“Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest.” – Warren Buffett
At Baskin Wealth we don’t believe you can be a good investor without reading a lot. We read partly to expand our knowledge, but also because we enjoy reading. From time to time, we will share some of the books from which we think everyone can learn. Here are two which I recently enjoyed:
Shoe Dog: A Memoir by the Creator of Nike
Author: Phil Knight
Shoe Dog is a detailed examination of the early days of Nike from founder Phil Knight’s perspective. The journey starts from Nike’s start as a distributer of Japanese shoes, and ends with Nike’s initial public offering (IPO) in 1980. This is an entertaining and beautifully written book, and provides a great example of the struggles and uncertainties of running a small company.
My main takeaway from this book is that the future is never certain, no matter what anyone says. A major theme in Shoe Dog is that there were several unforeseen events in Nike’s past, any of which could have wiped out the company. Phil Knight himself admits he had no idea whether the company would survive each of those challenges. Nike shares have returned over 32,000% since the IPO, and even more for those who were lucky enough to invest before the IPO. It would be seductive and easy for Phil and others to claim that they knew Nike would be successful from the start. Shoe Dog provides a humbling reminder to us that luck is often required for success as well.
Phil Knight is worth listening to. He has amassed a fortune estimated at $25 billion, has made gifts of over $1 billion to hospitals, universities and sports programs, and plans to give away most of his money before he dies.
Superforecasting: The Art and Science of Prediction
Authors: Daniel Gardner & Philip Tetlock
Superforecasting is a book about how a group of seemingly normal individuals dubbed “superforecasters” were able to consistently out-predict experts in areas of global politics, economics, and science, despite not having access to classified information. Since investing is, at least in part, about making successful predictions, this is a particularly important book for people who want to pick stocks. However, I think everyone would benefit from utilizing the behaviors that superforecasters use.
As you might expect, the authors argue that it is the thinking process that matters, rather than intelligence or super math skills. For example, a useful way to analyze a situation is to break down the question into knowable and unknowable “sub-questions”. We have benefited greatly from this book and we are more aware of our own psychological biases. We now continue to work on living out these practices throughout our research process. Whether we will end up being super at our forecasting remains to be seen, but we certainly hope to be better at it as a result of what we have learned.
Sept 26, 2016