10: My Most Important Tool, Simplicity Rules, and Forefront Values

Updates

  • We are up to 272 subscribers! Our goal is to get to 1,000 subscribers. Please help us get there by sharing this with someone who you think will enjoy it.

  • All editions of Saturday Signal are available here: Saturday Signal — The Irreverent Investor

Let’s dig in.

What I’m Writing

My write-up on DocuSign is now available for all Irreverent Investor members. Check it out here: DocuSign (DOCU) — The Irreverent Investor

I wrote about telling the difference between money, wealth, and status. Extremely important first principle for those new to creating financial freedom. I’ll be posting more of these articles aimed at helping out those newer in their financial freedom path.
Are You Seeking Money, Wealth, or Status? — The Irreverent Investor

Interesting Reads

https://www.bloomberg.com/opinion/articles/2021-09-17/complex-language-on-earnings-calls-is-a-warning-to-investors

I saw this and went “WOW!”

This goes right along with my theory that investing is simple, anyone can do well, and there is no barrier to entry. This doesn’t mean investing is simplistic, however.

From the piece:

This is the fascinating finding from research by the quants at Nomura Holdings Inc., looking at earnings calls. (The language in 10-Ks is always carefully vetted and written by committee. Such documents tend to be written in bad, complicated prose. But when executives are speaking on a call, they have the liberty to make straightforward points in a simple way.)

The results are dramatic. The researchers analyzed the language used by execs in calls for all the companies in the Russell 1000 large-cap index, and split them into 10 groups of 100. Since 2014, the 100 companies whose officers used the most complex language averaged a return of 9.45% per year. The companies in the simplest language decile returned 15.4% per year. The results are robust when controlled for volatility, with the simple language decile having a far higher Sharpe ratio:

800x-1 (1).png

What can lie behind this? In part, it’s because if you have something to hide you will tend to take refuge in longer words and more convoluted sentences. These will help to hide your meaning. As the trial of Elizabeth Holmes, who ran the failed blood-testing startup Theranos, is in the news, it’s instructive to look at this quote from a now infamous profile of her by Ken Auletta for the New Yorker, published in 2014, before the problems with her technology had been revealed:

“What exactly happens in the machines is treated as a state secret, and Holmes’s description of the process was comically vague: “A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.” She added that, thanks to “miniaturization and automation, we are able to handle these tiny samples.””

Just amazing. This points to the necessity for intellectual honesty and thinking for yourself.

One of the main things on my checklist is “can I explain this to a 5 year old?” It might be time to add “Is the leadership explaining things in a simple way?”

Learning

https://aswathdamodaran.blogspot.com/2021/09/the-esg-movement-goodness-gravy-train.html

Aswath Damodaran nails it with “The ESG Movement: The “Goodness” Gravy Train Rolls On!”

Last year, I wrote a post on ESG and explained why I was skeptical about the claims made by advocates about the benefits it would bring to companies, investors and society. In the year since, I have heard from many on the topic, and while there are some who agreed with me on the internal inconsistencies in its arguments, there were quite a few who disagreed with me. In keeping with my belief that you learn more by engaging with those who disagree with you, than those who do, I have tried my best to see things through the eyes of ESG true believers, and I must confess that the more I look at ESG, the more convinced I become that “there is no there there”. More than ever, I believe that ESG is not just a mistake that will cost companies and investors money, while making the world worse off, but that it create more harm than good for society.

I love his writing.

I highly recommend reading his post. It dives into values and the importance of thinking for yourself.

Resources & Tools

Most of you are clicking a lot on these resources and tools sections, so I’m going to put a little more oomph into them. Here’s one of my top priority tools that helps me quite a bit:

Digital Online Whiteboard App – Microsoft Whiteboard

I had a chat with a good friend the other day about values and do less, then obsess. The main problem was saying ‘no’ to shiny objects. This is paramount when you are your own boss.

My method is to use a whiteboard. I use Microsoft whiteboard, but you can use whatever you want. The method is the same.

Write down your values, what you want, and what you do in a visually organized way. Like this. Here’s mine zoomed out:

The trick is to take a gander first thing every day.

I think this method can help a lot of people, learners, investors, and entrepreneurs. If it fosters living deliberately then it’s probably a good thing.

For Fun

https://sparklinecapital.files.wordpress.com/2021/08/sparkline-culture.pdf

Legend Kai Wu writes about Measuring Culture. This is a fantastic paper. Highly enjoyed it.

Company culture is widely recognized to be a key intangible asset, yet few investors have attempted to formally measure it. We use natural language processing to build multidimensional culture profiles for each company. Firms with strong cultures have outperformed the stock market, while those with toxic cultures have lagged.

Quote Of The Week

“An environment is within human reach if it is possible to create an open-ended stream of explanatory knowledge there.” ~David Deutsch

Some Thoughts

A lot of people are either taking a break from fintwit (financial twitter), deactivating, or complaining about “the golden era of fintwit is over.” This is incredibly shallow thinking. Stick around long enough to see any industry or organization evolve and we’ll quickly notice that things were never stationary. It was our thinking that was stationary.

Create games that evolve, then evolve with them.

Players that refuse to evolve at the forefront of the infinite games are left in the dust.

E_d5BLbXIAAq9YM.jpg

Disclaimer: The information provided on this website is for general informational purposes only and should not be considered investment advice. Please read our full disclaimer for more information. You can access it by clicking HERE.

Responses

Subscribe

Get smarter
Invest wisely
Never miss a thing

You have Successfully Subscribed!

Shares