The Value Investor Library

Each year, in my opening lecture I ask my students the same question:

"How much would you pay for a can of a magical soft drink that would raise your level of wisdom?"

The replies are invariably the same - and range from the hundreds to thousands of dollars.

I proceed to explain that such a product has existed for centuries, and that it is now more available to mankind, then ever before in its history. It is cheap, sometimes free, and is even available on the internet. You do not consume it via your digestive system - but rather through your mind. Yes - I am referring to books. The bad news is that you will have to sacrifice some time that you are currently devoting to television, sleeping, or bumming around.

If there is one way to get into the mind's of the world's greatest investors and see the world the way they are seeing it, it is by investing the time in reading what they are reading. Even if you devote ten hours to finishing off one book, and you only take from it one good idea - it is worth it. All it takes is a handful of ideas to become a successful (and wealthy) Value Investor. It is no wonder that when Warren Buffett was asked by a young investor in the Berkshire Hathaway 2007 Annual Shareholder's Meeting:

"What should I do to become a great investor?"

Warren Buffett replied

"Read everything you can".

It is for this reason, that over a decade ago and with the guidance of my mentors and teachers, I embarked on my journey of investing self-education. I was committed to one thing - to read what the world's greatest investors were reading - so that perhaps I could see what they are seeing. Back then, as a junior equity analyst I thought to myself that if I read at least a chapter a day, then in a year I would have read about 10 books - and probably a lot more. I usually have a book with me wherever I go, in the event that I am stuck somewhere, in a queue or on a train and a bus. It is also why I enjoy flying so much - it gives me a chance to get stuck into a book.

The problem is that the more I read, the more I realize how much I don't know, and how much more there is to learn. And these days as any parent of young children will testify, time is my most precious resource, and my own reading time competes head-to-head with Barney the Dinosaur - and is losing.

And so, dear reader, I provide for you a list of books that some of the world's most successful investors recommend. They are divided into 8 categories:

(1) Value Investing Core Texts - These are the MUST HAVE's. These are required reading if you are to build your Value Investing foundations of knowledge. If you don't have these yet, buy, borrow - do what you must - these are essential.

(2) Value Investing Texts: Your second tier of knowledge - these are the books that will hone your value investor skills.

(3) Books on Warren Buffett: There are close to 20 books that have been written on the man. It is not surprising as there is great demand to know what makes this man ticks and what are his secrets.

(4) Books on Charlie Munger: There are 2 in this category and both are brilliant!

(5) Books Recommended by Warren Buffett: Usually these recommendations have taken place at the Annual Berkshire Hathaway Shareholders' Meeting. When the Oracle of Omaha (WB) recommends a book, you would do well to heed.

(6) Books Recommended by Charlie Munger: Generally these are books which have little to do with investing and a lot to do with learning about the world we live in. Charlie believes (and I am convinced) that the best investors are those that view the worlds from the perspective of multiple disciplines and using multiple 'mental models'. He argues that if "if the only tool we have in our toolbox is a hammer, then every problem is a nail". He calls this his 'Latticework'. The books in this section will develop new tools for your investor toolbox.

(7) Other 'Latticework' Texts: Apart from being extraordinary reading, and stretching the mind in new directions, they will also build your reportoire of mental models.

(8) Other Recommendations: Mostly my own personal recommendations.

Be warned - the list is long and may intimidate some. The solution is simple - start now, pick one book - and just begin. If you are disciplined and read a chapter a night, within a couple of years you will possess some of the knowledge possessed by the investment masters. Don't hesitate even for a moment. Life is too short. Feeding your mind with quality reading is something that you won't regret. Do not be daunted by the number of books on this list. Remember 'a journey of a thousand miles begins with a single step' - so choose one and begin that journey today.

(1) VALUE INVESTING CORE TEXTS

Security Analysis - Benjamin Graham



This is the text that started it all.Written by the 'father of Value Investing', and Warren Buffet's university professor, mentor and employer, Benjamin Graham. It is as applicable today as it was in 1951. My investment partner is always finding investment ideas from the book, that are relevant and applicable today.

The Intelligent Investor - Benjamin Graham

Warren Buffett writes in the preface:

"I read the first edition of this book early in 1950 when I was 19. I thought then that it was by far the best book about investing ever written. I still think it is".

In fact, after reading the book, Buffett decided that he needed to study under Graham, and enrolled in Columbia University's Business School. Buy this book, read it cover to cover, read it a second time for good measure, and you will understand why.

I received a copy for my 26th birthday, from Tony Holley, a close friend and mentor, who introduced me to Buffet and Value Investing. For me, it was like someone switching the light on. Chapters 8 (on Mr. Market) & 20 (on Margin of Safety) are worth the price of the entire book.

Common Stocks and Uncommon Profits - Philip A. Fisher

Warren Buffett says:

"I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits...when I met him I was impressed the man as by his ideas. A thorough understanding of the business, obtained by using Phil's techniques... enables one to make intelligent investment commitments. I am an eager reader of whatever Phil has to say, and I recommend him to you."

Buffett has often described his investment style as 85% Benjamin Graham, 15% Philip Fisher. I suspect however that Fisher part of the equation is much higher, and that Buffett understated this in deference to his former teacher.

Fisher's 'scuttlebutt' principle is priceless and should be adopted by any investor that wishes to gain an informational advantage on the investor masses. Tony Holley also gets credit for putting this into my hands. This is another Tony Holley special.

One Up on Wall Street - Peter Lynch

Written by legendary Fidelity Magellan fund manager Peter Lynch. If you had invested $10,000 when Lynch became fund manager of the fund in 1977, your investment would have been worth $280,000 in 1990 when he left his position.

I was given this book by my first boss when I was a junior analyst. Brilliant and easy to read, Lynch shows how the average investor can have an informational advantage over fund managers and large insitutions.

(2) VALUE INVESTING TEXTS

Value Investing: From Graham to Buffett and Beyond - Bruce Greenwald et. al

This book reads like a college textbook, which is not surprising as it is written Professor Bruce Greenwald, Professor of Finance and Asset Management at Columbia University Graduate School of Business. Nonetheless, if you've got the patience (how badly do you want to beat the market?), then read it slowly - chapter by chapter and take lots of notes.

Value Investing Made Easy - Janet Lowe

Written more than 10 years ago, it is a much easier read than most of the core texts or Greenwald's. A good primer for the reader that does not want to work too hard.

The Dhandho Investor - Mohnish Pabrai

Pabrai is one of this decades up and coming money managers. With stellar returns of 20%-plus in the last 8 years, he is committed to the tenets of Value Investing. An ardent follower of Warren Buffett, he attributes his investment success to Buffett's teachings and philosophy.

