Are you in need of a last minute gift idea? Or perhaps something to while away the hours on an upcoming vacation to Bonnie Doon or Bali? We’ve got you covered. These books were our favourite reads of 2017. There should be something for everybody on this reading list. For more ideas, refer back to Forager’s 2016 book list or my solo book list from 2015. Merry Christmas and enjoy your summer break.
The Outsiders: Eight Unconventional CEOs and their Radically Rational Blueprint for Success by William Thorndike
I finally got around to this book after years of haranguing by value investors everywhere. Like all good yarns, it glossed over some important details—survivorship-bias being a chief one. But there are good lessons/reminders in the book:
1. A Chief Executive Officer’s capital allocation decisions are critically important to shareholder returns. Their most important job is to steward the company’s resources and put it to best use, be that internal investment, mergers, divestments, buybacks or dividends depending on the season. To do that well they generally need to zig when the rest of the world zags—the best CEOs share traits with the best contrarian investors. Many of these CEOs took the capital allocation role so seriously that they delegated operational parts of the role to others.
2. It pays to own shares in industries with a strong tailwind. Using stockmarket performance as the gauge, each of the 8 outsider CEOs outperformed their industry. But they also operated in industries that handily outperformed the wider stockmarket. I’m not sure this lesson was intended by Thorndike, but it’s clear. Not to diminish any of the achievements highlighted, but a good CEO paddling downstream travels faster and farther than a great one paddling upstream.
3. No book should use the word ‘iconoclast’ or any of its derivatives more than once. Cut it out Thorndike.
Burial Rites by Hannah Kent
A beautiful read inspired by the true story of the last woman to be put to death in Iceland. In 1829 while awaiting her execution for the gruesome murder of two men, Agnes is sent to an isolated farm to live and work. Horrified by the prospect of living so close to a murderess, the family at first ignore Agnes.
The vivid portrayal of Northern Iceland’s changing landscape, particularly its punishing winter, was particularly captivating. Agnes slowly starts to gain acceptance by the family as she shares the communal burden of the fight to survive in such a harsh climate.
When Agnes eventually shares her side of the story, the farmer’s wife and daughters learn that there is another side to the story they’ve been told.
The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History by David Enrich
The story isn’t that wild, the backstabbing was done by brokers, not bankers, and I don’t think it is anywhere near the greatest scam in financial history. Putting the hyperbolic title to one side, it is a very entertaining, in-depth, insiders’ view of the global LIBOR fixing scandal.
Enrich tells the story of Tom Hayes, a UBS trader who colluded with a number of colleagues, competitors and brokers to manipulate benchmark interest rates to benefit his own trading portfolio. None of them thought they were doing anything wrong. Fudging the benchmark to benefit themselves was all part of the game. “Everyone is doing it, I’m just trying to do it better” was the mantra.
By the end of the book the author has developed a soft spot for his subject – believing that Hayes was unfairly singled out and that his long gaol sentence was unwarranted. It is this empathy, however, which enables us to get close to a world we may never fully understand.
A Little Life by Hanya Yanagihara
This book is an emotional rollercoaster following the lives of four friends, all from very different backgrounds, who meet at college and then move to New York to try to make it in their respective careers. It soon becomes clear that one of the friends, Jude, has had an extremely traumatic past which is revealed during the course of the book. The story focuses on his relationships, and how these develop over the course of time, with the friends and others who have come into his life. Jude tries to find happiness, but can this be enough to overcome the physical and psychological traumas of the past, and what impact does this have on those close to him? Extremely powerful writing – I couldn’t put it down.
Wealth, War and Wisdom by Barton Biggs
This book describes how various forms of wealth performed during the Second World War. Biggs looks at the performance of stock markets around major turning points in the war. He found that on average markets interpreted new information more accurately than the press and the experts of the time. He attributes this to markets’ ability to aggregate together the views of diverse, independent and motivated people. Investors mistakes tend to offset each other, leaving the more accurate group knowledge—the wisdom of the crowd. The reminder for investors is that beating the market is hard without a genuine insight. More often than not the market is right. A great read for both investors and history lovers. Well-structured and rich with anecdotes.
