Insights
Weekly reading recommendations
Here's what River Road's investment team members are currently reading, curated by Portfolio Manager Matt Moran, CFA
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Monthly book reviews

Jerusalem Demsas' "On the Housing Crisis" offers a compelling and accessible examination of America's complex housing shortage. The book identifies exclusionary zoning and restrictive land use policies as primary culprits, highlighting how local democracies have become complicit in anti-development aspirations that benefit a few at the expense of many. Demsas also points to severely underfunded affordable housing programs, and deep-rooted political and institutional barriers as key factors exacerbating the crisis. Through a collection of essays, the author illuminates the political and institutional changes that have made it increasingly difficult for people to access housing in areas of opportunity, challenging readers to understand why something as seemingly popular as abundant, affordable housing remains elusive. By focusing on these systemic issues, Demsas provides a refreshing and comprehensive guide to understanding this generation-defining national emergency.

Sebastian Mallaby's "The Power Law" masterfully chronicles the evolution of venture capital through the stories of industry pioneers like Georges Doriot, Arthur Rock, and Tom Perkins, who laid the foundation for modern technology investing. The book illuminates how these visionaries succeeded not just through financial acumen, but through their ability to spot transformative talent and technologies before others—a skill exemplified by Rock's early investments in Intel and Apple. While value investors typically focus on current fundamentals and margin of safety, Mallaby demonstrates how venture capitalists' capacity for identifying secular trends and backing visionary founders has created extraordinary returns, suggesting that traditional investors could benefit from selectively incorporating this forward-looking optimism into their analysis. The key lesson for value investors is that maintaining valuation discipline need not preclude the kind of creative thinking and long-term vision that has made venture capital so successful, particularly when evaluating companies at the forefront of technological change.

While most investors revere left-brain analytical skills, they often underperform the market, suggesting a crucial missing element in their approach. By embracing the right hemisphere's visual, intuitive, and sensing qualities, investors can develop a more balanced and potentially more successful investment strategy. This whole-brain approach encourages trusting instincts and judgment over rigid rules, combining the strengths of both hemispheres for enhanced pattern recognition, risk assessment, and creative problem-solving in market analysis. Ultimately, investors who learn to integrate both analytical prowess and intuitive insights may find themselves better equipped to navigate the complexities of the financial markets and achieve superior results.

Neil Howe's The Fourth Turning is Here offers a timely analysis of generational cycles as we approach a crucial presidential election. The book argues that we're in a crisis period, or "Fourth Turning," which began around 2008 and may climax in the late 2020s or early 2030s. Howe predicts significant societal shifts, including economic revival, increased civic engagement, and technological advancements. While we approach macro predictions cautiously as value investors, Howe's framework provides valuable context for considering long-term societal trends that could impact markets and industries. As we navigate this period of uncertainty, the key takeaway for investors is the importance of adaptability and identifying companies with strong fundamentals that can thrive in an evolving landscape.

We found Prasad's What I Learned About Investing from Darwin to be an intriguing exploration of how evolutionary principles can inform investment strategies. The author skillfully draws parallels between natural selection and market dynamics, offering fresh perspectives on portfolio diversification and risk management. Prasad's insights on adapting to changing market environments and the importance of patience in long-term investing are particularly compelling. While the book's premise might seem unconventional, we believe it provides valuable food for thought for investors seeking to enhance their decision-making processes and develop a more robust investment approach.

One of our favorite investors, Chuck Akre, has recommended the book 100 to 1 in the Stock Market by Thomas Phelps, which we read and enjoyed. Christopher Mayer, the author, has dedicated this book to Phelps and he has done a nice job. As committed value investors, this book may seem a bit far removed from our philosophy. However, we appreciate that there are many “ways to win” in the market and a relatively small number of big winners have driven our results over time as well. Mayer spent upwards of $50,000 in compiling a database of every 100-bagger between 1962 and 2014 and then spent a chapter on each of the key drivers. And they are what you’d expect: smaller companies, great businesses, reasonable starting valuations, led by wonderful operators, plenty of reinvestment opportunities, etc. A great book and the cornerstone of the approach can be summed up with a quote from Charlie Munger, “If a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result.”

The recently deceased Nobel Prize winner, Daniel Kahneman, once wrote that overconfidence is “the most significant of the cognitive biases.” Using compelling examples from various fields, the author advises both individuals and organizations to reflect on how to avoid overconfidence and strive to be “less wrong.” From thinking in confidence intervals to considering the average opinion and relying on data, investors and investment firms can likely improve personal and professional performance. Investors should trade less often and sell their losers while organizations should find ways to reward well-intentioned failure. The book may help investors better calibrate their own confidence and help take Voltaire’s words to heart: “Uncertainty is an uncomfortable position, but certainty is an absurd one.”

We have read a lot of books about great investors. This one sticks out as particularly insightful and easy to read. The investors range from the very well known, like Bill Miller and Charlie Munger, to the less well known, like Nick Sleep and Arnold Van Den Berg. The author interviewed these legendary investors on multiple occasions over many years and their subtle wisdom jumps off the pages. The writing flows and is a pleasure to read – we suspect this will become a classic over time.