Chapters 13 & 14, and particularly his walk-through rationale behind his investments in Stewart Enterprises, Level 3 and Frontline should be mandatory reading in any serious investment syllabus. I loved his use of the chakravyuh concept and how he explains the 'low risk / high uncertainty' model. His explanation and use of the Kelly Formula is exceptional. I thoroughly enjoyed this read and will certainly be keeping an eye on Pabrai.

Beating the Street - Peter Lynch

In this sequel to his best seller, One Up on Wall Street, Lynch takes the reader through how he has analyzed several industries, and also candidly discusses his investment mistakes. This really is an excellent account of how he achieved such a stunning trackrecord.

The Little Book That Beats the Market - Joel Greenblatt

I'm a big fan of Joel Greenblatt. Greenblatt, a champion of Value Investing, has one of the best trackrecords - on average 30% per year over the last 20 years. This is superior to Buffett's. This alone should be reason enough to read what he has to say. Both his book's are well-written and easy to read. If you wish to introduce a friend, child or family member to the world of investing - this is the ideal gift. This book was written for his own children in mind, so it is light and simple, and yet heavy with the investment concepts that will develop into a solid foundation.

You Can Be a Stock Market Genius - Joel Greenblatt

See above review.

The Little Book of Value Investing - Christopher H. Browne

The author is a former student of Benjamin Graham (the 'father of Value Investing') and is referred to in Warren Buffet's Superinvestors of Graham and Doddsville.

The Motley Fool Investment Guide - David & Tom Gardner



I am a big fan of 'The Fool'. They have made it their mission to educate the masses about how easy it is to invest, and how easy it is to beat brokers and fund managers. If you are uncertain about buying this book, then have a look at their site. You won't be disappointed.

How to Think Like Benjamin Graham and Invest Like Warren Buffett - Lawrence A. Cunningham



Outsmarting the Smart Money - Lawrence A. Cunningham



Stocks for the Long Run - Jeremy J. Siegel

This book was voted by Business Week as one of the top 10 business books of 1994. Despite the fact that at the 2006 Berkshire Annual Shareholders meeting Charlie Munger called Siegel demented for comparing 'apples to elephants' - I did find much of value in this book. This book provides strong evidence for the long term 'buy-and-hold' strategy. It is good to return to during short-term periods of market turbulence that rock your portfolio.

What Works on Wall Street - James P. O'Shaugnessy



There's a lot of empirical data and discussion in this book, but it is set out in a way that it makes it readable. Valuable for learning how to design stock screens that will generate value ideas. I found it of immense value. A Tony Holley special.

Value Investing: A Balanced Approach - Martin J. Whitman

Marty Whitman is the founder and principal of the renowned Value Funds - Third Avenue Funds. Both his books have had mixed reviews - most probably because he highlights the faults of academics with regards to Modern Porfolio Theory.

The Aggressive Conservative Investor - Martin J. Whitman

See above.

Contrarian Investment Strategies - David Dreman

In his book, Dreman delves into psychology to show that our brains are 'hard-wired' for under- or average performance on the market. By adopting a contrarian approach - buying when everyone is selling - we must over-ride and ignore our most basic instincts of 'flight'.

More Than You Know - Michael J. Mauboussin

Mauboussin who is Chief Strategist at Legg Mason Capital Management, is a brilliant mind - and a great writer. His focus is on 'behavioral finance' - and you can read much of his writing here. This book follows in the steps of Munger's 'latticework of multiple mental models', and leads the reader through psychology, science and other disciplines. Great.

Expectations Investing: Reading Stock Prices for Better Returns - Michael J. Mauboussin

This book teaches you to think about investing by focusing on valuation, expectations of future cash flows and obviously discounted cashflow.

(3) BOOKS ON WARREN BUFFETT

The Warren Buffett Way - Robert G. Hagstrom, JR.



This was the first book that I ever read about Buffett (placed into my hands - yes - by Tony Holley). Very well researched and written, it provides much insight into the man. I try to re-read it once every second year. I highly recommend it.

The Warren Buffett Portfolio - Robert G. Hagstrom, JR.

Recommended by Buffett and Munger as one of the better books to read.

The Essays of Warren Buffett - Warren E. Buffett & Lawrence Cunningham



A MUST READ. A compilation of Buffett's writings, from his 'Letters to Shareholders'. It doesn't get better than this. Raw wisdom. His metaphors and aphorisms are his greatest marketing tools.

Buffett: The Making of an American Capitalist - Roger Lowenstein



This is considered one of the better Buffett biographies. Superbly written, it provides depth of insight into Buffett's character, but does not delve into his investment strategies. Nonetheless, highly recommended.

Of Permanent Value - Andrew Kilpatrick



This is the ultimate Buffett biography. 2 volumes, 9 pounds, 1,800 pages. All that you have ever wanted to know about the man. I have not read this - yet - but it is on my 'wishlist' (hint).

How to Pick Stocks Like Warren Buffett - Timothy Vick



The Tao of Warren Buffett - Mary Buffett

Despite being written by Buffett's former daughter-in-law, and without his consent, Mary Buffett provides for readers 125 meditations (Buffett quotes) - each with a page that explains further the 'thoughts'. It's an easy read - finished in one sitting. Some of the thoughts include: "You can't make a good deal with a bad person", "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those that take the subway", and "What we learn from history is that people do not learn from history".

The Midas Touch - John Train



From the best-selling author of The Money Masters, this is a short and easy read. A good first book on Buffett.

Warren Buffet Speaks - Janet Lowe



An easy read - and probably the most comprehensive collection of Buffett aphorisms. I refer to it often to make sure that I am getting th quote right.

The New Buffetology - Mary Buffett



Written by Buffett's former daughter-in-law. Contains some good case studies on Buffett's investments, and a good investment checklist.

(4) BOOKS ON CHARLIE MUNGER:

What Warren Buffett thinks of Charlie Munger:

“Charlie can analyze and evaluate any kind of deal faster and more accurately than any man alive. He sees any valid weakness in sixty seconds. He is a perfect partner.”

"Charlie shoved me in the right direction of not just buying bargains, as Ben Graham had taught me. This was the real impact Charlie had on me. It took a powerful force to move me on from Graham's limiting views. It was the power of Charlie's mind. He expanded my horizons."

Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger

This is without a doubt one of my most valuable books in my library. At $50, it is a bargain for the value that you are getting. I wish I'd bought it 10 years ago! While it looks like a 'coffee table' book, it is much much more. You can open to any page and just learn. It is filled with a biography of Munger's life, his speeches over the past 20 years, and hundreds of quotes and testimonials. My copy sits on our dining room table, and whenever I am waiting for my wife to 'finish getting ready' before we go out, I just randomly flip to a page and soak up some Munger-wisdom. Makes one hell of a gift, and the proceeds go to the Munger Research Center at the Huntington Library.

