Archive | March 2008

This American Life…on Love / relationships


Listen: This American Life

I finally was able to listen to this podcast on love as recommended to me by my friend Jerry.  It’s really a fascinating episode (the podcast in general is great).  The most interesting quote from this show (which sort of confirms my thoughts from the other day):

“Psychologists say that you can only stay in love for 18 months.  That’s the limit.  After that it becomes something else: admiration, respect, etc.  It becomes something else.”

That is the chemical that kicks off that puppy love we all really enjoy only lasts for 18 months or so. From there it is our responsibility to keep growing the relationship.

Listen to it here

VVP gets a press mention


Vista Verde Partners, the investment group focused on Costa Rica real estate I co-founded last year, was recently profiled on alternative investments blog, PERE.  I have to say I was pretty shocked when the reporter called me to ask a few questions about the company.  Unfortunately the article is behind a registration wall (free, but annoying), but you can read our recap over at the Vista Verde Partners blog (which is rarely updated).

End of shamless plug…

“Tap dance to Work”

Ok I’ll admit the Warren Buffett posts are probably getting a little old, unfortunately fascination of the moment. There are many reasons to admire and respect a man like Warren Buffett (the man is the self made richest person on the planet and he did give away more than 85% of his net worth to the Bill and Melinda Gates foundation), but the thing I admire most about him is that he’s one of those few who found and followed their passion. Or to put it into Warren’s words, he “tap dances to work everyday.”It may be a pipe dream but somewhere in the last 3 years of my life, I’ve convinced myself that there is some sort of path in life I can take that will “click” for me. I don’t want to come across sounding mystical, like there’s some powerful force guiding me towards “my thing,” because I don’t believe that. I just believe that we can find work that touches who we are at the deepest level, work that energizes us, and pulls out the most amazing parts of our being. This is the work that you would probably do for free, but ironically the one where you have the most financial opportunity. This seems to be the case for Warren Buffett. It has never been about money or fame for him. He just was fortunate to discover early on that everything about investing clicked with who he is. A quote from a class discussion Buffett with some students at Emory:

I enjoy what I do, I tap dance to work every day. I work with people I love, doing what I love. The only thing I would pay to get rid of is firing people. I spend my time thinking about the future, not the past. The future is exciting. As Bertrand Russell says, “Success is getting what you want, happiness is wanting what you get.” I won the ovarian lottery the day I was born and so did all of you. We’re all successful, intelligent, educated. To focus on what you don’t have is a terrible mistake. With the gifts all of us have, if you are unhappy, it’s your own fault.

I’m amazed by his gratitude for his life. You don’t have to be a billionaire by the way to be so lucky (won the ovarian lottery…great). Another great quote showing his humility and gratitude:

I had nothing to do with my own success. My father was a securities broker and after the Great Crash, he had no one to call. Consequently, I was born in 1930 in the United States during the time of one of the greatest capital markets. I was born with the wiring for capital asset allocation. I had the right wiring at the right time. Temperament is a large part of my wiring. I was naturally good at it, and I used some feedback to develop it better. There is nothing to be arrogant about. Gates says if I had been born earlier, I would’ve been some animal’s lunch. I can’t run, I can’t climb. I’d be talking about allocating capital and the animal would think, “Those are the kind that taste the best.”

I also love this quote:

“I have so much fun that it’s not work. I get to do what I want, where I want – on a boat, wherever.”

It sounds to me that Buffett would agree with the notion that the best investment you could ultimately make is in yourself. Take the time and spend the money to really find the path that works for you. It may take a few stops and starts, but the pursuit is worth it.

Relationships: they’re work (in a good way)


I had a long talk with my sister this morning about relationships and it reminded me of something my Mom used to tell me: relationships (of all kinds) take work.  I’m amazed really at how easily people forget this (myself definitely included).  Expecting a relationship, whether between you and your significant other or your friend or sibling or children, to just be great all the time without any effort is crazy.  It’s the same as expecting to be in tip top shape physically without ever going to the gym. It just doesn’t happen.  Yes, some people are more naturally gifted and can stay more physically fit without any work just as some relationships just naturally click better than others, but those are the exception and not the rule.

