read similar books in the past, you can skip this one. No new paths blazed.

In The Attention Merchants: The Epic Scramble to Get Inside Our Heads (Amazon,) author Tim Wu walks us through how the advertising industry evolved from its patent medicine roots to the current mess of privacy invading ad exchanges.

Advertising is primarily about gaining a person’s attention. The medium through which this is done has evolved from posters and billboards to newspapers and magazines to tv and internet. The media is the aggregator of attention – their principle goal is to draw people in and then sell their attention to the highest bidder. But how do you measure attention? How do you know if someone watched your ad? Or, for that matter, should watch your ad? What are the boundaries of one’s privacy?

What struck me was that as the stakes kept getting higher, so did the degree of invasion into our head-space. We are now at a point where the vast majority of websites you visit are sending your data to third-party sources, usually without your permission or knowledge.

For every two eyes looking at a screen there are probably ten or more looking back at them.

And it is no longer just your “digital” footprint.

Did you know that there are now billboards that can track you by your phone’s wifi?

All WiFi-capable devices broadcast a unique ID – a Media Access Control (MAC) address – when they’re looking for networks (and so long as WiFi is enabled, they’re always looking for networks). So if you walk around carrying a mobile phone with WiFi turned on, you’re broadcasting your own, unique radio beacon, and it’s easy to track your movements.

Scary stuff.

Recommendation: Worth a read.

Mistakes Were Made (But Not by Me): Why We Justify Foolish Beliefs, Bad Decisions, and Hurtful Acts by Carol Tavris (Amazon,) shows how we self-justify the mistakes we make, blame it others and perpetuate a destructive cycle.

Almost all of us carry an image of ourselves that we are smart, and basically good. When me make decisions that lead to poor outcomes, it conflicts with this internal image. This dissonance, if left unchecked, is resolved by self-justification. And so, unconsciously, we create fictions that absolve us of responsibility, restoring our belief that we are smart, moral, and right – a belief that often keeps us on a course that is dumb, immoral, and wrong.

As investors, we aim to have “strong convictions that are weakly held.” But it is easier said than done. Even though we know to follow scientific process, while faced with disconcerting evidence, we tend to double down – “having the courage of one’s convictions.”

It is part of the scientific attitude to change one’s beliefs once they are discredited. Well, it’s not an easy thing to do. Combine invested time, invested money, high hopes, high expectations, and a relative amount of pride, and you’re up for quite a challenge when confronted with contradicting evidence.

In investing, there are examples where both “sticking to ones guns” and “be like water, my friend” have worked. Here’s an example of the former: Tony Dye (from the Undercover Economist) stuck to his guns, lost his job, but was eventually proven right.

And as an example of why you shouldn’t stick to your guns: The Half-Life of Investment Strategies

And when you are wrong, even the best of us try to reduce dissonance by blaming somebody else: This Angry Stock Picker Says Trump Tweets Are Hurting His Investments

How do you change your mind?

Recommendation: Worth a read.