Supported by Greenhaven Road Capital, finding value off the beaten path.
I had a problem. Too many of my subscriptions went unread. Too much podcast advice went unheeded.
I had another problem, I need repetition to learn things. The first time it took me over an hour to change a headlight. Now it takes fifteen minutes.
I have a solution (not for the headlight). If you want a short email, each weekday, focused on one theme for the week you can sign up.
There will be no links. There will be no breaking news. There will be no interviews, analysis, or something else, someone else is already doing really well.
There will be stories. Some will be apocryphal, second hand, and every now-and-again they will be untrue. That’s okay. We aren’t aiming for statistical significance, we’re aiming for ideas to try.
Rory Sutherland is fond of saying that a change in perspective is worth forty IQ points. That’s what this is. It’s a fast hit, a thinking vitamin, a dash mushroom. It’s asymmetrical, minuscule investments for gigantic payouts. There will be weeks when this email is unhelpful, maybe even unwelcome. But there will be once when it leads to a brilliant idea. Sign up.
The theme for week one is small bets. Here are two snapshots.
Happy (belated) Father’s Day to the dads. Father is a biological term but that’s not really what we celebrate. It’s not the number of kids you have but the kind and kindness you show.
How we measure things matters. In academia it’s p-value. A value of p=.05 means that there’s less than a one in twenty chance the observed effect is due to chance. For studies published in journals read by professors that’s good. But not for real life. Instead, we’re looking for anything that works.
That’s what Sam Walton did we he started Walmart. As Charlie Munger notes, Walton invented almost nothing we might think of when we think of Walmart. Instead, he copied the best from everyone else then stacked, piled, or implemented it himself. Walton once bragged that no one had been in more Kmart stores than he had. One time he was walking down the aisle of Costco taking notes on his ubiquitous notepad when the store manager asked him to leave. That was Sam Walton.
Not all the ideas were good but none were fatal. One time Walton borrowed $1,800 for an ice cream machine and popcorn maker. They grabbed attention and got people into the story. But he wrote: “Every crazy thing we tried hadn’t turned out as well as the ice cream machine, of course, but we hadn’t made any mistakes we couldn’t correct quickly, none so big they threatened the business.”
These emails will not be statistically significant in the academic sense. These will be stories. There will be survival bias. There will be irrelevant, apocryphal, and wrong things. That’s okay too because a change in POV is worth 40IQ.
Marc Cohodes is a short seller. Cohodes is candid. He’s active on Twitter (@AlderLaneEggs) and even creates websites for whistleblowers to report fraud at companies he suspects. He’ll swear in interviews. He’s a reckless guy.
Except he’s not. To short a stock, Cohodes borrows a share at one price with a promise to repay at a later date. In theory, his downside is infinite while his upside is capped – at zero. Though brash, he’s cautious and Cohodes said that he uses the lifeguarding motto he was taught as a way to think about how he invests. Lifeguards are taught to Reach, Throw, Row, Go.
Though it makes for good television, running into the surf, diving into a pool, or swimming through the water is the path of last resort.
Caution saves lives. The Red Cross has even adapted the rhyme to instruct most people; Reach or Throw, don’t Go. The point is to nibble new ideas, not gulp them down.
Charlie Munger is an investor, but not a short seller like Cohodes. Munger has worked with Warren Buffett for four decades. Buffett said that Munger has the best brains in the business. Reflecting on his early investing career, Munger told a group of University of Michigan students, “I was not a courageous, adventuresome admirable man. I was a cautious little squirrel.”
There are many ways to take big swings but those are often the moments that expose us most. Sam Walton took calculated risks by getting cheap rents and copying best practices. His weird ideas were small things, like introducing Walmart shoppers to flip flops or buying an ice cream cart to use for promotions.
It’s not big swings that change our course but new ideas. As they say, a change in POV is worth 40IQ.