• Steve Jobs on learning to run a company

    From Robert X. Cringley’s “Steve Jobs: The Lost Interview”: You know, throughout the years in business I found something, which was I’d always ask why you do things. And the answers you invariably get are “Oh, that’s just the way it’s done.” Nobody knows why they do what they do. Nobody thinks about things very … Continue reading Steve Jobs on learning to run a company

  • Google Glass and the Segway Paradox

    The customer rearely buys what the company thinks it is selling him. — Peter Drucker Google Glass was finally announced to the public yesterday. Glass is a solution looking for problems. It’s too hard to say what jobs-to-be-done Glass will be hired to do at this stage, or how widely used it will be. We’ll only … Continue reading Google Glass and the Segway Paradox

  • Mistakes = information

    Re-posted from the Atlastory blog. In Nassim Taleb’s new book “Antifragile,” there’s an interesting segment about how an entire system can be antifragile (benefiting from variability / disorder / stressors) precisely because its individual parts remain fragile (harmed by variability). A few examples: The engineer and historian of engineering Henry Petroski presents a very elegant point. Had the Titanic not had … Continue reading Mistakes = information

  • How to separate luck and skill

    These are some of my notes from the book “The Success Equation” by Michael Mauboussin. This book was spotted on Warren Buffett’s desk in this tour of his office. There’s lots more interesting stuff in the book, but these notes in particular answer the question “How do you separate luck and skill?” We’ll start off … Continue reading How to separate luck and skill

  • Instacart: analysis of a startup

    Instacart is a seed-stage startup that delivers groceries and other basic items in a very short timeframe. They are the “ with a 1 hour delivery.” At the moment their current market is only San Francisco and the Silicon Valley area. Customers can place either a 3-hour order ($3.99) or a 1-hour order ($14.99).  Orders are … Continue reading Instacart: analysis of a startup

  • The Tallest Skyscrapers in the World

    The tallest skyscrapers in the world, from 1895 on. All pictures link to a hi-res version (some link directly to the image; right-click > open in new tab to avoid slide show). 1895: Milwaukee City Hall, Milwaukee, USA (353 ft.) 1899: Park Row Building, NYC, USA (391 ft.) 1901: Philadelphia City Hall, Philadelphia, USA (511 … Continue reading The Tallest Skyscrapers in the World

  • Retail Numbers

    Some interesting retail numbers from my archives: Highest Single Store Revenues Store City Year Sales (2010 $mm) A. T. Stewart NYC 1873 217 Wanamaker Philadelphia 1902 442 Macy’s NYC 1906 403 Field’s Chicago 1906 610 Bon Marché Paris 1906 962 Macy’s NYC 1930 1,280 Hudson’s Detroit 1953 1,242 Field’s Chicago 1962 969 Hudson’s Northland 1962 … Continue reading Retail Numbers

  • Groupon Revisited

    I never purchased shares in Groupon as it was obviously overvalued at first, and as the price fell I became more skeptical of the ability of anyone to predict future cash flows with any margin of safety. The accounting troubles were unfortunate — I think this was a result of bad internal controls combined with … Continue reading Groupon Revisited

  • Cesar Hidalgo on Academia & Culture

    From a conversation with Cesar Hidalgo at Edge: At the [MIT] Media Lab, the whole goal that I see is that I have to be creative and I’m free to be creative, and I’m not constrained to a subject category. I don’t need to be creative in chemistry, or I don’t need to be creative … Continue reading Cesar Hidalgo on Academia & Culture

  • Book Notes: The Visible Hand

    The Visible Hand: The Managerial Revolution in American Business was written by Alfred Chandler and released in 1977. It’s a great history and study on business and why it exists the way it does today. For some books I read, I transcribe and summarize my highlights/notes in order to better learn the material and for … Continue reading Book Notes: The Visible Hand

  • On startup dictatorships

    There’s a trade-off that CEOs — particularly startup CEOs — must make, and it’s between two roles that can be both conflicting and complementary. The first role is that of guiding visionary. They guide overall strategy and ensure that the vision, purpose, and values of the organization are aligned with that strategy and permeate the company. This is … Continue reading On startup dictatorships

  • Glotz Builds Starbucks

    It is 1980: You’ve just inherited Starbucks, a small Seattle business that roasts and sells coffee beans in 4 locations. How would you build it into a company worth more than $30 billion in 30 years? (Before continuing, make sure you’ve read the template to this post, the famous essay by Charlie Munger about Glotz building … Continue reading Glotz Builds Starbucks