I consider myself lucky to have an amazing girl like Julie in my life, and we do get along very well.  Actually I think we have a pretty good relationship.  It is not perfect by any measure, but I the foundation is good..we love each other and we like to be around each other.  I just realized recently that life had done its part to dull things for us.  It’s not that things got worse, it’s just that we stopped putting effort into the relationship.  I try to spend at least an hour a day on my body at the gym, but recently I have not even spent that much time deepening my relationship with her.  Now we both are very busy, and it is hard when we finally connect around 9pm after a long day to do much other than talk a little and watch some tv.  I suspect this is the case for lots of couples, and I can only imagine it gets more difficult when you have kids. But it doesn’t take a rocket scientist to see why we have recently felt a little distant, why things don’t feel like they did when we first got together.  It’s not because we don’t care for each other, and it’s not because we don’t work well together, it’s because we’re not putting in any effort.  Relationships, good ones, take work (movies are wrong).

If you’re spending more time on your blackberry writing emails than you are talking with your significant other, it’s only a matter of time before things “don’t feel like they used to.”  I’m not saying you have to give up everything else in your life, I’m just saying you don’t expect to get washboard abs by avoiding the gym so why do you expect your relationships to just be great without any effort?

How do you start working on it?  I’m not sure exactly, but talking is a pretty good place to start.  Ask them what’s on their mind, what’s going on their life, what they like, what they want from the relationship…and then see where it goes from there.

I know this is a subject most people don’t like to talk about (guys especially), and I think that’s the problem.  It was on my mind, so I posted it…

My Starbucks Idea

My Starbucks Idea

The reviews are not good, but I have to say  like where they are going here.  Not so much for the consumer side of things (all of the ideas on there are fairly obvious…free drink on my birthday, free drinks for every 10 coffees, etc), but because of the new Partner only idea section.  As a starbucks shareholder (don’t worry, I am a recent shareholder so I missed out on the -50% performance over the last 12 months), I’ve been reading Starbucks Gossip for the last few weeks to get an inside glimpse at operations. The site is basically a Starbucks Barista community and through the comments I have see countless good ideas from employees on how to cut down on waste, increase customer satisfaction and quality, as well as improve sales.  I, for one, think the potential benefits of tapping the wisdom of frontline people far outweighs the costs of setting up the site.  I’m a big believer in Howard Schultz, and I think he’s made the right move here.

Buffett’s Words of Wisdom…



(on flickr from trackrecord)

I finally sat down and took some time to read through Warren Buffett’s annual letter to shareholders for 2007 (released a few weeks ago).  As always Warren teaches and shares so much about life and business.  I’ve really become a big fan of his after reading R0ger Lowenstein’s book: Buffett: The making of an American Capitalist.  Warren is not perfect, but his passion for what he does really excites and inspires me.  He’s been quoted so many times as saying that he “tap dances to work.”  It may sound too good to be true, but just do a youtube search for Warren Buffett, and you’ll see the man truly loves what he does.  He always seems like a kid in a candy store, whether talking  to shareholders or meeting a high ranking government official.  I really admire people who have found and chosen to follow their internal compass.  Buffett is one of those people.

Anyway, his 2007 letter is full of good info and I’d highly recommend you read it yourself.  I’ve included some good bits of info and quotes below.

My favorite quote:

At 84 and 77, Charlie and I remain lucky beyond our dreams.  We were born in America; had
terrific parents who saw that we got good educations; have enjoyed wonderful families and great health;
and came equipped with a “business” gene that allows us to prosper in a manner hugely disproportionate to
that experienced by many people who contribute as much or more to our society’s well-being.  Moreover,
we have long had jobs that we love, in which we are helped in countless ways by talented and cheerful
associates.  Every day is exciting to us; no wonder we tap-dance to work.


on protective moats:
A truly great business must have an enduring “moat” that protects excellent returns on invested
capital.  The dynamics of capitalism guarantee that competitors will repeatedly assault any business
“castle” that is earning high returns.  Therefore a formidable barrier such as a company’s being the low-
cost producer (GEICO, Costco) or possessing a powerful world-wide brand (Coca-Cola, Gillette, American
Express) is essential for sustained success.  Business history is filled with “Roman Candles,” companies
whose moats proved illusory and were soon crossed.

Our criterion of “enduring” causes us to rule out companies in industries prone to rapid and
continuous change.  Though capitalism’s “creative destruction” is highly beneficial for society, it precludes
investment certainty.  A moat that must be continuously rebuilt will eventually be no moat at all.

