Whitney Tilson’s email to investors discussing that much of America is shut out of the greatest borrowing binge ever; the recession is over for the rich, but the working class is far from recovered; Jeff Bezos’ congressional testimony, “Playing Offense,” the final chapter from his book, The Art of Playing Defense.
Q2 2020 hedge fund letters, conferences and more
1) Following up on Wednesday's e-mail, in which I highlighted Ball Corp. (BLL) selling $1.3 billion of junk bonds at record-low yields, this Bloomberg article underscores the feast-or-famine weirdness in the economy today: Much of America Is Shut Out of The Greatest Borrowing Binge Ever.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
2) This Washington Post article underscores that a similar, troubling dynamic is at work among American workers and households. I hadn't heard the term "K-shaped recovery" before... The recession is over for the rich, but the working class is far from recovered.
Jeff Bezos' Congressional Testimony
Love him or hate him, he's built a company that's changed the world as much as any in history... He concludes:
Let me close by saying that I believe Amazon should be scrutinized. We should scrutinize all large institutions, whether they're companies, government agencies, or non-profits. Our responsibility is to make sure we pass such scrutiny with flying colors.
It's not a coincidence that Amazon was born in this country. More than any other place on Earth, new companies can start, grow, and thrive here in the U.S. Our country embraces resourcefulness and self-reliance, and it embraces builders who start from scratch. We nurture entrepreneurs and start-ups with stable rule of law, the finest university system in the world, the freedom of democracy, and a deeply accepted culture of risk-taking.
Of course, this great nation of ours is far from perfect. Even as we remember Congressman John Lewis and honor his legacy, we're in the middle of a much-needed race reckoning. We also face the challenges of climate change and income inequality, and we're stumbling through the crisis of a global pandemic.
Still, the rest of the world would love even the tiniest sip of the elixir we have here in the U.S. Immigrants like my dad see what a treasure this country is – they have perspective and can often see it even more clearly than those of us who were lucky enough to be born here. It's still Day One for this country, and even in the face of today's humbling challenges, I have never been more optimistic about our future.
4) I was working this week on the final chapter of my forthcoming book, The Art of Playing Defense, and wanted to share the first part of it with you:
Playing Offense: Snippets of Advice for Growth and Success in Business and in Life
This book so far has focused on avoiding calamities – in other words, playing defense. Now, I'd like to end the book by talking about playing offense.
You can transform yourself into the person you want to be, but you have to decide early because the chains of habit are too light to be felt until they are too heavy to be broken. – Warren Buffett
Think about that. All the little things you do dozens of times every day – your habits – define who you are, and once these patterns are set, they're really tough to change. It's critically important to develop good habits early in life.
Look around at the people you work or go to school with and ponder this question: who do you think is going to be really successful in life, not just financially, but in every way?
As you think about this, what are the characteristics you're focusing on? Are they smart? Do they work really hard and not give up easily? Do they have integrity? Is their word their bond? Are they 100% reliable? Are they well organized? Do they take care of themselves and not take foolish risks? Are they kind and a pleasure to spend time with? Do they make the world a better place?
Now ask yourself: what are they doing that I can't do as well? I think you'll find at least 90% of these traits are things over which you have total control.
So you see, you don't need me to tell you what habits you should try to adopt – you already know. There's no secret – they're obvious! The real question is: what are you going to do about it? To answer this question, I turn again to Buffett:
Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don't have the first, the other two will kill you. You think about it; it's true. If you hire somebody without [integrity], you really want them to be dumb and lazy.
In this chapter, I'll discuss all three of the qualities Buffett mentions: integrity, intelligence, and energy.
By "energy", Buffett's not just talking about putting in a lot of hours – though that's part of it – but also maximizing the value of those hours by being smart, focused, and disciplined.
Maximize Your Time
Tim Ferriss's book, The 4-Hour Workweek, is one of the dumbest I've ever read. Of course you should try to be efficient and delegate well, as he advocates, but, especially early in your career, there's no substitute for hard work. Trust me, you are far more likely to get ahead if you are the first into the office every morning and the last to leave.
I've never forgotten the line from a famous Hollywood executive (I think it was Peter Guber), who came to speak at Harvard Business School while I was there. He said: "I've gotten ahead by working half days. And you know what? It doesn't matter which 12 hours a day I work!"
That's not hyperbole. Do the math: 12 hours a day dedicated toward your job/career/study/learning leaves 12 hours a day for everything else: eight hours of sleep (see below), one hour of exercise, and three hours of eating, socializing, relaxing, etc. Then on weekends, cut your work in half to six hours – and be sure to take some wonderful vacations!
By the way, an important part of this isn't just putting in a lot of hours but also overcoming obstacles and having grit, determination, and resilience. All of us face setbacks in life – it's how we handle them that's critical. One study measured students' IQ and also grit, and it turns out grit is twice as important in determining life outcomes. (The best research in this area is being done by Angela Duckworth, who wrote a book about it called Grit: The Power of Passion and Perseverance.)
Get Eight Hours of Sleep
For most of my adult life, I used to feel guilty about getting anything more than six hours of sleep each night. I know a handful of people – like my friend Wendy Kopp, with whom I worked starting Teach for America in 1989-90 – who perform at super high levels yet only sleep four hours a night. How I envy them – I would pay a lot of money for a pill that allowed me to do this!
A few years ago, I tried to train myself to function on six hours of sleep, staying up until midnight and setting my alarm for 6am, but it didn't work – it just made me tired all the time and I could tell my brain wasn't functioning 100%.
So I went back to my usual seven to seven-and-a-half hours...and feeling guilty...until I saw a 19-minute TED Talk last year by Matt Walker called "Sleep Is Your Superpower."
In it (and in his book that I subsequently read, Why We Sleep: Unlocking the Power of Sleep and Dreams), Walker shared the results of numerous studies, all of which show the critical importance of getting at least eight hours of sleep – and the terrible consequences of sleep deprivation.
Premature aging ("the shorter your sleep, the shorter your life"). Early onset dementia like Alzheimer's. Reduced ability to absorb, process, and remember things. Impotence. A suppressed immune system, resulting in higher cancer risk. Increased chances of auto accidents, suicides, cardiovascular disease, and heart attacks.
Sleep, unfortunately, is not an optional lifestyle luxury. Sleep is a non-negotiable biological necessity. It is your life-support system, and it is Mother Nature's best effort yet at immortality.
And the decimation of sleep throughout industrialized nations is having a catastrophic impact on our health, our wellness, even the safety and education of our children.
It's a silent sleep-loss epidemic and it's fast becoming one of the greatest public health challenges that we face in the 21st century.
Walker's wisdom changed my life – seriously! Instead of strategizing how to get less sleep, I now try to get more. Rather than viewing it as a wasteful luxury, eight hours of sleep is now the minimum I try to get each night – and nine is even better!
While I am, of course, only a sample size of one, I can tell you that ever since I started getting more sleep, I feel more energetic and stronger, both physically and mentally.
(If you have trouble falling/staying asleep, there are many websites with lots of advice – and for serious cases, there's therapy and I've found Ambien to be very effective, though I recommend avoiding this prescription drug if you can. Walker's tips include avoiding naps during the day and alcohol and caffeine in the evenings; going to bed and waking up at the same time every day, including weekends; and keeping the nighttime bedroom temperature cool, at 65 degrees.)