Damn Right! Behind The Scenes With Berkshire Hathaway Billionaire Charlie Munger - Janet Lowe

This is one of the most enjoyable books that I read this year - I couldn't put it down. An in-depth biography of Buffett's partner - Charlie Munger, it tells the story of a brilliant mind, committed to learning about this world, and to contributing to society. Absolutely inspirational. I can't recommend it enough.

(5) BOOKS RECOMMENDED BY WARREN BUFFETT:

When Genius Failed - Roger Lowenstein

Buffett refers to Long Term Capital Management saga often as an example of the irrelevance of IQ when it comes to successful investing. There is much to be learned from their failure.

Nuclear Terrorism: The Ultimate Preventable Catastrophe: Graham Allison

Recommended by Buffett at the 2005 Annual Berkshire Shareholders meeting. Never in the history of mankind has there been a situation where one man (or 19) has the ability to kill tens of thousands. 9-11 taught us otherwise. What is described in this book is the type of 'black swan' that Taleb refers to in his book. A good op-ed in the Wall Street Journal by the author can be read here.

F.I.A.S.C.O: Blood In The Water On Wall Street - Frank Partnoy

Recommended by Buffett at the 2005 Annual Berkshire Shareholders meeting. Munger said of the book:

"You would be disgusted if you had a fair mind and spent a month really delving into a big derivative operation. You would think it was Lewis Carroll (Alice in Wonderland). You would think it was the Mad Hatter's Tea Party. And the false precision of these people is unbelievable. They make the worst economic professors look like gods. Morever, there is depravity augmenting folly. Read the book F.I.A.S.C.O by law professor and former derivatives trader Frank Portnoy, an inside account of depravity in derivative trading at one of the biggest and best-regarded Wall Street firms. The book will turn your stomach."

The Wealth and Poverty of Nations: Why some are so rich and some are so poor - David Landes

This book explores and attempts to explain why some cultures that possess certain advantages have never become world powers, and why others have become so prosperous. Thought-provoking.

Guns Germs and Steel- The Fates of Human Societies - Jared Diamond

Diamond tackles the same subject as Landes (see previous recommendation), and attempts to explain why certain countries become cultural centers and military superpowers. It provides the reader with an interesting explanation of why the world has developed the way it has.

The Third Chimpanzee - Jared Diamond

A provocative book that attempts to show the reader that with 98% of human genes being identical to chimpanzees, that we are merely another more developed species of ape. The book explores the evolution of mankind from ape to what we are today.

A Short History of Nearly Everything - Bill Bryson

Recommended by Buffett at the 2004 Annual Berkshire Shareholders Meeting. I recently finished this book and highly recommend it. I possess little to no formal science education and this filled many gaps. Bryson is a great writer, witty and brilliant - he takes the reader on a journey - showing him how insignificant mankind and the planet earth are in the greater scheme of things - and yet how significant we are in protecting an environment that is becoming ever more fragile.

Personal History - Katherine Graham

Owner of the Washington Post, Kay Graham was a close friend of Buffett and a remarkable woman. This is an inspirational read. This book is a 1998 Pulitizer Prize winner.

Titan: The Life of John D. Rockefeller, Sr. - Ron Chernow

A biography of history's first billionaire.

Bull: A History of the Boom and Bust - Maggie Mahar

The Smartest Guys in the Room - Bethany McLean

The full story behind the Enron scandal.

In an Uncertain World - Robert Rubin

Warren Buffett says of the author:

"As Secretary of the Treasury, Robert Rubin ranked with the best. The drama-packed account of his years on the job should be read by all who are interested in what happens when politics and economics intersect."

Liar's Poker - Michael Lewis

(6) BOOKS RECOMMENDED BY CHARLIE MUNGER:

Influence: The Psychology of Persuasion - Robert Cialdini

This is my favorite Munger recommendation and another Tony Holley special. Charlie Munger actually gave the author one Berkshire Hathaway share (worth today $120,000) as a show of appreciation. This is one of the most useful books that I have read in the past decade. Makes you realize what suckers we really are and how easily we are manipulated. In the book, Cialdini describes six psychological principles that drive our powerful impulses to comply to the pressures of others, and shows how we can defend ourselves against manipulation or use them to make our persuasion techniques more effective.

The Martians of Science - Istvan Hargittai

Recommended at the 2007 Annual Wesco Shareholders Meeting. Munger said: "It's a hell of a book about five Hungarian physicists driven to the U.S. by Hitler, who contributed much to science here. I can't recommend it enough." You can read an excerpt from the book here.

Einstein: His Life and Universe - Walter Isaacson

Recommended at the 2007 Annual Wesco Shareholders Meeting. Munger said: "I've read all the Einstein biographies and this is by far the best - a very interesting biography."

Master of the Game: Steve Ross and the Creation of Time Warner - Connie Bruck

Munger says of the book:

"I very much enjoyed Connie Bruck's biography - Master of the Game - about Steve Ross... she is a very insightful writer and it's a very interesting story." - 1994 Annual Berkshire Shareholders Meeting

Ice Age - John and Mary Gribbin

What Munger had to say about the book:

"Ice Age is one of the best books I have ever read. I've spent thousands of dollars buying copies for my friends. If you don't like Ice Age, then you have some limitations." - 2002 Wesco Annual Shareholders Meeting

How the Scots Invented the Modern World: The True Story of How Western Europe's Poorest Nation Created Our World and Everything In It - Arthur Herman

What Munger had to say about the book:

"I also recommend How the Scots Invented the Modern World. It's amazing how one million poor people with a lousy climate and no resources had such a large constructive influence on the world. I tried to figure it out and I couldn't. The professor did that. It's a wonderful book."

Deep Simplicity: Bringing Order to Chaos and Complexity - John Gribbin

"Not everyone will like Deep Simplicity. It's pretty hard to understand everything, but if you can't understand it, you can always give it to a more intelligent friend." - Charlie Munger, 2004 Wesco Annual Shareholders Meeting.

A Matter of Degrees: What Temperature Reveals About the Past and Future of Our Species, Planet and Universe - Gino Segre

A Matter of Degrees, by a physicist named Segre, is a perfectly marvelous book. Not a book you can go through at 90 MPH, but if you parse through it slowly, you'll get a lot out of it. You'll get a lot of hours per dollar if you use it right." - Charlie Munger, 2003 Wesco Annual Shareholders Meeting.

Getting It Done: How to Lead When You Are Not in Charge - Roger Fisher

What Munger has to say about the book:

"This book is must reading for those seeking to maximize their contribution to the constructive work of the world."

