Book Review
“Big Mistakes” explores the failures of renowned investors like Warren Buffett, offering invaluable lessons to avoid similar pitfalls in investing.
“Big Mistakes” explores the failures of renowned investors like Warren Buffett, offering invaluable lessons to avoid similar pitfalls in investing.
A comprehensive guide to personal finance, debt management, and career growth, offering expert advice and real-world examples.
Which brings us back to Vinod Khosla. In the two decades he spent at Kleiner Perkins before starting his own venture firm, he learned not to worry about the bets that went to zero. All he could lose was one times his money.” What Khosla cared about were the bets that did pay off, and in the mid-1990s he fastened on an especially audacious and contrarian notion: that, with the coming of the internet, consumers would not be satisfied with a mere doubling or tripling in the capacity of traditional phone lines. Rather, they would clamor for a step change in bandwidth, involving routers that handled data flows a thousand times larger. While the telecom establishment snickered at this sci-fi babble, Khosla set out to kick-start the companies that would make the step change possible. The startups that Khosla backed are largely forgotten names: Juniper, Siara, Cerent. But they illustrate what venture capitalists do best and how they generate both wealth and progress.
–The Power Law: Venture Capital and the Making of the New Future
The ideal capital cycle opportunity for us has often been one in which a small number of large players evolve from a situation of excess competition and exert what is euphemistically called “pricing discipline.” Having a small number of players is important, since retaliation (say a price cut) is likely to be a more powerful weapon in the hands of a dominant price setter, although barriers to entry are also required to deter opportunistic entrants from taking advantage of any price umbrella.
Capital Returns: Investing Through the Capital Cycle: A Money Manager’s Reports
“Investors play a different game. They generate superior returns when they correctly anticipate revisions in the market’s expectations for a company’s performance. Investors do not earn high rates of return on the stocks of the best value-creating companies if those stocks are priced to fully reflect that future performance. That is why great companies are not necessarily great stocks. An investor uses competitive strategy analysis as a means to anticipate revisions in expectations.”
Excerpt From: Michael J. Mauboussin. “Expectations Investing.”
“From time to time we saw better economies and worse—slowdown and prosperity, recession and recovery. Markets, too, rose and fell. These fluctuations were attributable to normal economic cycles and to exogenous developments (such as the oil embargo in 1973 and the emerging market crisis in 1998). The Standard & Poor’s 500 had a few down years in the period from 1975 to 1999, but none in which it lost more than 7.5%. On the upside, however, 16 of those 25 years showed returns above 15%, and seven times the annual gain exceeded 30%. Despite the ups and downs, investors profited overall, investing became a national pursuit, and Warren Buffett, one of America’s richest men, got that way by buying common stocks and whole companies. A serious general uptrend was underway, reaching its zenith in 2007.”
Excerpt From: Howard Marks. “Mastering the Market Cycle.”
“Spinoffs can take many forms but the end result is usually the same: A corporation takes a subsidiary, division, or part of its business and separates it from the parent company by creating a new, independent, free-standing company. In most cases, shares of the new “spinoff” company are distributed or sold to the parent company’s existing shareholders. There are plenty of reasons why a company might choose to unload or otherwise separate itself from the fortunes of the business to be spun off. There is really only one reason to pay attention when they do: you can make a pile of money investing in spinoffs. ”
Excerpt From: Joel Greenblatt. “You Can Be a Stock Market Genius.”
“It wasn’t long ago that amateur stockpickers had a hard time following the fundamentals of the companies whose stocks they owned. Analysts at the brokerage houses were scurrying around, finding out everything they could, but this information rarely reached the client. If a brokerage house changed its recommendation from “buy” to “sell,” the small-time customer was the last to know. If you asked for it, your broker might send you an analyst’s report on a company, but these reports were often several months out of date. Amateur investors had to rely on the quarterly and annual reports put out by companies themselves. They also made frequent trips to the local library, where they pored over a publication called Value Line. Value Line gives a one-page rundown on hundreds of companies and is packed with useful information—it’s an excellent resource even today.”
Excerpt From: Peter Lynch and John Rothchild. “Learn to Earn.”
“As you saw from my study of the last 500 years up to now, there were Big Cycles of great accumulations and great losses of wealth and power, and of these, the greatest contributing factor was the debt and capital markets cycle. From an investor’s perspective, this could be called the Big Investing Cycle. I felt that I needed to understand these cycles well enough to tactically move or diversify my portfolio to be protected against them and/or to profit from them. By understanding them, and ideally realizing where countries are in their cycles, I can do that.”
Excerpt From: Dalio, Ray. “Principles for Dealing With the Changing World Order : Why Nations Succeed and Fail”
In order for Pay Yourself First to be effective, the process has to be automatic. Whatever you decide to do with the money you’re paying yourself—whether you intend to park it in a retirement account, save it as a security blanket, invest it in a college fund, put it aside to help you buy a home, or use it to pay down your mortgage or credit card debt—you need to have a system that doesn’t depend on your following a budget or being disciplined. I actually started by Paying Myself First just 1 percent of my income. That’s right—only 1 percent. I was in my mid-twenties, and I wanted to make sure it didn’t hurt. Within three months, I realized that 1 percent was easy, so I increased the amount to 3 percent. It was around then that I met the McIntyres and said to myself, “Enough is enough—I want to start young and finish rich.
– The Automatic Millionaire: A Powerful One-step Plan to Live and Finish Rich – Amazon Link