#65 Compounding Human Capital (2023)
My 22 books of the year
Human capital is the accumulation of skills, knowledge, and experiences that contribute to an individual's overall worth and potential for success. Knowledge is power, and this is especially true when it comes to building a strong foundation for our future. In a similar way to the art of investing, reading is an endless, intellectual labor of discovery. A constant self-recognition of the lack of knowledge, counterbalanced by the hunger to learn more. In the same way as any type of capital, the formation of human capital compounds over time. Similarly, it requires time, patience, and perseverance.
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“The man who doesn’t read good books has no advantage over the man who cannot read them” - Mark Twain
Reading is a key activity to increase human capital. It is not the only one, and perhaps it is not fundamental for many people, but as time goes by, I realize that it is becoming more and more so. Nevertheless, we continually encounter criticism from quite a few people about those who read a large number of books per year. The criticism is that such reading must necessarily be rushed and unreflective, advocating a much smaller and more reflective quantity. As in almost everything, there is no single methodology applicable to everyone and everyone has to discover what works best for them. Those who read many books can acquire a wide range of knowledge and perspectives that can be beneficial to their personal and professional development. The discussion is quite similar to the eternal battle between generalists and specialists. In either case, finding the right balance between quantity and depth of reading can be key to maximizing the benefits of reading and, therefore, increasing one's human capital.
My goal normally at the beginning of each year is to read 24 books. Last year I managed to read 40 books, this one I could only stop the counting at 22. The number doesn't made me particularly proud last year, nor I am ashamed this year. The learning and the journey do.
At the bottom of the post, a list of my 22 books of 2023 with my ratings. Hope you find something for your library.
Investing - Management - Strategy
The Luxury Strategy (94%)
An essential read for anyone seeking a deep understanding of luxury brand management. Touted as the Bible of luxury, it dissects all the nuances of managing a luxury brand, from the inception of a luxury product to its marketing and distribution strategies.
This book is not just an academic exploration; it's a practical guide filled with real-life examples and case studies that illustrate the successful application of its principles. It's a must-read for business leaders, marketers, and anyone fascinated by the allure of luxury.
Good Strategy, Bad Strategy (87%)
A compelling read that cuts through the jargon to reveal what truly makes a strategy effective. It dismantles popular misconceptions and buzzwords often associated with business strategy. The book emphasizes that a good strategy is not just about lofty goals or motivational slogans. Instead, it's about having a clear understanding of the challenges at hand, developing a coherent approach to overcome them, and focusing resources where they can make the most difference. Rumelt argues that many organizations fail to develop a true strategy, settling instead for vague aspirations or unrealistic targets.
A concise guide, with plenty of examples, for anyone looking to develop meaningful strategies in business or any other field requiring clear, effective planning.
An Investment Thinking Toolbox (76%)
Daniel Zhang, Teqnion’s CXO explores various tools and mental models that can enhance decision-making in the world of investing. This book stands out for its pragmatic approach, blending theory with practical application.
With real-world examples and case studies, the book is more than just a theoretical guide; it's a helpful resource for anyone looking to thinks about their processes and investment strategies.
Stall Points: Most Companies Stop Growing-Yours Doesn't Have To (71%)
The books delves into the complexities of business growth, specifically examining why some companies experience a sudden halt in their growth trajectory. While the book takes a somewhat academic approach, it offers some insights into the factors that can cause thriving companies to plateau.
The authors conduct a thorough analysis, identifying common patterns and triggers that lead to these stall points. From strategic missteps to market shifts, the book explores a variety of reasons behind these growth interruptions. It also discusses how internal dynamics, such as leadership changes and cultural shifts, can significantly impact a company's momentum. For those looking to deepen their understanding of corporate growth dynamics and strategies to maintain business momentum, "Stall Points" is a worthwhile read.
Accounting for Growth (66%)
A classic in financial literature, Terry Smith gets into the intricacies of accounting practices and their impact on business growth. Although some aspects of the book may feel dated due to changes in accounting rules and the age of its examples, the core insights it offers remain relevant. The book takes a deep dive into how accounting methods and financial reporting can be leveraged—or manipulated—to present a company's performance in a particular light. It highlights the thin line between creative accounting and outright financial deception, providing real-world examples to illustrate these practices.
Despite its somewhat old-fashioned approach, "Accounting for Growth" still holds valuable lessons for today's investors. It serves as a reminder of the importance of scrutinizing financial reports and understanding the potential for manipulation in financial data.
