Being Cheap, Best of Munger, a Rare Bezos Interview, and Other Links by John Huber, Base Hit Investing
I was catching up on some links and articles this weekend. Sometimes, things that are interesting but not time sensitive get pushed to the back burner. In these cases, I sometimes create a file filled with things that I’d like to read and the early morning Saturday hours are sometimes a good time to catch up on these things.
Anyhow, here are some things I’ve read recently that I read that I thought readers might be interested in taking a look at.
The Advantage of Cheapness
This is a piece from 1997 on the then-CEO of Fastenal (now Chairman) Bob Kierlin. The article discusses his incredible appetite for low costs at all costs, and how his cheapness helped foster the culture at Fastenal, and helped it become lean, profitable, and sustainably competitive.
Warren Buffett’s 2018 Activist Investment
Most investors are aware of Warren Buffett's most high profile long-term investments. However, there is one long term investment that is often overlooked. Q2 2020 hedge fund letters, conferences and more This is building materials maker USG, which was owned by Berkshire Hathaway for more than 17 years before it was acquired in 2018. If Read More
Some Ivy League MBA professors will say cost cutting is not a “sustainable competitive advantage”. In other words, these skeptics will say: yeah, a frugal management team is great, but if keeping a lid on costs is the only advantage one company has over competitors, soon those competitors will cut their costs also and erase this edge.
Once again, I think this calls for the great Yogi Berra quote: “In theory, there is no difference between practice and theory. In practice, there is.”
There aren’t many CEO’s worth a quarter of a billion who are renting vans to drive themselves on business trips, eating fast food, staying in motels, and eschewing the stationary store’s scratch pads in favor of homemade notepads made from used paper and glue. Maybe this passage takes the cake:
“And then there are his suits. At a discount store, they’d probably go for $200 apiece. But Kierlin didn’t buy them there. He got them from the manager of a men’s clothing store. Not from the manager’s store. From the manager. The suits are used. “Luckily, we’re the same size,” says Kierlin, a triumphant smile crossing his face. “I picked up six of those suits for 60 bucks each.”
Cheapness might be a personality trait, but there are some who can use this to foster a culture that leads to increased profitability. And the reason this is sustainable is simply because being cheap often means not taking the easy route (i.e. the company paying for your private jet is much more comfortable than driving yourself for 5 and a half hours in a rented van). In practice, most CEO’s aren’t willing to do what in theory they would.
Read the full article here.
Charlie Munger Complilation
For you Charlie Munger fans, here is a document I came across a few weeks ago that is a nice compilation of the Wesco annual meeting notes as well as a number of other transcripts and articles written by or about Munger.
The title of the compilation is “Best of Charlie Munger” or something to that effect. But any compilation of Munger isn’t complete without this one: The Art of Stock Picking. I might highlight a passage or two from this piece some other time: it’s a great discussion on behavior, mindset and investment philosophy.
Jeff Bezos Interview
This was a great discussion with Jeff Bezos. The Amazon CEO rarely gives these types of at-length interviews, and it’s worth watching if you have some time. I’ve never invested in Amazon, but I really admire Bezos’ ability to stay focused on the long term mission of building value at his company with complete disinterest for what short term traders, analysts, and observers think about him or his strategy. Time will tell if Bezos’ strategy of investing “profits” back into the business is successful, but it is refreshing to listen to a CEO who really doesn’t care about short term results and pays more than just lip service to “thinking for the long term”.
Other Odds and Ends
Here are a few other interesting articles that I came across recently…
- How to Make $12 Billion Investing in This: This is a story on the leveraged buyout of Hilton by the Blackstone Group, and it’s a really interesting event to read about.
- Berkshire Hathaway Director Susan Decker Offers Rare Peek into Warren Buffett’s Boardroom:
There is a great Buffett response to one of Decker’s suggestions when she was a new board member and recommended to Buffett that large potential acquisitions should be brought before the board for consideration: “Save that for the next CEO”.
- An Examination of the Banking Crisis of the 1980’s: This is an FDIC piece that discusses the history and the causes of the banking crisis of the late 80’s and early 90’s and the bank failures as a result. It’s an interesting read on its own, but it is somewhat relevant to the current time given the recent debacle in energy prices.
I hope a few of these are interesting. Have a great week!