Summer Reading

Investment Views
July 2017 Print article
Hugh Yarrow Fund Manager

Company results for the first half of 2017 are beginning to come out (approximately a third of the Evenlode portfolio has already released updates since the start of the month) and we are busy absorbing these statements and speaking to management teams. We have been encouraged by news from Evenlode holdings thus far, with good free cash flow development a key theme, and I will discuss the results season in more detail in my August investment view.

In the meantime, as summer holidays beckon, I’ve compiled a selection of the books that I’ve found useful and interesting over the last year and more. Wider reading is an important part of our research effort at Evenlode and I am often asked for book recommendations. We find books complement industry research, financial analysis, company reports, management meetings and newspapers/magazines/journals by providing a broader perspective and a historical framework.

Last year journalist Lucy Kellaway wrote a wry article on the edifice that has become known as the ‘Summer Reading List’. As she put it various themes emerge. The books must be varied. Mainly recent. A mixture of history, tech and biography is essential. A novel is OK, so long as it is obscure, difficult or literary enough. With Kellaway’s words ringing in my ears I’ve sharpened my pencil and had a go. Many of the books on my list are not particularly new and whilst there is a lot of tech and biography (and most of them are histories of some kind) there are no novels. I’m also afraid there’s a bit of a bias towards North American male authors, but it’s this demographic that’s written the majority of investment and industrial books over the last few decades. I’ve limited myself to ten books organised around five loose themes and have chosen them based on their relevance to long-term business-perspective investment, but also - crucially - for their readability and brevity. I’ve included an appendix that suggests a few other books connected to each theme that nearly made my list, or which I’ve found very helpful but are too dry for a holiday and/or too thick to take in your hand luggage!

Theme 1: Business Biography

Book 1: The Everything Store: Jeff Bezos and The Age of Amazon
Amazon has its disruptive finger in the pie of so many industries now. Brad Stone tells the story of the company’s not always straightforward progress from its 1994 inception in Seattle. From day one, the intense Jeff Bezos has relentlessly focused on driving prices down for his customers, whilst simultaneously scanning the horizon for his next move into a new, unsuspecting industry.

Book 2: In The Plex: How Google Thinks, Works and Shapes Our Lives
As with Amazon, to appreciate the modern industrial landscape it helps a great deal to understand where Google has come from and where it might head next. Steven Levy tells the story of Larry Page and Sergey Brin’s ascendancy as they utilise their unrivalled machine learning algorithms to ‘organise the world’s information’ whilst ‘doing no evil’ along the way. With both Amazon and Google’s story, it is interesting to observe the tensions that emerge (both internally and externally) as these upstart businesses become huge behemoths subject to competition from the latest wave of upstarts, criticism, regulatory interference, and all the other challenges that industry incumbents face.

Book 3: Shoe Dog: A Memoir By The Creator of Nike
Phil Knight’s book, published last year, is a very readable, honest and funny account of his efforts to build one of the greatest global consumer brands to emerge in the second half of the 20th Century. It starts in 1962 when a consignment of Japanese track shoes arrives at Phil’s parents house, and gathers momentum from there.

Theme 2: Innovation

Book 4: Elon Musk: How the Billionaire CEO of SpaceX and Tesla is Shaping our Future
Musk is sometimes compared to the Marvel comic-book character Tony Stark and his life story, as told by Ashlee Vance, is indeed bordering on the unbelievable. South African born, he co-founded Paypal in the 1990s and has gone on to found both the electric car company Tesla and SpaceX (the company he hopes will ultimately help send humans to Mars). A softly-spoken, foul-mouthed, singleminded eccentric, Musk’s story makes for a fascinating read and is an interesting perspective on one of the great ‘disrupters’ of the last twenty years.

Theme 3: Economics

Book 5: The Great Depression: A Diary
Written in the 1930s by Benjamin Roth, a young lawyer in small-town America, this book is an inimitable account of what it felt like to live, work and invest through this period. While the economic backdrop of the post 2008/9 financial crisis has been by no means as extreme as the 1930s (the US economy, for instance, was cut in half between 1929 and 1932), it is hard to ignore the parallels.

Book 6: Stuffocation: Living More with Less
James Wallman has written a readable, refreshing take on the dematerialisation of the developed world economy, the shift towards more ‘intangible’ economic activities (services, experiences, the digital economy etc.) and away from the desire for and the consumption of ‘stuff’. It’s thought provoking - even if you don’t agree with all of it - and you’ll want to declutter your house after reading this book!

Theme 4: Investment

Book 7: When Genius Failed: The Rise and Fall of Long-Term Capital Management
A gripping account of the hedge fund (whose founders included two Nobel Prize winners) that brought financial markets to their knees during the Russian debt crisis in 1998. The story demonstrates what can happen when a combination of arrogance, huge quantities of leverage and an ‘investing by spreadsheet’ mentality collide. There will always be room for self-doubt, prudence and common sense in the world of investment!

Book 8: One Up on Wall Street
This is a book I find myself dipping into often, a very funny romp through Peter Lynch’s business perspective approach to investment. But a serious, sensible message underpins it and Lynch gives the reader an interesting window into the world of investment from the 1970s through to the early 1990s.

Book 9: Where are the Customer’s Yachts?: or A Good Hard Look at Wall Street
Again, a book I return to often. A satire of Wall Street, and particularly its incessant habit of attempting to predict very short-term fluctuations in share prices and myriad other financial variables. Fred Schwed’s book (one of Buffett’s favourites) feels as relevant today as I’m sure it did when it was first released seventy five years ago - human nature doesn’t change a great deal. Laugh-out-loud funny (or am I just a sad investment geek?)

Theme 5: Management and Stewardship

Book 10: The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
William Thorndike’s entertaining sketch of eight highly successful business leaders (including the legendary Henry Singleton who I have discussed in past investment views) is a great reminder that sound capital allocation, an owner-oriented alignment and a long-term mindset make for far more appropriate CEO material than a desire for world domination, a slick investor relations presentation and a sharp suit.

So that’s my investment-perspective summer reading list. Take your pick, but please do take a novel on your holiday too! Enjoy the rest of your summer and I look forward to giving a detailed update on the Evenlode portfolio and recent results in my August investment view.

Hugh Yarrow
Fund Manager
20th July 2017

Please note, these views represent the personal opinions of Hugh Yarrow as at 20th July 2017 and do not constitute investment advice.