The Goal (90%)
One of the best books of the year. A classic business novel, written in 1984, introduces the Theory of Constraints, a revolutionary approach to improving productivity and management in manufacturing and other industries. The story follows Alex Rogo, a plant manager struggling to save his failing factory from closure. As he navigates the challenges of his personal and professional life, Alex meets a former professor named Jonah, who becomes his mentor and introduces him to the Theory of Constraints.
Throughout the novel, Alex and his team learn to identify and eliminate bottlenecks in their production process by focusing on the goal of increasing throughput while simultaneously reducing inventory and operating expenses. The team discovers that by concentrating their efforts on improving the performance of the constraint, they can significantly enhance the overall efficiency of the plant.
Investors will easily see how the focus eventually is on increasing throughput/sales (organic growth) while boosting ROIC. Because it is as simple and difficult as just that. This is a must-read for anyone looking to improve their understanding of operations management and drive positive change in their workplace.
Chip War (75%)
At first, I found it a bit weak, but the book improved as I continued reading. It serves as an intriguing introduction to the geostrategy of semiconductors, their history, and the current key players involved. For instance, the book delves into the early days of semiconductor development, exploring the rivalry between Intel and AMD, as well as the rise of Asian semiconductor giants like TSMC and Samsung. It also provides an insightful look into the geopolitics surrounding the industry, such as the US-China trade war and its impact on the global semiconductor supply chain, the creation and monopolistic position of ASML, etc. I would have given it a better rating, but I didn’t quit at the beginning because I was interested in the topic, and I “couldn’t”.
The Joys of Compounding (70%)
An inspiring exploration of the power of compounding, not just in wealth creation, but also in the continuous development of our human capital. This book is a delightful reminder of the importance of lifelong learning, curiosity, and persistence.
The Passionate Pursuit of Lifelong Learning combines Gautam’s personal journey with essential lessons about lifelong learning, investing, and personal development. Drawing inspiration from legendary investors such as Warren Buffett, Charlie Munger, and Peter Lynch, he explores value investing principles and the significance of having the right temperament and emotional intelligence in investing. Additionally, it covers personal development topics, such as setting clear goals, cultivating good habits, and developing a growth mindset, all while encouraging readers to embrace the lifelong journey of learning and self-improvement.
A book to give as a gift to transmit wisdom to the new generations.
Future Luxe (46%)
What's Ahead for the Business of Luxury? The book aims to provide a comprehensive view of the future of the soft luxury goods market, exploring trends and challenges that the industry will face. Though the book has its moments of insight and presents some thought-provoking content, it's a bit of a mixed bag in terms of overall satisfaction.
Erwan Rambourg delves into the evolving landscape of luxury brands and consumer behavior, touching on topics such as sustainability, digitization, and shifts in generational preferences. While some sections captivate with their in-depth analysis and forward-thinking perspective, other parts leave the reader wanting more, feeling underwhelmed and disappointed.
Companies History
A Business History of the Swatch Group (84%)
For those intrigued by the intricacies of horology and business strategy, this book is a compelling read. It goes beyond mere celebration of Swatch's victories; it critically examines the group's missteps, extracting valuable lessons from its entire journey. The author's approach offers a balanced view, acknowledging both the triumphs and the challenges faced by the company.
Yet, my personal reflections on the book suggest a missed opportunity in critiquing the Swatch Group's strategic choices more thoroughly. The destruction of certain brand legacies during the quartz crisis and the subsequent rise of the company to become a family business under a major shareholder and former consultant hints at complex, perhaps questionable, strategic decisions. This critical angle, although not deeply explored in the book, raises intriguing questions about the long-term impacts of such strategies on the company's legacy and the broader watchmaking industry.
Despite these reflections, the book remains an insightful and worthwhile read. It effectively situates the Swatch Group's story within the larger context of watchmaking history and global economics, showcasing the power of creativity, branding, and market acumen in a traditional industry.
No Rules Rules: Netflix and the Culture of Reinvention (74%)
At the heart of Netflix's culture lies a radical approach to freedom and responsibility. The book details how the company empowers its employees with a high degree of autonomy, encouraging risk-taking and creativity. This is complemented by a transparent feedback system, where open and honest communication is not just encouraged but expected.
An interesting read for those interested in understanding how a culture of empowerment and reinvention can drive a company to the forefront of its industry.