Conspiracy of Fools: A True Story – Kurt Eichenwald



Charlie Munger said of the book: "... that Enron book is really worth reading because the evil is so extreme. You see people getting sucked in by the evil around them. You just learn so much." - 2007 Wesco Annual Meeting.

Several books have been written about the Enron affair, but this is, in my opinion is the best. A great read. Thoroughly-researched and Eichenwald is a great story-teller.

The Path to Power (The Years of Lyndon Johnson, Volume 1) – Robert A. Caro

" I loved Caro’s book – I thought it was very well done. I think reading his biography on LBJ is very important for anyone who wants a view into the human condition. LBJ never told the truth when a lie would be better. This is the way he went through life. He had a high intellect and extraordinary energy and did a lot of good along with the bad. I’m not sure he didn’t do more good than bad. But I think it’s an appalling life to lie as much as LBJ. What I said at Berkshire meeting about the robber barons applies here: “When he’s talking, he’s lying, and when he’s quiet, he’s stealing.” - Charlie Munger, 2004 Wesco Annual Shareholders Meeting.

Les Schwab: Pride in Performance – Les Schwab



"If you want to read one book, read the autobiography of Les Schwab. He ran tire shops in the Midwest and made a fortune by being shrewd in a tough business by having good systems…He made hundreds of millions selling tires". - Charlie Munger, 2004 Berkshire Hathaway Annual Meeting.

The Selfish Gene - Richard Dawkins

Recommended in the second edition of Poor Charlie's Almanack.

Only the Paranoid Survive - Andy Grove

Recommended in the second edition of Poor Charlie's Almanack. A great read - a reminder to why Buffett steers clear from Hi-tech companies: the environment is changing to quickly - the 'moats' and the unless the management is continuously vigiliant and prepared to adapt, then any competitive advantage is only temporary.

Three Scientists and Their Gods: Looking for Meaning in an Age of Information - Robert Wright

Recommended in the second edition of Poor Charlie's Almanack.

Getting to Yes: Negotiating Agreement Without Giving In - Roger Fisher & Ury Fry

Recommended in the second edition of Poor Charlie's Almanack

Benjamin Franklin: An American Life - Walter Isaacson

"The Isaacson book on Franklin was terrific. He had a terrific subject – it’s hard to write a bad book on such an interesting subject." - Charlie Munger, 2004 Wesco Annual Shareholders Meeting.

Darwin's Blind Spot - Frank Ryan

Recommended by Charlie at the 2003 Annual Berkshire Shareholders Meeting.

Living Within Limits: Ecology, Economics and Population Taboos - Garret Hardin

Charlie says of this book: "It is a summary of the major things Hardin has learned in a lifetime. He is a real thinker. That is a fabulous book. " - Outstanding Investor Digest, June 30, 1993

The book argues for population and immigration control and proposes that the earth is not capable of supporting limtless population growth.

(7) OTHER 'LATTICEWORK' TEXTS TO EXPAND YOUR MENTAL MODELS:

On the Latticework (multiple mental models) concept, Charlie Munger says:

“You must know the big ideas in the big disciplines and then use them routinely – all of them, not just few. Most people are trained in one model – economics, for example – and try to solve all problems in one way. You know the old saying: ‘To the man with a hammer, the world looks like a nail.’ This is a dumb way of handling problems.”

– Charlie Munger, Poor Charlie’s Almanack, p.55

Seeking Wisdom - Peter Bevelin

Another Tony Holley recommendation. I haven't read it yet - but it's on my wishlist. I hope to pick it up in Omaha in 2008.

Latticework: The New Investing - Robert G. Hagstrom

The author writes: "Investment decisions are more likely to be correct when ideas from other disciplines lead to the same conclusion. Those who strive to understand (these) connections are well on the way to worldly wisdom. This makes us not only better investors but better leaders, better citizens, better parents, spouses and friends."

Beyond Graham and Dodd - Mitch Julis

Recently released, I look forward to reading and reviewing this. Mitch is the founder of Canyon Capital.

The Origin of Wealth - Eric D. Beinhocker

This was recommended to me by Canyon Capital's Mitch Julis. It recently arrived in the post - and I look forward to reviewing it once I have completed it.

(8) OTHER RECOMMENDATIONS:

Manias, Panics and Crashes - Charles. P Kindleberger

Warren Buffett once said that the one thing you can learn from history is that people do not learn from history. It is for this reason that it is worth reading both this book and the next one - so that we are able to remain apart from the herd during times of panics or irrational exuberance.

Devil Take the Hindmost - Edward Chancellor

See the review above.

Revolutionary Wealth - Alvin & Heidi Toffler

I recommend all the books written by the Tofflers. They are 'futurists' at heart - keen observers of the changes that are occuring in our world, and where we are heading. In their latest book, the Tofflers examine the new 'wealth system' of the 21st century - and look at everything from extreme sports, how vodka is marketed to blogging etc. If you want to get a glimpse of the future - this is the book for you. Adapt or wither.

The Rediscovered Benjamin Graham - Janet Lowe



This is a great collection of Graham's writings, speeches, interviews and lectures.

Fooled By Randomness - Nassim Nicholas Taleb

Remember the line from Baz Lurman's 'Wear Sunscreen' - the one that goes: "Whatever you do, don't congratulate yourself too much, or berate yourself either. Your choices are half-chance, so are everybody else's."? Well - that's what this book's all about. This book examines the difference between skill and luck, and looks at to what extent randomness plays in success and failure. Taleb has a brilliant mind - a deep thinker - and his writing is both humorous and rivetting. His latest book 'Black Swan' is a New York Times Best Seller.

The Black Swan - Nassim Nicholas Taleb

Do you know what a 'Black Swan' is? No - not the bird. In this new York Times Best Seller, Taleb argues that the really important events that affect us (and financial markets) cannot be predicted by past events, but instead will be rare and unpredictable - what he refers to as 'Black Swans'. Why Black Swans? Before Australia was colonialized by the British, Europeans believed that all swans were white. That is, until they arrived on the shores of Australia to discover that their assumptions were wrong - and that black swans exist.

Like his first best-seller, Taleb continued to explore risk and uncertainty. Both of his books are in my opinion the best on these subjects.

Family Village Tribe: The Story of Flight Centre Limited - Mandy Johnson

Another Tony Holley Special! This is a great read about one of Autralia's most successful franchises.

The Millionaire Next Door: The Surprising Secrets of America's Wealthy - T. Stanley & W. Danko

Also a Tony Holley Special - this book surprised me by confirming that my behavior, though significantly different to my friends, is validated. I highly recommend it if you are open and willing to look at yourself critically and change patterns of behavior.

The Power Laws: The Science of Success - Richard Koch

A birthday present from - you guessed it - Tony Holley. This is along the lines of Latticework's multiple mental models - and actually lists the different laws and how they can be applied.