  • Being a founder is about responsibility

    When you start a company alone, you are 100% responsible for every job it entails. You are a true generalist. This means your job consists of product strategy, customer service, development/engineering, UX design, finance, accounting, janitorial work, hiring, distribution, etc. etc. As you bring new people into the organization, they slowly start taking responsibility from … Continue reading Being a founder is about responsibility

  • Found Quotes 2

    If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea… — Antoine de Saint Exupery The little dissatisfaction which every artist feels at the completion of a work forms the germ of a … Continue reading Found Quotes 2

  • My favorite books on business, management, investing and design

    Out of the many books I’ve read in different subjects, below is a list of some of my favorites with some brief commentary for some of them. There are a few other “Mental Model” categories (psychology, history, economics, ecology, etc.) that I left out — hopefull they’ll be the subject of another post. Business theory … Continue reading My favorite books on business, management, investing and design

  • Stealing time from customers

    When you make a good product or service more efficient, you are giving your customers time. Never take any of that time back in the future or customers will never forgive you. New versions of a product should always take less of customers time (or the same time at the very least). How do you … Continue reading Stealing time from customers

  • Companies I admire

    Here’s a short list of modern companies I admire, in no particular order: Apple Berkshire Hathaway Pixar Bridgewater Associates W.L. Gore & Associates YCombinator IDEO The Baupost Group (see here) Valve Corporation Costco Amazon I admire each for different reasons, but primarily it is their culture, processes, and organizational structure. All of these also maintain … Continue reading Companies I admire

  • London 2012 Adjusted Medal Rank

    UPDATE: All stats and figures below have been updated with the final medal counts as of August 12, 2012. Prior medal equation had population weighted at 1x and GDP/cap weighted at 1.85x. I was watching the Olympics with my brother last week, and we were discussing what the best way to rank countries is. Some media … Continue reading London 2012 Adjusted Medal Rank

  • Charlie Munger on business education

    From Charlie Munger at the 2011 Berkshire Hathaway meeting: Costco of course is a business that became the best in the world in its category. And it did it with an extreme meritocracy, and an extreme ethical duty—self-imposed to take all its cost advantages as fast as it could accumulate them and pass them on … Continue reading Charlie Munger on business education

  • Tech trends shaping the future

    Here are some of the questions I ask when thinking about what trends will shape the business and technology worlds in the years to come: What is becoming cheaper/more abundant/ubiquitous? What is improving productivity across many industries? Does an innovation seem like an inevitable step in the progression of technology? What happens when everyone uses … Continue reading Tech trends shaping the future

  • JCPenney: A Transformation

    This is a selection from my Q2 letter to the partners of Braewick Holdings. Braewick currently has a position in JCPenney (JCP). We first purchased shares in JCPenney for $27½ in 2011. But as the difficult transformation has progressed, just as short-term optimism drove the price above $40, short-term worries have knocked the share price down below $22. … Continue reading JCPenney: A Transformation

  • BreitBurn Energy Update

    This is a selection from my Q2 letter to the partners of Braewick Holdings. Braewick currently has a position in BreitBurn Energy (BBEP). I posted about our first investment in BreitBurn two years ago. BreitBurn is essentially a physical oil and gas hedge fund. They invest in properties that have proven reserves, and receive a … Continue reading BreitBurn Energy Update

  • Found Quotes

    If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people… Just by lengthening the time horizon, you can engage in endeavors that you could never … Continue reading Found Quotes

  • Why big moats can be bad

    Large competitive moats play an important roll in determining the current and future success of a business. Moats are barriers to entry that protect the economic castle—from both new entrants, or expansion by current competitors. So the bigger the moat, the better the business, right? For the current and very near future, yes. But huge … Continue reading Why big moats can be bad

  • Stakeholder Value & The Dynamic Pie

    A recent article by Forbes contributor Steve Denning reviewed Roger Martin’s new book, Fixing the Game. It was a good review and I plan on reading the book. The gist of the article is that managers of public companies focus too much on the expectations behind their stock price, and in turn “maximizing shareholder value.” … Continue reading Stakeholder Value & The Dynamic Pie

  • Quotes On Steve Jobs

    * After reading Walter Isaacson’s biography and the last few months worth of articles on Steve Jobs, I put together a collection of my favorite quotes about and related to him: At the company he founded after being ousted from Apple, Jobs was able to indulge all of his instincts, both good and bad. He was unbound. … Continue reading Quotes On Steve Jobs

  • Entrepreneurial Arbitrage

    Arbitrage is “the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices.” Once the arbitrage spread closes, the profit is made and the opportunity no longer exists. According to Austrian Economics, … Continue reading Entrepreneurial Arbitrage

  • Generalists vs. Specialists (and the Specialist’s Dilemma)

    Generalists vs. Specialists (and the Specialist’s Dilemma)

    Animal species reside on a scale with “generalist” on one end and “specialist” on the other. Specialists can live only in a narrow range of conditions, while generalists are able to survive a wide variety of conditions and changes in the environment.