My Father’s Business (72%)
An autobiography and history of Dollar General with the principles and values that drove the family business. A tale that can be extrapolated on how to expand and grow retail businesses.
Junk to Gold (77%)
The inspiring story of Willis Johnson, a true self-made man who built Copart, the leading online vehicle auction company, from the ground up. The book takes readers through Willis' journey, highlighting his entrepreneurial spirit, constant exploration, and drive to build something bigger.
I enjoyed reading Junk to Gold quite a lot, as it provides a fascinating look into the life and mindset of a successful entrepreneur. While there are moments where Willis' choices may raise some eyebrows, the overall story is a testament to the power of perseverance, hard work, and innovative thinking. This book is definitely worth a read for those interested in entrepreneurship and obviously, Copart.
Ready, Fire, Aim: The Mainfreight Story (80%)
The rise of Mainfreight, a global logistics company founded in New Zealand. The book details the journey of founder Bruce Plested, who started the company in 1978 with just one truck, and how his vision and determination transformed it into a multi-billion-dollar business with operations across the world.
The Mainfreight story is an inspiring example of what can be achieved through a combination of hard work, a strong company culture, and an unwavering focus on customer service. One of the most compelling aspects of the book is the way it highlights the unique management style and values that have driven Mainfreight's success. The company's emphasis on empowering employees, fostering a sense of ownership, and nurturing long-term relationships with customers and suppliers has been key to its growth. The story is a testament to the power of a clear vision, strong values, and an unwavering commitment to excellence.
Economics - Finance History
The State in the Third Millennium (82%)
Written by the Prince of Liechtenstein, it a thought-provoking exploration of political philosophy and the future of governance and the role of the state, drawing from both historical context and contemporary challenges. The book proposes innovative solutions to modern political dilemmas, while emphasizing the importance of maintaining democratic principles and individual freedoms.
Definitely, a little unknown jewel.
How Asia Works (45%)
An analysis of the economic development in different Asian countries, focusing on how some nations have succeeded in achieving rapid growth while others have lagged behind. The book's central thesis revolves around three key factors that Studwell identifies as crucial to successful economic development in Asia:
1. Land Reform: the book argues that by redistributing land to create a large number of smallholder farmers, countries can boost agricultural productivity.
2. Focus on Manufacturing: The book contends that governments should actively intervene in the economy to foster manufacturing growth. This approach contrasts with the laissez-faire policies adopted by some countries, which Studwell argues have been less effective.
3. Financial Control: The third key element identified by Studwell is the need for governments to maintain firm control over the financial sector. Countries that maintained strong state control over finance, according to Studwell, were better able to channel resources into productive use and sustain long-term economic growth.
I found myself not aligning with the book's central arguments. While the analysis is thorough, the conclusions drawn felt somewhat one-dimensional, lacking the nuance and complexity that the topic deserves. This limited perspective on such a diverse and intricate subject matter like Asian economic development left me somewhat dissatisfied.
When Genius Failed (85%)
Fascinating. In the late 1990s, a group of distinguished investment bankers and economists, including Nobel laureates, founded Long-Term Capital Management, a hedge fund that espoused a revolutionary investment approach based on complex mathematical models based on identifying and exploiting pricing discrepancies between related financial instruments. The fund's managers believed that these spreads would eventually converge, allowing the fund to generate significant profits. However, their hubris ultimately led to their downfall, as the fund's spectacular collapse in 1998 highlighted the limitations of even the most sophisticated financial models when faced with the unpredictability of human nature.
We are talking about 30% market share worldwide, for a premium brand and with a premium price!
Besides, and due to strategic constraints, Apple cannot (and should not) match the radical innovation, nor the continuous product release cycles that other brands do. I am thinking here of any of the other big tech companies (Amazon, Microsoft or even Google) or any other of the competitor brands in any of the
Firefighting: The Financial Crisis and Its Lessons (65%)
An insider's perspective on the response to the 2008 Global Financial Crisis, authored by the very trio who were at the helm of key institutions - Ben Bernanke, Timothy Geithner, and Henry Paulson. Ironically, while they present their narrative as a guide to understanding the crisis and the actions taken to address it, the book serves as an eye-opening account of their thought process and the extent of their hubris.
The lack of self-criticism in their analysis is staggering, as they overlook the consequences of their own policies and actions. Wrapped in a veil of egotism, they showcase an unwavering belief in their prescriptions as the cure for the crisis, seemingly unaware of the fact that those same medicines were what infected the system in the first place. By the time the book was written in 2019, they were still under the illusion that their actions had no negative repercussions.