Decision Traps: The Ten Barriers to Brilliant Decision-Making and How to Overcome Them - J.E Russo & P.J Schoemaker

Decision making should become a science in its own right, and a mandatory course in all MBA's. What is Wisdom but the ability to discern the best course of action, and to see through the illusions that blind us.

The Long Tail: Why the Future of Business is Selling Less of More - Chris Anderson

Understanding the Long Tail concept is essential in understanding how business has been forever changed by the knowledge sharing phenomenon that is the internet. Authored by Wired Magazines editor, he explores how niche markets and unlimited shelf space has changed nature of business. Thought-provoking. I highly recommend it.

Against the Gods - Paul Bernstein

The skill of understanding, recognizing and minimizing risks is integral to successful value investing. This is a great book to hone this skill. It draws from history and biographies to trace the development of risk management. It's up there with Taleb's books.

The Art of the Long View - Peter Schwartz

Peter Schwartz is one of the world's 'futurist pioneers'. This book is not about predicting the future, but rather about preparing for the future. It discusses how to think about possible scenarios in the future in order to make better decisions in the present.

Ishmael - Daniel Quinn

If I was to choose 5 books that had the most impact on my life, this would be one of them. There is a quote on the front cover of the book by Jim Britell from the Whole Earth Review - "From now on I will divide the books I have read into two categories - the ones I read before Ishmael and those read after." - I couldn't agree more. I read this whilst diving in Vanuatu - and I remember being troubled by the books ideas. It challenged my core outlook of the world and the paradigms I held true. Quinn is a master story teller and I could not recommend his writings enough. I have bought tens of copies for friends and loved ones.

The Story of B - Daniel Quinn

See review above.

My Ishmael - Daniel Quinn

See review above.

The Lexus and the Olive Tree - Thomas Friedman

Thomas Friedman is a multiple Pulitzer Prize winner, regular New York Times columnist - and a great writer and futurist. Although some of this book is out-dated, his ideas on globalization are mandatory reading for those who want to gain a better grasp on the world we live in today. Concepts such as 'the electronic herd' must be understood to remain in-sync with today's investing environment. Chapter 3 - "and the Walls Came Tumbling Down" - is great - and discusses 'soft power' - how the West can positively influence oppressive regimes without using military force - but rather by using global media and satellite TV. The concepts regarding the 'democratization of information' were way ahead of its time - (considering the fact that it was written in 1999) - before the blogging era.

The World Is Flat - Thomas Friedman

See above review. In his latest book, Friedman continues from where he left off in the Lexus and the Olive Tree, to share his insights of what our future is going to look like.

The Richest Man in Bablyon - George S. Clason

A short and easy read, this best-selling classic offers timeless wisdom on how to generate and maintain wealth. The beauty of the ideas contained in the book are that they are simple and common sense. Readers will say 'obviously' - and yet very few have the discipline to implement these.

Tuesdays with Morrie - Mitch Albom

Albom's book - a true story and best-seller, also places on my 'top 5 books of all time'. I read it in one sitting (on a flight from SF to NY) and have bought tens of copies for friends. This book nourishes the soul and serves as a reminder of the things that are truly important in our lives. Make sure you have a box of tissues - I guarantee you'll need it.

Man's Search for Meaning - Viktor Frankl

This is also one of the top 5 books that has had a major impact on the way I view the world. Viktor Frankl, neurologist, psychiatrist and holocaust survivor, brought to the world his theories of logotherapy. Absolutely brilliant. I have bought tens of copies for friends and loved ones.

The Tipping Point - Malcolm Gladwell



Both of Gladwell's books are must reads. In the Tipping Point, he examines why and how ideas and trends catch on and spread. The chapter on 'mavens' and 'connectors' (especially on Lois Weisberg) was superb.

Blink - Malcolm Gladwell

If you believe in 'gut instincts' or a 'sixth sense' then you will want to read this book. In this book, Gladwell examines how we are able to sub-consciously make snap-decisions - and why it is often best to go with our first instincts. This book deals with how we often 'just know' something without really being able to explain why we know it, and how this is one of the most powerful skills that we have. This book shows how we can develop these skills and how these can help us make better decisions.

Freakonomics - Stephen D. Levitt

The cover refers to the author as a 'rogue economist' - and that title could not be more appropriate. Levitt, a brilliant researcher and writer, draws from various fields and statistics to show his readers that conventional wisdom and opinion is often incorrect. This is a book that encourages you (leaves you little choice) but to think critically.

The World as I See It - Albert Einstein

At little over a 100 pages in length - this collection of Einstein's writings touches on his views on wealth, science, politics, education, religion and on the Jewish people. Insightful.

Everyday Irrationality - Robyn Dawes

Filters Against Folly - Hardin Garrett

The Secret to Becoming a Great Investor

Greetings dear reader!

As I last promised I am about to reveal to you the Secret to Becoming a Great Investor. But before I do, allow me to address a question of no less importance:

"Why do most individuals have little chance of becoming great investors?"

To answer this, I would like to take you back 900 years (indulge me, I beg you) and introduce you to one of Judaism's foremost philosophers - Rabbi Moses Maimonides. Now this chap was not your average run-of-the-mill Rabbi. Fluent in Arabic, Spanish, Greek and Hebrew, he was learned in Jewish mysticism, the exact sciences, medicine, astronomy, Greek philosophy and served as the Royal Physician in Egypt. Like I said a pretty cool guy.

Maimoides authored a text called 'The Guide to The Perplexed' (or 'Moreh Nevuhim') - an esoteric work that deals with Kabbalah and Jewish Mysticism. Not the easiest of books to read (Trust me, I received a copy on my 19th birthday from my best friend - and I still haven't finished it!). I digress. In Chapter 34, he explains why the average individual will never be able to grasp the secrets of Jewish Mysticicm - of Kabbalah. 900 years later, his explanation also applies to the question I posed - "Why do most individuals have little chance of becoming great investors?". I provide a loose translation below:

"Preparatory studies are of long duration and Man by his nature is focused on the end result, finds these tedious and is reluctant to engage in them. Know this, if a man were able to reach a worthy goal, without any preparatory studies, such studies would be futile and a waste of time. Now suppose you awaken any person, even the most simple, and say to him 'Do you not wish to understand the nature of the heavens, their number and their form; what beings are contained in them; what the angels are; how the creation of the whole world took place; what is its purpose, and what is the relation of its various parts to each other; what is the nature of the soul; how it enters the body; whether it has an independent existence, and if so, how it can exist independently of the body; He would undoubtedly say "Yes," and show a natural desire for the true knowledge of these things. But he would wish that this desire be satisfied and to attain such knowledge by only listening to a few words. Ask him however to interrupt his usual pursuits for a week, and devote his time to obtaining such knowledge, and he would not do it. He would rather be satisfied with simple imaginary and misleading notions and would refuse to believe that there is anything that requires extensive investigative learning."

