Shoulders of Giants

Shoulders of Giants – Charlie Munger & Li Lu Interview 08/2018

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Note: I have shared these videos via my Twitter account before, however may have missed readers who only follow the blog. Copyright of Weekly in Stocks, all contents are shared for non-commercial knowledge sharing purpose.

These are interviews conducted by a Chinese finance/business media called Weekly in Stocks. Overall, I really enjoyed it and think all questions are really well prepared. As expected, many questions are around China (both philosophy & capital markets).

I think this might be the first time Munger explicitly drew parallel between his & Buffett’s philosophy & practices and oriental philosophies. Quoting from Munger: “…why are these people in China so interested in Berkshire Hathaway and Charlie Munger… and why do the Chinese like the book (Poor Charlie’s Almanack), I think the answer is it sounds Confucian…”, “…If you are a better person, you are likely to be a better investor; If you are a wiser person, you are likely to be a better investor…”

The follow-up interview with Li Lu alone is also of great interest, where he, may be for the first time, talked in details about Munger’s life, their interactions & his lessons learned from Munger, as well as his unique views of Chinese capital market.

Interview with Charlie Munger along with Li Lu [3 parts]

Follow-up Interview with Li Lu [2 parts]

 

 

Great Oriental Investors – Shoucheng Zhang, a Quantum Polymath (Award Winning Physicist and VC Investor at once)

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As I mentioned in my first investor letter, my investing philosophy had deep roots in oriental philosophies. For this reason, I always find those investors who are able to master both eastern and western mental models extremely intriguing. On surface, lots of eastern mental models & philosophies resonate with well-known western principles already, but I also believe they have more unrecognized value to investing practices. I am planning to start a series to document all investors that fits this category, to document my lessons learned from them and to share with my readers their insights (many of which aren’t available in English media).

 

The first one is Shoucheng Zhang (Wikipedia Link). Zhang is an ingenious physicist, to say the least. He got admitted by one of the top universities in China purely by self-study after the Culture Revolution ended in 1978 when he was only 15, then went abroad and finished his PhD by 24. His best known finding is probably topological insulators, for which he was awarded a Dirac Medal in 2012. His work was estimated by Thompson Reuters to be able to win Nobel Prize in 2014 (Link). Zhang is also a tech VC investor. He is said to be one of the early investors of VMWare (as he’s a neighbor of the co-founder Mendel Rosenblum who is also a Stanford professor) and made hundred bagger on it. He officially started his profession investing career in 2013 by founding Danhua Capital (website link), an early/growth stage VC focusing on disruptive technologies.

 

Like Charlie Munger, Zhang also see Benjamin Franklin as an archetype. Zhang mentioned that he struggled at a young age on whether he should aspire to be a scientist or an entrepreneur, until he realized he really could be both after reading about Franklin, one of the greatest polymaths in history. Not surprisingly, he is also a fan of multi-disciplinary mental models. As a theoretical physicist, his application of quantum physics principles to investing (and life) is the most interesting insights among other thing. Additionally, contradicting to stereotype of physicists, he seems to have strong interests in Aesthetics.

 

Zhang’s key philosophy can be summarized by a quote he constantly mentioned in multiple interviews: “Complexity out of Simplicity” or “First Principle”. Before moving on, I think it would be beneficial to expand on the “First Principle” (Wikipedia link) as it initially appeared foreign to me. My understanding is that first principle is a thing/principle/notion which is in its most fundamental form and is self-evident without proof or deduction.  That is where you want to start your learning/thinking process.

 

Some of my favorite thoughts of Zhang (paraphrased) are below:

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Shoulders of Giants – Bruce Greenwald Barron’s Interview

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Spend each day trying to be a little wiser than you were when you woke up.

— Charlie Munger

 

Bruce Greenwald is the Robert Heilbrunn Professor of Finance and Asset Management in Columbia Business School, and also Director of Heilbrunn Center for Graham & Dodd Investing. He recently had an interview with Barron’s [link here], which I find very insightful.

 

Below are some wise quotes from the article & my thoughts for self-reminder purpose.

 

Opinion on Discounted Cash Flow

“There is a fundamental stupidity about discounted-cash-flow valuations.”

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Shoulders of Giants -Brian Bares Interview

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Before today, I never heard the name Brian Bares even though I follow value investing world closely. I came across this interview and thought it’s definitely worth sharing.

Brian  Bares is the founder and CIO of Bares Capital Investment, a Austin based small/micro cap focused value money manager. He studied math and worked for a quantitative value investing shop before he started his own fund in 2000.

I’m impressed by his clear reasoning when addressing questions and the differentiating position he set for the firm by specializing in concentrated small/micro cap strategies.

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Shoulders of Giants – Jeremy Siegel’s Outlook for Stock and Bond Returns 2015

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Jeremy Siegel, best known as “Wizard of Wharton”, gave a presentation about his outlook for stock and bond return on 11/18/2015. You can see the full replay from following link:

http://livestream.com/livecfa/Siegel15

As a finance historian, Siegel’s predictions are sometimes “right on” based on his observation on long period of time. A famous ancient Chinese saying says “Take history as a mirror and you will know the rises and falls.“. A western equivalent is Victor Hugo famous quote: “What is history? An echo of the past in the future, a reflex from the future on the past.” For the respect of history, I listen to Siegel closely.

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Shoulders of Giants – Dealbook Conference 2015’s Interviews with Stan Druckenmiller & Carl Icahn

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Thanks to Dealbook Conference, we could listen to ideas of the most influential leaders in their own area about the theme this year “PLAYING FOR THE LONG TERM”. Guests include Al Gore, Peter Thiel, Reed Hastings, Gary Cohen, Larry Fink & James Gorman, etc. What attracts me the most are the interviews with legendary investors like Stan Drunkenmiller and Carl Icahn.

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Shoulders of Giants – Whitney Tilson’s lesson from World Acceptance Corp. Short

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Short ideas are harder to implement than longs, as you need to pay interests to maintain the position. On the other hand, market can stay wrong longer than you expect, causing both loss of the position and  shorting interest costs. Tilson’s story with WRLD shows how important a catalyst is for a short position. For influential active investors, if there is no catalyst, they can create one by publish some 100+ pages presentation (David Einhorn’s Green Mountain Coffee short, and Bill Ackman’s Herbalife, for example). For others, I think Tilson’s advices are very valuable: if you believe in your thesis about a short, start your position small and keep following the name, wait for a catelyst and you can double up.

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Shoulders of Giants – Takeaway From Interview with Southeastern’s Josh Shores

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Southeastern Asset Management is one of the most well regarded value money managers, with whom I happened to had some interaction on the trading side at work. Their orders are chunky and may take the desk weeks or even months to get in/out of a position. The order size clearly resonates with the firm’s investment approach Josh Shores mentioned in this interview conducted by The Manual of Ideas. Many products had about 20 positions which seems to be quite concentrated for firm like their size.

As a value investor, I find this transcripts very informative, here I had some thoughts and takeaways:

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