Additionally, this criterion eliminates the business whose success depends on having a great
manager.  Of course, a terrific CEO is a huge asset for any enterprise, and at Berkshire we have an
abundance of these managers.  Their abilities have created billions of dollars of value that would never
have materialized if typical CEOs had been running their businesses.

But if a business requires a superstar to produce great results, the business itself cannot be deemed
great.  A medical partnership led by your area’s premier brain surgeon may enjoy outsized and growing
earnings, but that tells little about its future.  The partnership’s moat will go when the surgeon goes.  You
can count, though, on the moat of the Mayo Clinic to endure, even though you can’t name its CEO.

***on reinvesting profits:
There’s no  rule that you have to invest money where you’ve earned it.  Indeed, it’s often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can’t for any extended period reinvest a large
portion of their earnings internally at high rates of return.

**capital stream
It’s far better to have an ever-increasing stream of earnings with virtually no
major capital requirements.  Ask Microsoft or Google.

**worst sort of businesses:
The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.  Think airlines.  Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers.  Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

** three types of businesses:
To sum up, think of three types of “savings accounts.”  The great one pays an extraordinarily high
interest rate that will rise as the years pass.  The good one pays an attractive rate of interest that will be
earned also on deposits that are added.  Finally, the gruesome account both pays an inadequate interest rate
and requires you to keep adding money at those disappointing returns.
-I like option 1

***Admit and analyze your mistakes for future growth opportunities. Mistakes are part of success and they are a certainty: To date, Dexter is the worst deal that I’ve made.  But I’ll make more mistakes in the future – you
can bet on that.  A line from Bobby Bare’s country song explains what too often happens with acquisitions:
“I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.”

***On hiring:
An aside: Charlie and I are not big fans of resumes.  Instead, we focus on brains, passion and
integrity.  Another of our great managers is Cathy Baron Tamraz, who has significantly increased
Business Wire’s earnings since we purchased it early in 2006.  She is an owner’s dream.  It is
positively dangerous to stand between Cathy and a business prospect.  Cathy, it should be noted,
began her career as a cab driver.

***on investing
it is interesting that he doesn’t really care about the stock price of where the company is trading or where he bought it.  He is actually concerned with his % ownership of the business and what the business is worth.  He is not concerned about share price growth, but instead on company earnings growth (per share). How he evaluates them:
I should emphasize that we do not measure the progress of our investments by what their market
prices do during any given year.  Rather, we evaluate their performance by the two methods we apply to the
businesses we own.  The first test is improvement in earnings, with our making due allowance for industry
conditions.  The second test, more subjective, is whether their “moats” – a metaphor for the superiorities
they possess that make life difficult for their competitors – have widened during the year.  All of the “big
four” scored positively on that test.

***On US dollar:
The U.S. dollar weakened further in 2007 against major currencies, and it’s no mystery why:
Americans like buying products made elsewhere more than the rest of the world likes buying products
made in the U.S.  Inevitably, that causes America to ship about $2 billion of IOUs and assets daily to the
rest of the world.  And over time, that puts pressure on the dollar.

At Berkshire we held only one direct currency position during 2007.  That was in – hold your
breath – the Brazilian real.

**on expected returns
I should mention that people who expect to earn 10% annually from equities during this century –
envisioning that 2% of that will come from dividends and 8% from price appreciation – are implicitly
forecasting a level of about 24,000,000 on the Dow by 2100.  If your adviser talks to you about double-
digit returns from equities, explain this math to him – not that it will faze him.  Many helpers are apparently
direct descendants of the queen in Alice in Wonderland, who said: “Why, sometimes I’ve believed as many
as six impossible things before breakfast.”  Beware the glib helper who fills your head with fantasies while
he fills his pockets with fees.

The Winning Investment Habits of Warren Buffett and George Soros



I finally got around to finishing the The Winning Investment Habits of Warren Buffett and George Soros as recommended by Ryan Allis way back when.  It’s an interesting and fairly simple read (despite being huge) with a lot of fantastic insights for anyone looking to spend a little more time managing their investments (it’s a really hard time to do that, I know).  There are a lot of practical tips in the book, and Ryan did an excellent job covering them in his post above, but I found some core life lessons in their winning habits as well.  I’ve re-posted them below (these are my personal notes, so I apologize if they don’t make sense).

