I have been reading, watching, and listening to a fair amount of finance media lately. But for this post we’re going to go back in time a bit, because I want to make sure this one did not escape our attention. It is also topical for an investment I am currently pondering.
This week I want to flag an older episode of Five Good Questions, with Jake Taylor (and the book discussed therein).
First, let me “pound the table” on this book Bad Blood. As discussed before, it is about the Theranos saga/alleged fraud. There are some fascinating (flawed) characters in this book. You can really whip out Poor Charlie’s Almanack and check off a lot of the categories in Charlie Munger’s The Psychology of Human Misjudgment and see these people working magical delusions on their own mind. A couple of fascinating characters are the CEO of Safeway who was spending hundreds of millions of dollars on renovating his grocery stores to set up Theranos clinics despite an inability to get any verification of the functionality of the Theranos testing devices or really any detail about their regulatory strategy. Perhaps unsurprisingly, he demonstrated a fascination with healthcare and had seemingly been more focused on managing the company healthcare and wellness plans than selling groceries. He also had to be influenced by the signaling from having so many prestigious members of the Theranos board (who were also apparently snowed or asleep at the wheel).
Another interesting dynamic is the relationship between the Fuse and Holmes families. I would describe them as epic “frenemies.” Fuse was a wealthy entrepreneur having sold several medical tech and pharmaceutical companies. They were neighbors at some point and the two wives were friendly. Apparently, Holmes’ father really could not stand Mr. Fuse and his displays of wealth. This was seemingly known by Fuse, yet Holmes went to see Fuse for some help when he was looking for work.
Anyway, Fuse was apparently triggered by Holmes’ mother bragging about some of her notoriety and especially the fact that she was running this high profile medical device company and had not deigned to consult him. The guy seems like a world class “character” but he went and filed a patent based on hearing her discussion of the (bogus) Theranos system. He basically patent trolled her. Then they get into some litigation with David Boies representing Theranos (in exchange for equity in the company!) This guy also was apparently working with the CIA and worked a long scheme to get revenge on a CEO who had not retained him after buying one of his companies. Someone should write a book about him.
One final note for my future self from this book (this should really already be a rule). If a CFO resigns unexpectedly AVOID. Maybe if the CFO is replaced by an experienced an reputable CFO, you can revisit after enough time for them to make whatever disclosures they feel are needed, but the risks are HUGE. The CFO basically resigned because he discovered Theranos was likely committing fraud and no one seemed to care. In sum, I’m only about halfway through but the book is very entertaining.
So here’s the episode of 5 Good Questions:
The guest is Jeremy C. Miller and they discuss his book Warren Buffett’s Ground Rules. The subject of the book is Buffett’s partnership days as told by his partnership letters and some case studies of his investments. Even if you already have all of the partnership letters in a PDF (as I did) I recommend picking up the book. It’s a nice easy read and will give you some real insight into Buffett and his early days as an investor as well as what prompted some of his evolution over time. The interview reminded me how much I enjoyed the book.
By the way, I really wish Miller (or someone else if he’s not into it) would undertake a similar project concerning Munger’s early investments/partnership. I personally would be very interested in that. Even some more detail about his real estate and other early deals as discussed in his biography, Damn Right. I’ve read Damn Right a few times, but it’s just sort of light in some areas and I would like to see what Miller or someone could do with it. The Snowball has a little discussion of Munger and Rick Guerin as incident to Buffett’s story of this time, but I bet there is a lot more to discuss.
Speaking of Buffett and Munger, I am considering buying some BRK.B here. It is trading down around 1.3x book; maybe 11x earnings ex-cash and would be a great place to be if the market winds start to blow. I want to do some more diligence on Berkshire Hathaway Energy first. I’m sort of thinking of the ROICs in that business maybe as the hurdle rate/low bar for expected future returns over the next decade or so. I also admit that I am sort of troubled by the airline investments; just for what they might indicate about their opportunity set. I have seen at least two articles about new airlines being started this year, which makes me think that the business hasn’t changed that much.
My next post SHOULD be about ConAgra Brands. I have been thinking about writing something this week, but didn’t get to it. I went through the presentation announcing the acquisition of PF and have some thoughts I want to get down. I think I might need to sell CAG. I also have to do my monthly savings update. I took a beating from the anniversary and the sell off in foreign stocks/dollar strength. I will try to get that stuff out over the next week.