Like I said - not easy reading. Simply put what the good Rabbi is telling us is that the average person wishes to know the 'secrets of the universe' but is unwilling to pay the price – and devote the long hours of study required. And that is why 'Hidden Knowledge' is not available to the
masses – it's not that it's physically hidden, but that people are not willing to apply themselves to the learning.

Ask anyone if they want to be as successful as Warren Buffett and they will reply in an instant 'Hell – yeah!' Tell them however, that the price they must pay for such success is that they are required to expand their breadth of knowledge, begin reading books (non-fiction), that they must teach themselves how to read financial statements and read tens of annual reports a month, and most will look sideways uneasily and immediately excuse themselves, muttering something about returning late DVD's or forgetting to feed the dog.

And so it is with Value Investing. It is not difficult and not rocket-science. In fact it's really quite simple. There is enough free material available on the internet that a person who willingly sacrifices time in front of the TV, and instead devotes several hours a week to research and learning, will in no time be viewing the stock market in a similar light to Warren Buffett.

And now for the Secret to becoming a great investor:

In the 2007 Berkshire Hathaway Annual Shareholders' Meeting, a 17-year old asked Warren Buffett:

'What should I do to become a great investor?'

Buffett replied:

"Read everything you can…. When I was ten I'd already read every book in the Omaha Public Library with the word 'finance' in the title".

In my next post - "The Value Investors Library" - I will provide a list of books that have been recommended by Warren Buffett, and his partner Charlie Munger, and others which in my opinion are essential if you wish to expand your investment horizons.

Signing off for now - "May you possess the wisdom to see what the market does not, and the courage to act on it.

* It may be no coincidence that the root of Maimonides' name ('Maimon - or M-M-N) is also 'money' or 'finance'.

** Thanks to Oded for the 'Perplexed' quote.

Who is this Warren Buffett Dude Anyway?

Most people have heard of Warren Buffett, but very few have taken the time to discover how he has generated such immense wealth, why he has had such a profound influence on so many, and why his company Berkshire Hathaway attracts more than 20,000 people for the Annual Shareholders Meeting.

Warren E. Buffett is many things to many people. To me, he is first and foremost a teacher – probably one of the greatest teachers I have ever had. Many may ask 'how can you call him a teacher if you have never met him or spoken to him'. My answer is simple: a teacher is someone that you learn from. Someone that successfully passes on to you a message. The greater that message, and the greater the impact that it has had on your life, then the greater the teacher. I suspect that in this, I am not alone.

With good reason Buffett is viewed by many as one of, if not the greatest investor of all time. Not only has he created immense wealth for himself, but also a greater collective wealth for the thousands of loyal shareholders of his investment holding company, Berkshire Hathaway Inc. Like Donald and Mildred Othmer.

The Othmers, he a chemical engineer and she a school teacher, made two astute investment decisions in their lives. Their first astute investment decision came in 1956, when the then 25 year old Buffett established his first investment partnership. The Othmers, a modest couple in their mid-50's and friends with the Buffett family, each gave the young Buffett $25,000 to invest. In 1970, they each received 7,500 shares of Buffett's new company Berkshire Hathaway Inc, which were then priced at $42 a share. Buffett had multiplied the Othmer's initial investment by almost 13 times, in less than 15 years. Recognizing Buffett's investment prowess, the Othmers decided not to sell their shares and continued to hold Berkshire stock for the long term. This was their second astute investment decision.

Donald Othmer died in 1995, and his wife three years later. Their shares, which they had refused to sell, had grown from $42 a share to over $60,000 a share, creating an estate that was worth over $800 million.

And then there's the story of Buffett’s neighbor, Don Keough. Keough served as chairman of the board of Coca-Cola (1986-1993) and Columbia Pictures (1985-1989), and has served as a member of the boards of McDonalds, Heinz, The Washington Post, and Home Depot. He currently serves on the boards of Coca-Cola and Berkshire Hathaway. Keough once mentioned in an interview that when he was a young executive he would leave for work every day while Buffett ran his investment operation from his home. He recounts:

"Warren Buffett had a marvelous hobby, model trains, and my kids used to troop over there and play with them. One day, Warren popped over and asked us if I’d thought about how I was going to afford to send my kids to college. In truth, I hadn’t given it much thought. But I told him I planned to work hard and see what happened. Warren said that if I gave him $5,000 to invest, he’d probably be able to do it better. My wife and I talked it over, but we figured we didn’t know what this guy even did for a living – how could we give him $5,000? We’ve been kicking ourselves ever since. I mean, if we had given him the dough, we could have owned a college by now".

– from The Midas Touch, John Train

If you had invested $10,000 in the S&P 500 in 1966, your investment would have grown to almost $528,000 by the end of 2006, or what equates to an annualized return of 10.6% annualized return. If on the other hand you chose to allow Buffett to manage those funds, your initial investment would have ballooned to an incredible $59.2 million by the end of 2006 – more than 100 times the S&P 500's return. Buffett's annualized return over that period equates to an annualized return of almost 24%, more than double the S&P 500. This more than anything else demonstrates the difference between the results of average and exceptional performance that is compounded over the long term.

A little over a decade ago, when I first heard of Buffett's phenomenal investment track record one thing became absolutely clear to me: there is something different that this man is doing that allows him to outperform the market by a wide margin – and I needed to know what it is. I became a man on a mission and was determined to discover Buffett's investment secrets.

Within six months I had collected and read all the Annual Berkshire Shareholder Letters and voraciously soaked up every fact and detail from the few books that had been written about him at the time. After I devoured those, I went on to read the writings of those that had the most influence on his investment philosophy - Buffett's mentor Benjamin Graham and other investment giants such as Philip Fisher and Peter Lynch. I soon realized how little I knew, and how much learning lay before me.

If you are at all interested in generating the wealth (who isn’t?), then I highly recommend that you embark on the same journey that began for me over a decade ago – and learn about Buffett’s methods, and the views of those that influenced him.

The Israel Value Investing Blog is a great place to start.

Some Interesting Buffettology:

• With a net worth of more than $52 billion, Bufffett is the 3rd richest man on the planet behind Bill Gates and Mexican businessman Carlos Slim Helu.


• Most of Warren Buffett wealth is in Berkshire Hathaway stocks. He owns approximately 38% of the company.


• Berkshire Hathaway is currently worth $184.87 billion, and holds $47 billion in cash (about 40%).


• In 1979, the share price of Berkshire Hathaway (Buffett’s company) traded at $279. Today (August 2007) it trades at around $120,000. That’s $120,000 for one share!