  • the reminder that my path is MY path: both Soros and Buffett went their own way.  They never worried that they were entering the exit doors.  They never did or do what they are “supposed to do.”  They created a set of beliefs, and they stick to them, which has served them extremely well.  There is no “right” path for me that someone else took.  My path is mine.  My belief and life criteria will define that path for me, and those are also MINE.  They are borrowed and pulled from others, but I ultimately get to decide what ends up in there.
  • conventional wisdom gets you conventional results:  I realized while reading their habits neither one of them follows any of the investment habits you often hear about on CNBC or read in Money magazine as the “right ones.”  You would never hear Suzie Orman preaching these guy’s habits.  For example neither one of them believes in diversification.  Diversification is of course a way to manage risk, but they both feel they can adequately remove risk from a situation by spending time thinking and researching.  They say if you spend enough time BEFORE buying you can remove the risk greatly, and if you remove the risk why wouldn’t you put all of your resources behind it?  Soros put his entire fund’s assets ($7B + $3B on margin) into his trade against the Bank of England.  He KNEW his downside was 5% or less but his upside was huge (he was right…$2B in net on that trade).
  • skip to work:  Buffett has been quoted many times as saying that he literally skips to work.  He says even that he has instructed Berkshire to hold seances for him after he dies, so that he can continue to actively invest.  He simply loves it.  It is clear $$$ has nothing to do with his drive.  The same is true for Soros.  Although they both hit their strides when they realized which sides of their businesses they wanted to be involved in day in and day out, and which parts to delegate. It seems pursuing something that makes you feel this good is ultimately the safest investment.
  • Happiness in the details:  It’s clear these two both enjoy the process instead of the results.  For Buffett it is pouring over annual reports and balance sheets.  He LOVES that.  He literally does it all the time.  In fact he has often said he feels like he should pay to have his job (he does in many ways…a $100k salary for the last 30 years is absolute steal for shareholders).  Soros is the same.  He sees himself as a philosopher and investing is just a playground where he can test and prove or disprove his ideas.  The $$$ is merely the vote tally on whether or not his hypothesis were correct.
  • thinking and just sitting are crucial:  Soros says his favorite time is down time, his “thinking time.”  He says times when you do nothing are just as, if not more, important than when you do something.  Spending the time to think and process your thoughts is key to success he says.  They say that some of the biggest mistakes people can make is thinking that they HAVE to do something everyday.  There’s a great quote in the book that says something along the lines of “Why do people on wall street feel like they have to come and do SOMETHING everyday?…I find that there is very little I HAVE to do on a day to day basis.  I’d much rather spend my time reading and researching on the beach, and only come in when I have to buy or sell something.”  Buffett has a little less of a work / life balance than Soros it seems according to the book.
  • focus. Both of these guys have focused in on a few core competencies and an investment approach in which they specialize in.  They rarely stray from these.  This allows them to really hone their skills. I realized that I constantly jump from one space / field to the next based on stories I hear / read.  The focus needs to be on a field with a criteria that fits uniquely me.  This weekend while in cincy I helped Ethan (my little brother) practice basketball.  His friend is very good at layups and I was showing ethan some techniques.  He got frustrated when I told him that kid probably practices everyday and that is why he is so good.  I was naturally a good basketball player but I also LOVED to play, so I played every single day for hours after school.  These two things made me very good.  I of course wanted to be good, but I didn’t practice because of that.  I practiced because I liked to play.  The same is true for why I read business books and magazines.  I love the stories.  I love the trends. I love hearing about the people.  How can I find my basketball feeling again?

These guys stay within themselves.  The book talks about the “loser” investor as one who is constantly adjusting their techniques based on the last story they heard.  I’ve realized that when you don’t take the time to think about and find what you enjoy and are good at analyzing in the investment world, you tend to jump from one person’s ideas to another. The same is true in life I believe.  I think it is why so many of those get rich infomercials work so well.  It’s hitting people who have no idea what their core strengths and passions are, and aren’t seeing any good results in their current approach (most likely based on something someone else told them) so they are so willing to buy another idea, especially when it is presented so well.  These guys (Buffett an Soros) have found the shoes they are comfortable in and they STICK to them, knowing that is where they are happiest, most comfortable and ultimately most successful.  I will say though that the personal criteria for living for everyone always borrows from others ideas, the key is to borrow from those that you can truly make your own and not from those you hope you can absorb.