#50 Compounding human capital Q1 2023
A book journey through diverse ideas: 10 books of the quarter
Human capital is the accumulation of skills, knowledge, and experiences that contribute to an individual's overall worth and potential for success. Knowledge is power, and this is especially true when it comes to building a strong foundation for our future. In a similar way to the art of investing, reading is an endless, intellectual labor of discovery. A constant self-recognition of the lack of knowledge, counterbalanced by the hunger to learn more. In the same way as any type of capital, the formation of human capital compounds over time. Similarly, it requires time, patience, and perseverance.
“The man who doesn’t read good books has no advantage over the man who cannot read them” - Mark Twain
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Reading is a key activity to increase human capital. It is not the only one, and perhaps it is not fundamental for many people, but as time goes by, I realize that it is becoming more and more so. Nevertheless, we continually encounter criticism from quite a few people about those who read a large number of books per year. The criticism is that such reading must necessarily be rushed and unreflective, advocating a much smaller and more reflective quantity. As in almost everything, there is no single methodology applicable to everyone and everyone has to discover what works best for them. Those who read many books can acquire a wide range of knowledge and perspectives that can be beneficial to their personal and professional development. The discussion is quite similar to the eternal battle between generalists and specialists. In either case, finding the right balance between quantity and depth of reading can be key to maximizing the benefits of reading and, therefore, increasing one's human capital.
Below are the books I finished reading in the first quarter of 2023:
When Genius Failed (85%)
Fascinating. In the late 1990s, a group of distinguished investment bankers and economists, including Nobel laureates, founded Long-Term Capital Management, a hedge fund that espoused a revolutionary investment approach based on complex mathematical models based on identifying and exploiting pricing discrepancies between related financial instruments. The fund's managers believed that these spreads would eventually converge, allowing the fund to generate significant profits.
However, their hubris ultimately led to their downfall, as the fund's spectacular collapse in 1998 highlighted the limitations of even the most sophisticated financial models when faced with the unpredictability of human nature.
I wrote a post about this financial event here.
The Joys of Compounding (70%)
An inspiring exploration of the power of compounding, not just in wealth creation, but also in the continuous development of our human capital. This book is a delightful reminder of the importance of lifelong learning, curiosity, and persistence.
The Passionate Pursuit of Lifelong Learning combines Gautam’s personal journey with essential lessons about lifelong learning, investing, and personal development. Drawing inspiration from legendary investors such as Warren Buffett, Charlie Munger, and Peter Lynch, he explores value investing principles and the significance of having the right temperament and emotional intelligence in investing. Additionally, it covers personal development topics, such as setting clear goals, cultivating good habits, and developing a growth mindset, all while encouraging readers to embrace the lifelong journey of learning and self-improvement.
A book to give as a gift to transmit wisdom to the new generations.
Animal Farm (88%)
A timeless classic that skillfully uses allegory to critique totalitarianism and the corruption of power, independently of whether it is coming from communists, fascists, so-called democrats, or a group of pigs. This thought-provoking novel serves as a reminder of the importance of vigilance, critical thinking, and the value of individual freedom.
Another book I wish I had read when I was 16.
Firefighting: The Financial Crisis and Its Lessons (65%)
An insider's perspective on the response to the 2008 Global Financial Crisis, authored by the very trio who were at the helm of key institutions - Ben Bernanke, Timothy Geithner, and Henry Paulson. Ironically, while they present their narrative as a guide to understanding the crisis and the actions taken to address it, the book serves as an eye-opening account of their thought process and the extent of their hubris.
The lack of self-criticism in their analysis is staggering, as they overlook the consequences of their own policies and actions. Wrapped in a veil of egotism, they showcase an unwavering belief in their prescriptions as the cure for the crisis, seemingly unaware of the fact that those same medicines were what infected the system in the first place. By the time the book was written in 2019, they were still under the illusion that their actions had no negative repercussions.
So, if you're looking for a revealing read on the mindset of these influential figures during the GFC, then this book is definitely worth your time. Just be prepared to take their self-congratulatory analysis with a grain of salt and a healthy dose of irony.
Future Luxe (46%)
What's Ahead for the Business of Luxury? The book aims to provide a comprehensive view of the future of the soft luxury goods market, exploring trends and challenges that the industry will face. Though the book has its moments of insight and presents some thought-provoking content, it's a bit of a mixed bag in terms of overall satisfaction.
Erwan Rambourg delves into the evolving landscape of luxury brands and consumer behavior, touching on topics such as sustainability, digitization, and shifts in generational preferences. While some sections captivate with their in-depth analysis and forward-thinking perspective, other parts leave the reader wanting more, feeling underwhelmed and disappointed.
In summary, "Future Luxe" offers a global view of the luxury goods market and its future, but its uneven quality might not be everyone's cup of tea. If you're interested in the luxury industry and are willing to sift through the book's highs and lows, it might still be worth a read, even though it might not completely live up to your expectations.