• From 1965 to 2006 Berkshire Hathaway achieved an annual compound return of 21.4% compared to S&P 500 of 10.4%. The overall return for Berkshire Hathaway shares from 1965 to 2006 was 361,156 % compared to 6,479% for the S&P 500.


• The Berkshire Hathaway companies have more than 217,00o employees and generate more than $100 billion in revenue per year.
  
• Berkshire owns 49 private businesses which can be viewed here. These businesses generate a minimum of $150 million per week in free cash flow for Berkshire Hathaway. Simply put - every week these businesses 'send checks' back to 'Head Office' worth at least $150 million for Buffett to invest (it is no wonder he is sitting on $47 billion of cash!)


• There are about 20 employees at Berkshire's head office - mostly accountants. There are no analysts. Buffett is the only one.


• Buffett’s current annual salary is $100,000 (compare this to the average CEO salary of the S&P 500 companies which is $9 million).


• Every year in May approximately 25,000 Berkshire shareholders gather Omaha’s Qwest Center for the Annual Shareholders meeting. It is a 2-day affair and involves many activities. The main event is a 6-hour Q&A session with Buffett and his partner Charlie Munger.


• Buffett loves playing bridge, and plays about 12 hours a week. Sometimes over the internet with Bill Gates.

• Buffett’s favorite place to eat is Gorat’s in Omaha. He always purchases a T-bone steak (cooked rare), a double order of hash browns, and Cherry Coke.

• According to U.S. News and World Report, he drinks about five Cherry Cokes a day.

• Buffett does not have a pc on his desk, does not use e-mail and drives his own car.

• In 1956 he purchased a 5-bedroom home for $31,500. He still lives there today.

• Buffett reads 5 different newspapers a day. On several occasions he has said that he spends 80% of his day reading - mostly company annual reports.

• Buffett does not read analyst reports or economic forecasts.

• Every year an auction takes place with the highest bidder winning a lunch with Buffett. In 2007, the highest bid was $650,100 to up and coming value investor, Mohnish Pabrai.


• Berkshire’s largest holdings are: Coca-Cola (8.6% of the company), American Express (12.6%), Moody’s (17.2%), Proctor & Gamble (3.2%) & Wells Fargo & Co. (6.5%).


• In June 2006, Buffett publicly committed to giving away his entire personal fortune to charity, with 83% going to the Bill and Melinda Gates Foundation (that’s $15 million a day!). This is the largest philanthropic gift in history.


• In 2006, 35 separate university classes from around the U.S visited Warren Buffett. Over 2,000 students received 6 hours face-time with Buffett. During this time, Buffett lectures them on character, business ethics, and takes questions. He then takes them out to eat at Gorat’s – his favorite steak house. You can view some of the notes from these meetings here, here, here, here, here and here.
  

The Making of Buffett – Ages 13 - 38

• At age 11, Buffett bought his first stock – Cities Service – for $38 per share. The stock dropped to $27 before shooting up to $40. Buffett sold his stock at this price. Soon after, the stock rocketed to $200 a share and Buffett learned the value of patience.


• At age 13, Buffett filed his first tax return and claimed a $35 tax deduction for his bicycle. The same year he declared to a friend that he will be a millionaire before he turns 30, or "[I'll] jump off the tallest building in Omaha."


• At age 15, Buffett began delivering newspapers for the Washington Post company, earning $175 a month. This was his first exposure to the print media industry. Later on in life, he bought 18% of the company.


• Also at age 15, he invested $1,200 of his savings and bought 40 acres of farmland.


• At age 17, Buffett and a friend bought a used pinball machine, and placed it in a nearby barber shop. Within a number of months, he owned 7 machines in different locations and was earning $50 a week. He later sold this business for $1,200.


• Whilst in highschool, he bought a 1934 Rolls Royce with a friend for $350, and rented it out for $35 a day. By the time he graduated high school he had saved $6,000.


• At Age 19, Buffett applied to Harvard Business School and was not accepted.


• That same year he read Benjamin Graham’s “Intelligent Investor” and was so impressed with the book that he immediately applied to Columbia’s Business school, where Graham was teaching. He was accepted, and received the only +A grade that Graham ever gave.


• At age 21, Buffett purchased a Texaco Gas station as a side investment, but the investment was not successful.


• At age 25 (1956), Buffett established a Limited Investment Partnership “Buffett Associates with $105,000 of investor funds, and worked from a bedroom in his home. Within 3 years Buffett doubled his investors’ funds. Within 6 years the partnership’s assets were worth $7.2 million. Within 11 years they were worth $65 million. Within 12 years they were worth $104 million. You can view facsimile copies of his letters to his investors during these years here.

Buffett Writings & Interviews online:

Annual Letters to Berkshire Shareholders (A must read!)

The Super-Investors of Graham-and-Doddsville by Warren Buffett

Warren Buffett lecture to Notre Dame Students, 1991

Warren Buffett lecture to University of Florida Students, 1998

Mr. Buffett on the Stock Market, Fortune Magazine, Carol Loomis, November 1999

What Worries Warren, by Warren Buffett, Fortune Magazine, March 2003 - Warren's thoughts on the dangers of Derivatives.

America's Growing Trade Deficit is Selling the Nation Out from Under Us, by Warren Buffett, Fortune Magazine, October 2003

A comprehensive list of articles on and by Buffett can be found here.

Buffett Videos and Lectures online:

Warren Buffett lectures to University of Florida Students, 1998

Charlie Rose, 2007 1-hour interview with Warren Buffett Interview.

CNN interview at the Berkshire Hathaway 2007 Annual Shareholders Meeting

Next Post - "The Secret to Becoming A Great Investor" - according to Buffett & Maimonides

Signing off for now: "May you always possess the wisdom to see what the market does not, and the courage to act on it."

The Relationship between Gratitude & Value Investing

I am continuously amazed at the extent of humility that I see in the value investors that I so much admire and learn from. When one reads / hears their words, one gets the distinct impression that they are genuinely aware they couldn't have been so successful without the assistance of others. They are forever declaring how lucky they are, how fortunate and grateful they are etc. They do not attempt to convince their investors that they can out-guess or time the market, and they are able to say 'I have no idea'. Their humor is self-deprecating and they do no hesitate in admitting their investment errors, or their infallibility.

Here's some examples of Warren Buffett's humility and gratitude:

"Charlie and I are extraordinarily lucky. 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 other 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 every day in countless ways by talented and cheerful associates. No wonder we tapdance to work."

"The odds for me to have been born in the US were 1 in 50. I won the ovarian lottery. If I had been born in Bangladesh, the chances are that I would not have had such great opportunity. Bill Gates says that if I had been born 1,000 years ago, I would have been some animal's lunch."

