Insights

We had heard many positive things about this book (more than 68,000 reviews on Amazon!), so we decided to move it to the top of our always growing ‘to-read’ book pile. Don’t start this book with any looming deadlines; you will likely have a hard time putting it down, and it’s a very thorough book. Although the book is massive in scope, covering early human history through today, with insights ranging from philosophy to capitalism, we found important takeaways for the growth and maintenance of an investment firm. The emergence of language more than 30,000 years ago likely led to the success of the Homo sapien versus the more imposing Neanderthal as it promoted social cooperation in extremely flexible ways. We think the best, at least those with the most promising future, asset management firms are those that can rally around a core set of principles and philosophy during both the good and the inevitable bad times.

Founder of the $55 B, United Kingdom-based global hedge fund partnership, Marshall Wace, the author has written a valuable guidebook to successful investing. The book is small and can be read in one sitting, but impressive in its reach. The author writes in a clear and concise manner and easily transitions between philosophical musings to market inefficiencies and the importance of humility and risk management. We think most investors will enjoy and gain from this book.

This book, which reproduces the manager’s Global Investment Review publications, belongs on every serious value investor’s shelf. The manager, Marathon Asset Management founded in 1986 and based in London, relies on ‘capital cycle’ analysis, which argues that high returns tend to attract capital and low returns repel it. The authors urge investors to closely monitor the amount of capital entering or exiting a particular industry as a guide to future potential returns. They back up their common-sense logic and investment framework with strong academic support and clear examples. We believe value investors, especially those that consider cyclical companies, will benefit from reading this book.

We enjoyed The Great Crash 1929 so much in 2020 that we decided to read Galbraith’s other famous work, The Affluent Society. Professor Galbraith makes the ‘dull science’ anything but with his mastery of history and insightful recommendations. He traces the economics profession back to the ‘founding trinity’ of economics through Adam Smith, David Ricardo, and Thomas Malthus and clearly describes the evolution of social Darwinism on one hand and the more active Keynesian view on the other. He predicts modern monetary theory decades before it emerged in national discussion (our review) and the notion of a basic income to help solve economics’ key issues including production, inequality, and economic security. The book should help any investor think more deeply and clearly as to the role of a productive economy for an affluent society.

A book praised from economic commentators ranging from Paul Krugman to Lacy Hunt is bound to be thought provoking. Written by a Northwestern economics professor, this massive book sometimes reads like an economics textbook, but it is worth the time investment. He zeroes in on the “special century” of 1870 – 1970 as unique to human history, as so many of its achievements could happen only once – from the railroad, steamship, and telegraph to electricity, gas, telephone, water and sewer utilities to x-rays, antibiotics, and cancer treatments. Since 1970, advances have typically centered around entertainment, communication, and information technology, and excluding the period between 1996 and 2004, U.S. productivity has steadily declined. The book concludes that the future growth of the U.S. standard of living is not promising.

We have enjoyed Peter Zeihan’s very readable books in the past, and this recent addition is another worthwhile addition to his collection. His expertise lies in geopolitics and demographics and his conclusions are stark and well-supported. The author’s basic premise is that the past 75 years have been the best, and will remain the best the world has ever seen. The American-led ‘Order’ since the end of World War II is collapsing and, along with it, the benefits of globalization. From Mr. Zeihan, “The 2020s will see a collapse of consumption and production and investment and trade almost everywhere.” The reader benefits from a deep dive into the implications for inflation, energy, agriculture, manufacturing, finance, etc. The book can help investors frame and consider the beginning cracks of de-globalization that we are already witnessing.

David Rubenstein, the author and co-founder of the highly successful private equity firm Carlyle, introduces each historian and then continues with a more in-depth discussion of the person in question. It makes for an entertaining, educating, and easy read that encourages the reader to dig deeper into each of these famous subjects. From the Founding Fathers through President Reagan, the book provides a snapshot that will “whet the appetite of the reader to learn more about American history.” As David McCullough describes John Adams, we think curious investors with a “profound and very often lifelong interest in history” will prosper over time.

A former investment banker himself, the author has an insider’s view of the private equity industry. Over 90% of the largest state and municipal pension plans invest in private equity and the author argues that this is a mistake. Hooke claims performance reporting is questionable, and the fees are outrageous compared with a simple, low-cost 60% / 40% index fund allocation. Academic studies suggest performance has trailed the broader public market since 2006. Like in public equity, it is difficult to determine which private equity managers will succeed in the future. We concur that today’s ultra-low rate environment has likely pushed some large investors into illiquid and expensive private equity funds, but we also think allocators with a thoughtful process can lead to investment with top quartile private equity managers. Those investments have far outpaced public markets.