The Munger Way

2015 is over and my challenge of 2015 was to acquire knowledge outside the software industry. In my opinion the energy sector is the most important sector of all, so I want to understand more of it. Without oil, no warm houses, no fertilizer (= less food), no transport, no travel (beyond a couple of miles). I felt like Alice in Wonderland going deep the rabbit hole and I want to share some of my insights. Grand Canyon First I studied oil history, than fracking oil industry, than the coal industry. Fracking is a very interesting topic by itself. 10 years ago nobody though the US will ever produce > 10M barrels a day - now it does. This is a huge game changer economically and geopolitically. The political debate in Europe to allow fracking made me very interested. Is there an hidden opportunity? Therefore I wanted to understand this (1) fracking revolution as well as (2) its impact on doing business. After the crash of the oil price in August I did research into the market str...

This article is how I came up with a medtech startup idea, which is based on my previous article about filtering ideas Startup Investing: How to build a snowball . How I got an idea Half a year ago I read the high interesting book "Risk Savvy" by Gigerenzer. The book is about decision making under uncertainty and risk. A couple of chapters are about medical decision making for doctors and patients. Basically Gigerenzer promotes the idea of using natural frequencies and fact boxes to communicate risks of a therapy, drugs and illnesses. Natural Frequencies describe probabilities as absolute numbers. Saying "5 out of 100 people get ill" is better than saying "5% of people get ill". The main advantage of saying "5 out of 100" is, that its easier to visualize. A second advantage is that it explicitly says on what the probability refers to and prohibits evil relative probability. Relative probability is mathematically correct, but really e...

Alice Schroeder named her Buffett biography "Snowball". What a wonderful analogy for compounding! In this article I describe how I build my snowballs aka. startups. A wonderful snowball ( flickr )   The maths of rolling a snowball Imagine a snowball on top of a hill. The ball is sunk into the snow coverage. Without a force pushing the ball to one side, it will not move. As we push the ball to one side, the ball moves and collects snow. As more and more snow is collected the ball grows bigger. This growing process absorbs some if not all of the pushing force. So, if the ball is too small, too slow or the hill not steep, the ball has not enough energy to support the growing process. Than the ball will just stop rolling. If the ball has more energy than the growth process requires, the ball will further accelerate thereby increasing its kinetic energy. As the ball has more kinetic energy it can accelerate the growth process.     The growth process creates fric...

I love the products and services of Alphabet and its subsidiary Google. I love android; I love gmail; I love search! As an investor I love the business model and market leadership! A few weeks ago, Google re-names itself to Alphabet. The new name transports the idea of their much better than google, which is just the name of their search service. Alpha-bet describes betting on alpha or first grade ideas. As they re-named the company, the management shifted from the slogan "don't do evil" to "do the right thing". This cultural shift will hurt the company in the long run! Alphabet/Google-critics argue, that without the "don't do evil" motto, Alphabet is now officially evil - why else changing the motto? The Alphabet management argues that a positive definition of their motto will yield to better results in efficiency, compliance and obeying the law, while allowing flexible motto definitions for each business unit. "Evil" is bette...

Dear reader, in this article I discuss my investment results from 2011 to 2015. At the end of this article is a table appended showing my past and current positions of my portfolio. Table Legend The yellow area visualizes my (past) holdings with current market prices. The green area represents my sold position. "Avg Days" represents the number of days the position is holded. "Abs Perf" is the absolute performance of that position. "Weight Perf" is the absolute contribution of that position to my overall portfolio. "Perf p. a." is the annualized performance of that position. Interpretation I can not provide year on year data, which limits the interpretation of my personal track record. First because it was impossible for me as private investor to separate my private cash holdings (insurance against general life risk) from my portfolio cash holdings (ammunition for new opportunities). Second as I began value investing in 2011 I did not dep...

"Take advantage of Wall Street’s handicap by seeking out low-risk, high-uncertainty bets." - Mohnish Pabrai This is the first articles of my "Low-Risk, High-Uncertainty Betting" article series. This article dives into the Turkey Problem and how it relates to entrepreneurship and investing. Summary: Never be the turkey! Before I read the book Antifragile by Nassim Nicolas Taleb I thought the world converges to an equilibrium smoothly with small bumps on the way - like a common vision the society wants to achieve (peace, wealth, love) and achieves it by walking its way directly towards it. After I finished the book I think the world converges to a common vision but not smoothly. The bumps on the way change the route to that goal in massive ways - even reverse the direction society is going for some time. I think of the Cuban Missile Crisis: if one warship-captain on any side would have lost his mind, the world now would be in a very different shape - humanity cu...