  • The Progression of Innovation

    It’s good for any investor or business person to know where their company fits when it comes to the progression of innovation. Even if a certain company or product isn’t new, at some point in time the business it’s in was. Throughout history, innovations (whether they be technological inventions or innovations in business model) came … Continue reading The Progression of Innovation

  • Underestimating the Groupon Model

    As widely reported, Groupon filed their first S-1 today in preparation for an IPO. They’re raising $750 million on top of the $160 million they have already raised from angel & venture capital investors so far. The likely valuation range will be $20-25 billion (or possibly more after what happened with the LinkedIn IPO). The … Continue reading Underestimating the Groupon Model

  • Fumbling the Future at Xerox PARC

    “There is a wide difference between completing an invention and putting the manufactured article on the market.” — Thomas Alva Edison In this week’s New Yorker, Malcolm Gladwell writes about innovation and how Xerox PARC failed to profit from the many incredible inventions that came out of its lab. (You can read the summary here.) PARC … Continue reading Fumbling the Future at Xerox PARC

  • On Buffett’s 2010 Letter to Shareholders

    Here is Warren Buffett’s 2010 Letter to Shareholders if you haven’t seen it already. It was a very good letter overall, with Buffett providing his usual wisdom and wit. This year, he didn’t have to review the basics as he did in 2009 for the new Burlington Northern shareholders, so there was even more wisdom … Continue reading On Buffett’s 2010 Letter to Shareholders

  • Apple Inc: The Greatest Turnaround in Corporate History

    Some fun facts about Apple’s turnaround: +8,524% (37.7% annualized): Stock performance since Steve Jobs’ return to Apple in 1997. +821% (18.6% annualized): Revenue growth since Jobs’ return. +5,093% (66.4% annualized): Stock performance since the launch of the iTunes Store in April, 2003. (A disruptive innovation.) +951% (39.9% annualized): Revenue growth since iTunes Store launch. In the … Continue reading Apple Inc: The Greatest Turnaround in Corporate History

  • On Wal-Mart Stores Inc.

    The following is a writeup I did for Wal-Mart on Sum Zero, included in its entirety below. Also at the end of the post are some charts that show how Wal-Mart has evolved over time. There is no doubt that Sam Walton and Wal-Mart are one of the, if not the greatest success story over … Continue reading On Wal-Mart Stores Inc.

  • Why Google Continues to be the Best

    As many have already seen, Google just posted some great third quarter figures. Both revenue and operating income were each up 23%, and Traffic Acquisition Costs (the revenue paid to AdSense partners) were at an all-time low of 25.7% of ad revenue. They also broke out some never-before-released sales figures: $2.5 billion a year for … Continue reading Why Google Continues to be the Best

  • BreitBurn Energy Partners

    I’ve owned BreitBurn Energy Partners (BBEP) both personally and through Braewick Holdings LP for the past year and a half. The following is a clip from my letter to partners explaining our investment in the company: BreitBurn is an oil and gas production company structured as an MLP (see my July 2009 letter for a … Continue reading BreitBurn Energy Partners

  • On Biglari Holdings and Type X Behavior

    In November of last year, I wrote “The Restaurant Investor” about Steak n Shake, Sardar Biglari, and what it takes for a restaurant to succeed. In the article, I mentioned that Steak n Shake (now Biglari Holdings) was on solid financial footing and that Biglari would likely start pursuing a holding-company strategy by investing excess … Continue reading On Biglari Holdings and Type X Behavior

  • Claude Bébéar, the Risk Avoider

    Claude Bébéar is the founder and former CEO of the insurance company AXA. I believe the AXA group is currently the third largest insurance company in the world (just behind Allianz and Generali Group). Bébéar built AXA through mergers and acquisitions, most notably the Drouot Group and the American insurer Equitable. More can be found … Continue reading Claude Bébéar, the Risk Avoider

  • The Innovations of Apple: Part II

    Instead of further examining where Apple’s current (and future) products fit in on the “innovation scale,” in Part II I want to talk about Apple as an investment, and where its products fit in in terms of investment value. Apple has been a fantastic investment over the past decade. In fact, since April 2003 when … Continue reading The Innovations of Apple: Part II