Quiet Leadership by Carlo Ancelotti
In his autobiography Ancelotti explores the similarities between running a business and a football team. He explains how in football, as in business, you cannot stand still. Tactics that prove successful do so only for a while. Opponents adapt and fight back. This concept is true about investing too. Markets are generally efficient and easy returns are often quickly competed away. Investors constantly need to look for different sources of value. A key part of Ancelotti’s ‘quiet’ philosophy is not to worry about the things he cannot control— the club president, the fans and the media, and focus on his relationship with the players. This idea is fundamental to successful investing too. There is no point to stress about the short term volatility of stock prices. The focus should be on deep analysis, sensible portfolio allocation and minimising costs. Overall, an entertaining book worth reading.
The Future is History: How Totalitarianism Reclaimed Russia by Masha Gessen
Tackling a subject both complex and opaque, Gessen constructs a modern history of Russia from the fall of the Soviet Union through to current day. Not simply a rote narrative, Gessen chronicles the lives of a number of real-life Russians and uses their experiences to illustrate and argue how Russia traded one authoritarian society for another. The book particularly excels in depicting how the glee and optimism underpinning the glasnost movement transitioned to chaos and disillusionment. Gessen is undoubtedly a fierce critic of Putin, but the details and life accounts of her subjects give a legitimacy and credence to the picture she paints. I obtained an understanding of Russian daily life and Russian psyche in a way I never had previously. The book felt compelling and relevant given today’s geopolitical climate.
Behave: The Biology of Humans at Our Best and Worst by Robert Sapolsky
This book is for those interested in the free will versus determinism debate, and its intersection with biology and psychology. Robert Sapolsky, a neuroendocrinologist and professor of biology at Stanford University, presents his revised perspective on the science of human behaviour. Using backwards time-travel as a concept-organising mechanism, Sapolsky comes to the same conclusion as Richard Dawkins before him: free will does not exist. He addresses the role of nerves, hormones and genes as agents of determination. And he discusses the moral and ethical implications of accepting such a conclusion. While loaded with technical jargon, Sapolsky simplifies such complex topics with his bohemian humour.
Podcast: Invest Like the Best by Patrick O’Shaughnessy
This weekly podcast is presented by O’Shaughnessy Asset Management’s CEO and covers a range of topics aimed at extracting the methods and ideas behind certain investment strategies. I’d recommend cherry picking rather than subscribing to the whole series. Recommended interviews include Brad Katsuyama—the subject of Michael Lewis’ “Flash Boys”—and the always-interesting Michael Mauboussin. I would also suggest the three-part “Hash Power” series posted in October. Amateurs (like myself) aiming to learn about the digital currency world will gain a lot from it. That series begins with an introduction to the blockchain technology and the basic components of computer sciences that inform it, and introduces some valuation techniques employed by various US funds that have invested in the crypto-space. Whether you are a bitcoin-believer or not, this is the perfect introduction to cryptocurrency, and will provide you with enough information to at least pretend to know about blockchain and its applications.
The Most Important Thing by Howard Marks
There isn’t just one most important thing of course. Among a long list of things, Marks encourages us to appreciate the role of psychology in markets, to look beyond obvious conclusions and to think of risk as permanent loss of capital rather than volatility.
A couple of things really stood out to me. One focuses on the macro environment. Marks suggests that instead of trying to forecast we stop and look around. Where are we now? Are markets hitting lows or are investors snapping up every half-baked IPO coming to market? If others are being aggressive, perhaps it is time to be cautious.
The other is quality. A good stock is not necessarily a good investment. High quality businesses can be bid up to prices where they make for lousy investments. Investors should think of that the next time they are chasing the new ‘sure thing’.
Chris Ten Berge
The Better Angels of Our Nature by Steven Pinker
A fascinating look into the history of violence and aggression in all its forms. You can’t help but read with horror about how cruel or indifferent to suffering many of our ancestors have been. The positive message, however, is that the world is safer than it has ever been. That’s contrary to what the media might have you believe. This is a long but rewarding book. Pinker covers a lot of ground, using a multidisciplinary approach to derive what I found quite compelling explanations for why violence has declined.
When Breath Becomes Air by Paul Kalanithi
Kalanithi was diagnosed with inoperable lung cancer, aged 35, immediately after completing over a decade of training in neurosurgery and neuroscience. His transition from a doctor (who frequently comforts others through tragedies) to a nervous patient is surreal. This autobiographical account of his battle with cancer is heart wrenching but inspiring and he captures moments of devastation and courage in a brave, matter of fact way. For me, this book affirmed the magic of life in some small yet profound way.
If you’ve got any good book ideas to share, please leave a comment. Thanks.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.