Circle of Competence Issue #53

March 16, 2019

QUOTE OF THE WEEK

 

"It is far more common for people to allow ego to stand in the way of learning." - Ray Dalio, Principles

 

 

FOOD FOR THOUGHT

 

Behavioral Reflection

 

This week I’ve been thinking about how our own psychological profiles and personality structures impact our every day lives as employees, employers, investors, operators, entrepreneurs, brothers, sisters, husbands, wives, mothers, fathers.  I began reading about various psychological profiles after being prompted by a friend of mine (H/T Dalton K.) and was particularly interested in the Myers-Briggs and and Enneagram institute theories as a way to learn more about myself, my family, my friends, and my peers.

 

How we think about the world around us, interact with others, and make decisions are largely dependent on our personality types (and our world views, but that is another topic for another time). Each of us have deep seated motivational drives that, if undiscovered, could be pulling us in negative directions or putting us at odds with spouses, bosses, friends, and family. If we do not understand what drives our inner relational and decision making process and do not perceive where others around us are coming from psychologically, there can be significant friction in our closest relationships.  At best, we can be doomed to misunderstand one another and at the very worst experience to pure hatred simply because we do not understand our drives and our neighbor's

 

Not only will our relationships suffer, but our decision making capabilities may be deeply biased without our even knowing it. I will share two personal examples. As a Myers-Briggs ESTJ, at a very high level, I am an extrovert and at times assert my opinion more than I'd like to... which can lead to less listening, less learning, and more stupidity on my part (confirmation bias). In addition, I test out as an Enneagram type 3 "Achiever"   which means I am prone to over activity, following the 'new shiny object', and saying yes to every opportunity presented (FOMO), and these personality traits can lead to severe a lack of focus. A lack of focus will be punished by your wife and your investments with equal severity!  The single biggest reason Buffett is Buffett is because he said NO to SO many ideas, investments, and 'opportunities' and FOCUSED.  

 

So, understanding my behaviors and psychological profile allows me to target negative habits and remove them in order to continue moving towards a more thoughtful and focused life. In addition to removing negative habits, some of the positive habits I am cultivating on a daily basis include slowing down, focusing on the things that matter (Essentialism), listening more, asking deeper questions, and taking a back seat in social situations. Each personality type has its own struggles and own growth opportunities, and the quicker you understand where you need to grow, the faster your self knowledge and self development will compound. In Ray Dalio’s book Principles, the first step in achieving your goals in life is to be radically truthful about reality and yourself.  To riff off of this, being honest with yourself and understanding how your personality impacts your self image, your decision making, and your relationships will begin a process of learning that begins to remove barriers between you and your goals - be they family, life, or work related. 

 

 

WRITTEN WORD

 

- TOP READ: Where Warren's Wrong (about Big Tech antitrust law)

Ben Thompson's site doesn't disappoint with analysis on tech issues. In this post, he discusses why Senator Elizabeth Warren's call to break up big tech is a mistake. I tend to agree with his antitrust principle of not allowing mergers of network platforms because of the 'winner take all' dynamics... If this were in force when Facebook acquired Instagram, the tech world would probably look very different.

 

- Glasses can be marked up 1,000% - two executives reveal why

Vox puts forth the opinion that the business combination between Essilor and Luxottica is a pure monopoly in the eyeglass space. But is a high gross margin and business combination enough to justify the case? I would say that consumer utility is worth the prices paid, regardless of the high margins. Thoughts?

 

Electra Meccanica's latest investor presentation

This is the first all electric car company that I have studied that is attempting to manufacture a three wheeled commuter car at a price ($15,000) that is appealing to the average consumer. Interesting design and is approaching the electric car market from the opposite side as Tesla (building from low price to luxury vs. luxury scaling down into low price). 

 

- Why America's new apartment buildings all look the same

Building codes have changed many times over decades, but one change in particular has lead to a lower cost apartment building model for developers which meant better returns on capital as well as addressing the housing shortage problem. 

 

- Brand it like Branson 

A deep dive into the investments and operations of Richard Branson and the Virgin brand and illustrates the benefits and risks of associating one brand with multiple types of companies. 

 

- Brookfield buys majority stake in Oaktree

Two of my favorite asset managers are combining into an alternative asset management powerhouse. Bruce Flatt, CEO of Brookfield, will let Howard Marks continue to run Oaktree. Two value investors who have complimentary asset management businesses with little overlap is a recipe for success in my opinion.

 

 

SPOKEN WORD

 

- TOP LISTEN: Howard Marks with Shane Parrish on luck, risk, and avoiding losers

Howard Marks expounds on markets, investing, political realities, and rearing children. I particularly enjoyed (and tend to agree with) his simple explanations of how everyone can benefit from specialization and free trade.

 

- a16z podcast - capitalizing on autonomous vehicles 

The key question seems to be where the spoils will go when autonomous driving becomes mainstream: to the software players (Silicon Valley) or to the hardware makers (Detroit)? Will the software and hardware ultimately become commoditized and lead to a winner-take-all lowest cost network dynamic for rides as a service? 

 

- 60 Minutes interview with Jay Powell

Being Fed Chair is a thankless job that leaves many exposed to withering criticism. It isn't for the faint of heart and is an institution that draws the ire of many with the question of 'is there no better model than this?'

 

- Motley Fool industry focus - gene therapy deals and Lyft deep dive

While I won't pretend to be an expert (or even novice) in genetic therapies, it seems that many biotech companies are seeing nascent signs of potential based on the deal volume in the subsector. As for the highly touted Lyft IPO, the pure value investor part of me is repulsed by a business model that runs billions in the red annually. But the long-term thinking side wonders if, with a duopoly between Uber/Lyft, the potential for autonomous driving cutting costs of drivers, and pricing power over consumers who need the services, that these deeply unprofitable companies will soon turn the corner. 

 

 

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