  • The Innovations of Apple: Part I

    Apple is an incredibly creative, innovative company, and is usually at the top of people’s minds when it comes to new consumer technologies. So for the rest of this post, I’ll examine if and why Apple’s products are disruptive. Disruptive Portable Music? Before MP3 players, the only real option for portable music was a CD … Continue reading The Innovations of Apple: Part I

  • Sustaining, Disruptive Innovations

    Although the phrase disruptive innovation is used often, it is best described by Clayton Christensen in his books “::amazon(“0060521996″,”The Innovator’s Dilemma”)::” and “::amazon(“1578518520″,”The Innovator’s Solution”)::.” Most new technologies are sustaining—they improve the performance of current products along dimensions that the market already values. Rarer disruptive innovations result in products that are worse than current offerings … Continue reading Sustaining, Disruptive Innovations

  • Berkshire’s Intelligent Acquisitions

    Just going through the book “The Innovator’s Dilemma” by Clayton Christensen. I have a few posts I’ll likely write that relate to the book — this is one of them. ::amazon(“0060521996”, “The Innovators Dilemma”):: talks a lot about a company’s culture, and why incumbent leaders of a certain technology are restrained from participating in a … Continue reading Berkshire’s Intelligent Acquisitions

  • Pyramids vs. Skyscrapers

    Pyramids vs. Skyscrapers

    Insight: When looking at a company, what type of building is it? Large companies (with competitive advantages) can be pyramids or skyscrapers. Both are large and have commanding presences. Both have high returns. Pyramids are strong — you can’t knock them over. Skyscrapers are tall and strong, but they can be knocked over much easier. … Continue reading Pyramids vs. Skyscrapers

  • See’s Candy; The Washington Post

    After posting “The Restaurant Investor” earlier this week, I realized that some of my older articles were now gone (they used to be up on the Gannon on Investing blog, which has been taken down). So, I re-posted them on this site, and you can see both through the links below. Enjoy! Quality Without Compromise … Continue reading See’s Candy; The Washington Post

  • The Restaurant Investor

    This is a long-form article about the restaurant industry and the turnaround of Steak-n-Shake in 2008–2009. It tells the stories of how McDonalds, In-N-Out Burger, and Steak n Shake were founded and have stayed successful for so long. A PDF of the article can be found here. Please enjoy, and checkout the update at the end regarding the Biglari story. In … Continue reading The Restaurant Investor

  • The McDonald’s Success Story

    I am currently in the process of researching and writing a long article on the restaurant industry, or more specifically Steak n Shake, McDonald’s, and In-N-Out Burger. I should have it finished in a few weeks or so. In the mean time, please enjoy the following excerpt of the article on McDonald’s: As Ray Kroc … Continue reading The McDonald’s Success Story

  • Finding an Edge

    Finding an Edge

    “The stock ticker is like a tote board. It gives the public odds. A trader who wants to beat the market must have an edge, a more accurate view of what bets on stocks are really worth.” —William Poundstone, “Fortune’s Formula” Everyone needs an “edge” in both investing and business. If it were just a … Continue reading Finding an Edge

  • Baupost Fund Allocations: 1995-2001

    A few months ago I helped put together a PDF of Seth Klarman’s letters to investors of the Baupost Fund from 1995 to 2001. Among many other great discussions, Klarman goes over a few of his individual holdings and Baupost’s rationale for investing. One interesting aspect of Klarman’s investing style is his allocation into many … Continue reading Baupost Fund Allocations: 1995-2001

  • Market Valuation Charts: 5/4/09

    Chart: Bond Yield over Equity Yield. 10-year treasury yield minus inverse of Graham P/E Ratio (10-year average equity earnings yield). Current value: -2.8% (5/4/2009) Low value: -4.9% (3/9/2009) Chart: Trailing 10-year return. Current value: -3.8% (5/4/2009) Low value: -5.9% (3/9/2009) Chart: 10-year trailing Graham (“Real”) P/E Ratio. Price of the S&P 500 divided by the 10-year … Continue reading Market Valuation Charts: 5/4/09

  • An Option Model for Value Investors

    The Black-Scholes model does an admirable job at valuing short-term options. If an option expires in a few weeks, the current price of the underlying stock and its recent volatility have a good deal of influence on the outcome of the option investment. A simple Black-Scholes calculation has a lot of flaws (none of which … Continue reading An Option Model for Value Investors