"Charlie shoved me in the direction of not just buying bargains, as Ben Graham had taught me. This was the real impact Charlie had on me. It took a powerful force to move me on from Graham's limiting views. It was the power of Charlie's mind. He expanded my horizons."

It occurred to me that there is a direct relationship between one's level of gratitude and one's ability to succeed as a Value Investor. But before I share this observation, I think I should first give thanks myself:

First and Foremost, I am extremely thankful for:

My wife Einat, who allows me to be me. From the onset you have been supportive of and willing to join me in doing things differently, in not being pressured with what is conventionally expected of us, and of holding a long term view. Our children could not want for a more amazing mother. I could not want for a more amazing partner. And you're one hell of a cook!

My daughters – Alma and Shira – you are my greatest teachers. I am in constant awe of you both, and of the role of parent. I can only hope I won't let you down.

My parents – who placed education above all. By example, you taught us the value of a strong work ethic and the importance of integrity.

And especially to my father, who put that first book 'How to Buy Stocks' (by Louis Engel) into my hands at age 12. I still have that paperback copy (1977 edition), its pages tattered and the color of a macchiato. Since then, I have been captivated by financial markets, and constantly seek to outwit 'the crowd'.

I am also very thankful to (in no particular order):

Oded Kraizel – My very own 'abominable no-man', he is the real impetus behind this blog. In the short time that I have known him, he has had a major positive influence. He has an eagle-eye when it comes to financial statement analysis, despite having no formal accounting training and is a committed Value Investor. And he makes the world's best Tahini!

Tony Holley – who first struck up a conversation with me at a bus stop in Sydney's financial district, and then proceeded to explain how my methods for investment analysis were all wrong. In the space of a couple of weeks you placed The Intelligent Investor into my hands, introduced me to the world of Buffett, and convinced me to abandon technical analysis and adopt the precepts of Value Investing. Ever since then, you continuously ensure that I am reading great books – even when the distance between us is thousands of miles.

Larry Shein – who was the raw definition of courage. I am forever grateful for the laughter and hours of philosophy, and for the chance to say goodbye.

Lisa Wade – who despite living on a different continent to me for most of the last 15 years, remains one of my closest friends. She was the first person that suggested that I become an equity analyst.

Hamish Petrie – who I have had the wildest of times with, and who dragged me from Sydney to San Francisco to set up our first company. He is one of the greatest salesmen I know. Watch out for his close – it's lethal!

Danny Marcus – who is committed to remaining young at heart. I miss diving with him, his friendship and humor, his worldly wisdom, and his insistence that I learn from his experiences.

Dave Shein, Nathan Cher & ComTech Communications - my years at ComTech had a major influence in shaping the way I view business strategy, management structures and accounting principles. I was the company's 4th employee, working part-time whilst still in highschool, making and testing networking cables in the Erskine Street basement. I financed my university years by working in the company's dispatch center and later in the PROM testing lab, before becoming the company's assistant accountant. There is much to write about what I learned at ComTech, and I hope to devote an entire post to it.

Prof. Yehezkel Dror – Recipient of the Israel Prize. I was fortunate to work under his steadfast tutelage during my first years in Israel. I will be forever grateful to him for introducing me to the world of futurist studies, and long-term scenario and trend analysis.

Shlomo Nir – who is always there and generous with advice on all matters, from parenting and marriage, to car engines and problems with the plumbing.

Illana McKinstry and Dezy Devai – the twin sisters that have been like my own. They have been there, unconditionally, for as far back as I can remember.

Paul Israel & The Australia-Israel Chamber of Commerce - for his untiring dedication to promoting bilateral trade between the 2 countries. Onya Paul!

Jon Boock and the Israel Funds Observer team - In an industry that does not possess a modicum of a long-term perspective, they are the lone voice committed to bringing to the Israeli Market a level of rationality and depth of analysis that did not exist previously. Watch for their analysis and commentaries - they will no doubt separate the wheat from the chaff!

Oren Shemesh – because you can't be lucky enough to have great neighbors!

My students - past and present - you are a constant source of challenge, fulfillment, learning and inspiration.

And I could not see what I see, nor do what I do, were it not for my teachers:

I am grateful to my teachers: Warren Buffett, Charlie Munger, Benjamin Graham, Philip Fisher, Mohnish Pabrai, and Joel Greenblatt.

I have yet to come face to face with any of you, and we have never exchanged a word, but you continue to share your knowledge generously. You answer questions that are too intelligent for me to pose, and you have blazed a bright and burning trail that has been easy to follow.

You see, I am really nothing more than the sum total of the cumulative influences of the individuals that I have deeply associated with, and from the books that I have read. The only credit I grant myself is in surrounding myself with people far more intelligent and talented than I am, my willingness to be open to new ideas, and for earning their friendship and affection. When you surround yourself with people that you admire and that you can learn from, you are left with little choice but to improve yourself. They force you to be the best you can be.

The relationship between Gratitude and Successful Value Investing

It is easy to feel genuinely grateful for one's situation when one is critically honest with oneself, and is not tainted by ego. One views things more clearly and has a greater appreciation of all the factors that have lead to the present moment.

Successful Value Investing begins with the ability to appraise an asset accurately – to see it clearly for what it is – without all the market noise. To appreciate something is to know its worth or value – to appraise it accurately - and so dear reader, it should be no surprise that the world's most successful value investors are also the most grateful.

You see, the process of wealth generation seems to begin by realizing how wealthy we already are. I think this is what Rabbi Ben Zoma meant when he said: "Who is rich? He who is happy with that he has." Pirkei Avot (Ethics of the Fathers). It is also an interesting coincidence that this same quote appears in Benjamin Franklin's Poor Richard's Almanack. Benjamin Franklin is Charlie Munger's hero. Charlie is Warren Buffett's partner.

A Gratitude Meditation

If you woke up this morning with more health than illness, you are more blessed than the million who will not survive this week.

If you have never experienced the danger of battle, the loneliness of imprisonment, the agony of torture, or the pangs of starvation, you are ahead of 500 million people in the world.

If you can attend a church / synagogue meeting without fear of harrassment, arrest, torture or death, you are more blessed than 3 billion people in the world.

If you have food in the refrigerator, clothes on your back, a roof over your head, and a place to sleep, you are richer than 75% of this world.

If you have money in the bank, in your wallet, and spare change in a dish someplace, you are among the top 8% of the world's wealthy.

If you have ever made a phone call, you are ahead of 50% of the world population that never has.

And if you are reading this blog - and have access to the internet then you are ahead of 90% of the world population that does not have access to the internet.

Next Post - "Who is this Warren Buffett Dude Anyway?"

Signing off for now: "May you always possess the wisdom to see what the market does not, and the courage to act on it."