Insights

A fascinating and inspirational story on how two unemployed Rhode Island School of Design grads and their tech buddy transformed the lodging industry. From its beginnings in the depths of the financial crisis, to its seven million active listings today (compared with the 1.38 million rooms at the leading hotel company Marriott International), the author digs deep into how these three men complemented each other and persevered through multiple setbacks. Perhaps most important for investors is CEO Brian Chesky’s “pathological curiosity,” which led him to devour books and seek out role models like Warren Buffett (four-hour lunch in Omaha), Disney’s Bob Iger, and Tesla’s Elon Musk. The future remains bright for Airbnb given millennial values and attitudes towards experiences and accommodations.

If you’ve ever been tempted to buy a Russian stock, please read this book first. What looks to be a mouth-watering “value,” may be cheap for a reason. The author traces his profitable adventures running a hedge fund in the first half of the book and exposing corporate and governmental corruption in Russia. His successes eventually provoke the Russian government to respond, which leads to the author’s inability to enter Russia and, tragically, to an associate’s torture and death. The second half of the book details the author’s fight for justice and the eventual passage of the Magnitsky Act in the U.S., which blocked suspected Russian human rights abusers from entering the United States.  An entertaining read, though most value investors will probably find the author’s bumpy road to hedge fund success more interesting than the remainder of the book which documents his efforts to fight back against the Russians.

A modest and ethical man, T. Rowe Price Jr. would certainly be proud of the company that still bears his name. From coining the term “growth stock” in 1935, to launching his firm in 1937 and reaching the nation’s “best investor” status by the 1960s, the company now manages over $1 trillion and boasts a $27 billion market cap. Mr. Price’s approach seems commonplace today, but that’s because of his common sense approach to investing produced results that attracted followers. Mr. Price believed in doing fundamental research, focusing on companies that could double earnings in a decade, meeting with management, and then holding for 7-10+ years. All investors can benefit from learning Mr. Price’s history and investment philosophy.

COVID-19: The CIDRAP Viewpoint
by Dr. Michael Osterholm

As the renowned epidemiologist Dr. Michael Osterholm recently noted, COVID-19 is the first pandemic to become the leading cause of death in the U.S. in just six weeks since the historic and horrific 1918 influenza. Our team took some time over the past month to read Dr. Osterholm’s book along with another on the 2014 Ebola outbreak and one more on the 1918 flu. Two of the authors, Dr. Osterholm and John M. Barry, teamed up with others to publish their current thinking regarding COVID-19. We came away with a deeper understanding of viruses in general and a broader appreciation of the range of potential economic outcomes in particular.

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The Great Influenza: The Story of the Deadliest Pandemic in History
by John M. Barry

In this read, the author recounts the deadliest pandemic in history with remarkable thoroughness and readability. This highly entertaining book details the history of American medicine and the tragic consequences of the common refrain… “this was influenza, only influenza.”

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Crisis in the Red Zone: The Story of the Deadliest Ebola Outbreak in History, and of the Outbreaks to Come
by Richard Preston

Picking up on John M. Barry’s “detective novel” non-fiction style, the author of this read expertly narrates the devastating 2014 Ebola outbreak in Western Africa.

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Deadliest Enemy: Our War Against Killer Germs
by Michael T. Osterholm

The author caps off a remarkable career in public health with a book that summarizes the most notable infectious diseases facing the world. This 2017 book reaches its maximum effect as it portrays a hypothetical future pandemic that nearly matches today’s COVID-19 headlines.

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An entertaining introduction to the run-up of the 1920s stock market and the crash/depression that followed. The parallels with today are present, but almost certainly not predictive. The U.S. had enjoyed a 10-year bull market by 1929, a massive rise in leverage and share buybacks, and public support from leading academics (Professor Irving Fisher), industrialists (the first statement by John D. Rockefeller in decades), politicians and bankers. Investors then relied on “organized support” to keep stock prices elevated and their dreams alive, which first included the big operators like Durant, Raskob and Livermore and later the big banks like J.P. Morgan. The American entrepreneur and economist Roger Babson noted a crash was coming in September 1929 (the “Babson Break”), which began the wave of selling and the periodic rallies when investors (according to the New York Times) felt “secure in the knowledge that the most powerful banks in the country stood ready to prevent a recurrence of panic.” Unlike today, politicians, economists and bankers were then committed to a balanced budget, which meant higher taxes, less spending, and the gold standard limited the flexibility of the Federal Reserve’s monetary policy. A quick and easy read, this book may be perfect during this national lockdown.

Published first after the 2008 market rout, the book chronicles the diary of a Youngstown, OH middle-class attorney between 1931 and 1941. The leadership at River Road has recommended we keep a diary of events around this volatile time and this book sets a wonderful precedent for us to follow. Benjamin Roth recounts the margin-driven bubble and the Depression consequences from a middle-class professional’s point of view. He outlined the constant searching for signs of economic improvement and fears what the New Deal meant for a balanced budget and future inflation. It was his personal investigation into how to create, keep and grow wealth over a lifetime that was most illuminating. Maybe the original asset allocator, Mr. Roth learned the hazards of common stocks and real estate and the importance of government bonds and cash to maintain liquidity and practice value investing most effectively. This book highlights the value of personal reflection and commitment to continuous learning.

We try to read The Outsiders at least annually. It is our favorite, and most recommended, book on the topic of shareholder orientation. The author compares eight unique CEOs and their legendary track records with the traditional example of a successful CEO…GE’s Jack Welch. The “Outsiders” share a common philosophy that includes several similarities: a preference for cash flow over earnings, opportunistic share buybacks, decentralized operations, the thoughtful use of leverage and infrequent, but meaningful acquisitions. Despite stock performances that trounced the market and their peers, this group of extraordinary leaders were not “charismatic”, but, rather were often humble, independent, highly analytical (more engineers than MBAs) and family-oriented. We are always on the “look-out” to partner with Outsider-like CEOs.

This book provides a great framework for understanding the current transition from fossil fuels to renewable energy by examining past energy transitions such as wood to coal and animal power to oil.  The basic thesis is that energy transitions are about cost, they are slow, and they have profound effects on society. The transition to renewables for electricity generation has accelerated in recent years as wind and solar power have become considerably less expensive than fossil fuels, even without tax credits.  However, renewables are still held back by the cost of battery storage, which is required to address wind and solar’s intermittency issue. Electric vehicles are approaching cost parity with internal combustion engines enabling a transition away from fossil fuels for transportation.  The speed of the renewable energy transition is hard to predict, but this book is well researched and provides wonderful insight into why the transition is occurring and how it is likely to develop.