Chip War (75%)
At first, I found it a bit weak, but the book improved as I continued reading. It serves as an intriguing introduction to the geostrategy of semiconductors, their history, and the current key players involved. For instance, the book delves into the early days of semiconductor development, exploring the rivalry between Intel and AMD, as well as the rise of Asian semiconductor giants like TSMC and Samsung. It also provides an insightful look into the geopolitics surrounding the industry, such as the US-China trade war and its impact on the global semiconductor supply chain, the creation and monopolistic position of ASML, etc. I would have given it a better rating, but I didn’t quit at the beginning because I was interested in the topic, and I “couldn’t”.
A Gentleman in Moscow (40% ?!)
The story of Count Alexander Rostov, an aristocrat who is sentenced to house arrest in the luxurious Hotel Metropol in Moscow during the tumultuous years following the Russian Revolution. Despite his confinement, the Count remains a man of impeccable manners and charm, refusing to let his circumstances define him.
As the years pass, Rostov forms relationships with the hotel staff and guests, who bring color and purpose to his life. He becomes a mentor to a young girl named Nina and later assumes responsibility for her daughter, Sofia. Through these connections, Rostov experiences friendship, love, loss, and the joys of fatherhood, all while the world outside the hotel undergoes a dramatic change.
A classic by all means, and for all. But not for me apparently. I normally get quite engaged with novels. That was not the case. After 200 pages, I still didn’t want to grab the book to continue reading. It was not it, it was probably me. Maybe I will give it a second chance at some other time.
The Goal (90%)
Best book of the quarter. A classic business novel, written in 1984, introduces the Theory of Constraints, a revolutionary approach to improving productivity and management in manufacturing and other industries. The story follows Alex Rogo, a plant manager struggling to save his failing factory from closure. As he navigates the challenges of his personal and professional life, Alex meets a former professor named Jonah, who becomes his mentor and introduces him to the Theory of Constraints.
Throughout the novel, Alex and his team learn to identify and eliminate bottlenecks in their production process by focusing on the goal of increasing throughput while simultaneously reducing inventory and operating expenses. The team discovers that by concentrating their efforts on improving the performance of the constraint, they can significantly enhance the overall efficiency of the plant.
Investors will easily see how the focus eventually is on increasing throughput/sales (organic growth) while boosting ROIC. Because it is as simple and difficult as just that. This is a must-read for anyone looking to improve their understanding of operations management and drive positive change in their workplace.
Junk to Gold (77%)
The inspiring story of Willis Johnson, a true self-made man who built Copart, the leading online vehicle auction company, from the ground up. The book takes readers through Willis' journey, highlighting his entrepreneurial spirit, constant exploration, and drive to build something bigger.
I enjoyed reading Junk to Gold quite a lot, as it provides a fascinating look into the life and mindset of a successful entrepreneur. While there are moments where Willis' choices may raise some eyebrows, the overall story is a testament to the power of perseverance, hard work, and innovative thinking. This book is definitely worth a read for those interested in entrepreneurship and obviously, Copart.
Ready, Fire, Aim: The Mainfreight Story (80%)
The rise of Mainfreight, a global logistics company founded in New Zealand. The book details the journey of founder Bruce Plested, who started the company in 1978 with just one truck, and how his vision and determination transformed it into a multi-billion-dollar business with operations across the world.
The Mainfreight story is an inspiring example of what can be achieved through a combination of hard work, a strong company culture, and an unwavering focus on customer service. One of the most compelling aspects of the book is the way it highlights the unique management style and values that have driven Mainfreight's success. The company's emphasis on empowering employees, fostering a sense of ownership, and nurturing long-term relationships with customers and suppliers has been key to its growth. I touched on some of the points here.
The story is a testament to the power of a clear vision, strong values, and an unwavering commitment to excellence.
All in all, a great quarter with many learnings and many great books.
The rating for Q1 2023 finished reads:
The Goal (90%)
Animal Farm (88%)
When Genius Failed (85%)
Ready, Fire, Aim: The Mainfreight Story (80%)
Junk to Gold (77%)
Chip War (75%)
The Joys of Compounding (70%)
Firefighting: The Financial Crisis and Its Lessons (65%)
Future Luxe (46%)
A Gentleman in Moscow (40% ?!)
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Thanks for sharing man. Keep the learning snowball going!
Thank you for sharing such an exciting list. I add The Goal, Animal Farm and When Genius Failed to my reading list. Apparently I enjoyed A Gentelman in Moscow much more than you, I couldn't stop reading😂 and from Orwell, I recommend 1984 in case you haven't read it yet as well as The Most Important Thing by Howard Marks, I just finished it and it's a pearl🤌🏽 thanks again and looking forward to reading more from you!