Good Reading -- July 2016

Books

• Grinding It Out: The Making of McDonald's -- I should have read this book a long time ago. It's short but exceptional. Ray Kroc had a fascinating life and a very clear, unique business philosophy -- always a good combination in a book.

• In-N-Out Burger: A Behind the Counter Look at the Fast-Food Chain That Breaks All the Rules -- A different playbook from the same industry and era. The story itself is fascinating, the business lessons are timeless, and the food may be better -- a lot better in my opinion -- even if the book isn't quite as good as "Grinding It Out."

• Both of these books reminded me of three other excellent business (auto)biographies pertaining to retail/consumer-oriented companies.

• When Breath Becomes Air -- A literary neurosurgeon/neuroscientist received a diagnosis of terminal cancer in his mid-30s, and this book is the unfinished result. It is thought-provoking and powerful. Just be prepared to cry like a baby.

• Being Mortal: Medicine and What Matters in the End -- I only read a portion of this book -- I had already read some of the essays that anchor the book, and the book didn't seem to cover much new ground; maybe I was tired from reading "When Breath Becomes Air" too -- but anything Atul Gawande writes is worth some time. An excerpt is here and a review is here. Gawande's recent graduation speech is here.

Facts and Figures

• Just 29 companies in the S&P 500 Index -- 5.7% of the total -- used exclusively GAAP accounting to report their 2015 results, a decline from 25% in 2006 and 42% in 1996. (Source: Audit Analytics/WSJ)

• Under GAAP, a survey of 380 companies in the S&P 500 reported a decline in combined net income of 11% between 2014 and 2015. Those same companies proclaimed a combined 6.6% increase in adjusted earnings in their press releases. (Source: The Analyst's Accounting Observer/WSJ)

• By this calculation, which stretches an already useless concept to the extreme by using the 100-day standard deviation of daily returns, the British pound experienced a greater than "12-sigma move" on June 24th following the release of the Brexit result. 12 sigmas is...a lot. (Source: BAML)

• The largest U.S. age cohort in 2010 was 45 to 49 years old. In 2015, the largest cohort was 20 to 24 years old. (Source: U.S. Census Bureau, CalculatedRisk)

• The most common ages by year:

• 2010 -- 50, 49, 20, 19, 47

• 2015 -- 25, 26, 24, 23, 27

Quoted

Blackstone CEO Steve Schwarzman: "Let's just take energy first because it's in the news a lot. And talk about a crazy business where there's almost not one person who knows what they're doing, right? At $120, it was going to $140 a barrel. When you were at $80, it was going to stabilize at $60. And when you're in $60, you didn't quite know, but maybe it would be $50 to $70. And then when it went to $24, everybody is a bozo, right? And then it was going to stay there, sort of $25 to $35 or maybe $40 for the next year or two, and now it's $50." [Schwarzman] said that his favorite person to talk to when trying to make sense of the oil market was Exxon CEO REx Tillerson. "When the price's around $60, I asked Rex, 'What do you think?' He said, 'Well, it's going to be between $20 and $120, and we're set up for all of those environments. I think it'll go a little lower than higher, but what do I know? I've just been doing this my whole life.' And I thought, he's kidding, but he really wasn't." (Source)

Links

• The Valeant Meltdown and Wall Street's Major Drug Problem -- Don't miss this Bethany McLean article, which will hopefully be turned into a book someday.

• Global-Warming Alarmists, You're Doing it Wrong -- At the risk of touching the third-rail of polite discourse , I enjoyed this column by Megan McArdle. (There is even a somewhat stretched analogy to macroeconomic modeling for the business-only diehards in the audience.) I also enjoyed the long series McArdle references on Warren Meyer's blog, Like her I didn't agree with every word, but the data and perspective are still worthwhile.

• Matt Ridley, author of the excellent book "The Rational Optimist," discussed this topic on EconTalk and on his blog.

• Charlie Munger has talked often about climate change. Some of his thoughts are here and here and here. Bill Gates has too.

• The Perilous Task of Forecasting -- Jason Zweig interviewing Phil Tetlock -- that's all you need to know.

• Best Advice to Small-Business Owners -- Goldman Sachs recently held an event to honor a community college in NYC, and a few guests (including Warren Buffett, Lloyd Blankfein, and Michael Bloomberg, among others) offered some brief advice.

• Is Middle America Due for a Huge Earthquake? -- If you liked "The Really Big One" about the potential destruction of much of the Pacific Northwest, here's the Midwestern equivalent. Or not.

• Who Will Build the Next Great Car Company? -- A broad but still worthwhile overview of the automotive industry as it faces the prospect of self-driving technology.

• After Fleeing the Nazis, a Legacy That Won't Run Dry -- A wonderful and amazing story on many levels. "The frugal young couple bumped in young Warren Buffett. Now they've left [$400 million] to Israeli water research."

• Jason Zweig on Russ Roberts's "EconTalk" podcast -- An excellent guest on an excellent podcast.