So, if you're looking for a revealing read on the mindset of these influential figures during the GFC, then this book is definitely worth your time. Just be prepared to take their self-congratulatory analysis with a grain of salt and a healthy dose of irony.
Literature - History
Atlas Shrugged (95%)
"Atlas Shrugged" by Ayn Rand is more than just a novel; it's a philosophical journey that challenges the reader's perspective on society, economics, and individual purpose. This monumental work has left a profound impact on readers worldwide, including myself, with its thought-provoking narrative and complex characters.
Set in a dystopian United States, the novel explores a world where the government increasingly asserts control over industry and innovation. The story revolves around the lives of protagonists Dagny Taggart and John Galt, who represent the innovative and productive forces in society. As they struggle against a system that rewards mediocrity and penalizes success, Rand's philosophy of Objectivism is artfully woven into the fabric of the story.
One of the most compelling aspects of "Atlas Shrugged" is its exploration of the role of the individual in society. The book champions the cause of those who dare to think differently and act on their convictions, emphasizing the importance of reason, individualism, and the pursuit of one's own happiness. Rand's narrative forces us to question the very foundations of our societal structures and the role of government in our lives.
For anyone looking to challenge their worldview and engage in a profound intellectual exercise, "Atlas Shrugged" is a must-read. Its influence on my thinking this year has been unparalleled, making it not just a favorite read but a pivotal one in my journey of understanding the complex interplay between individual liberty and societal progress.
A History of Japan in Manga (62%)
While the idea of exploring history through manga is innovative and has the potential to make the subject matter more accessible and appealing, especially to younger audiences or those new to Japanese history, the execution in this book falls a bit short. The manga format, while visually engaging, sometimes struggles to convey the depth and complexity of Japan's history in a comprehensive manner. Key historical events and cultural shifts are presented, but the details and deeper insights that might be found in a traditional history book are somewhat lacking.
A Gentleman in Moscow (40%)
The story of Count Alexander Rostov, an aristocrat who is sentenced to house arrest in the luxurious Hotel Metropol in Moscow during the tumultuous years following the Russian Revolution. Despite his confinement, the Count remains a man of impeccable manners and charm, refusing to let his circumstances define him.
As the years pass, Rostov forms relationships with the hotel staff and guests, who bring color and purpose to his life. He becomes a mentor to a young girl named Nina and later assumes responsibility for her daughter, Sofia. Through these connections, Rostov experiences friendship, love, loss, and the joys of fatherhood, all while the world outside the hotel undergoes a dramatic change.
A classic by all means, and for all. But not for me apparently. I normally get quite engaged with novels. That was not the case. After 200 pages, I still didn’t want to grab the book to continue reading. It was not it, it was probably me. Maybe I will give it a second chance at some other time.
Animal Farm (88%)
A timeless classic that skillfully uses allegory to critique totalitarianism and the corruption of power, independently of whether it is coming from communists, fascists, so-called democrats, or a group of pigs. This thought-provoking novel serves as a reminder of the importance of vigilance, critical thinking, and the value of individual freedom. Another book I wish I had read when I was 16.
The rating for 2023 reads:
Atlas Shrugged (95%)
The Luxury Strategy (94%)
The Goal (90%)
Animal Farm (88%)
Good Strategy, Bad Strategy (87%)
When Genius Failed (85%)
A Business History of the Swatch Group (84%)
The State in the Third Millennium (82%)
Ready, Fire, Aim: The Mainfreight Story (80%)
Junk to Gold (77%)
An Investment Thinking Toolbox (76%)
Chip War (75%)
No Rules Rules: Netflix and the Culture of Reinvention (74%)
My Father’s Business (72%)
Stall Points: Most Companies Stop Growing-Yours Doesn't Have To (71%)
The Joys of Compounding (70%)
Accounting for Growth (66%)
Firefighting: The Financial Crisis and Its Lessons (65%)
A History of Japan in Manga (62%)
Future Luxe (46%)
How Asia Works (45%)
A Gentleman in Moscow (40%)
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It is only my subjective opinion, open of course to dissent. I enjoyed the book very much! 87 out of 100 is quite high ;) Still, I believe the ones rated above are superior in their respective fields.
Would put Good Strategy/Bad Strategy higher IMO.