Some Books I Read in 2022

Investing, business, science, sci fi

Punch Card Investor

Dec 18, 2022

Just like last year, I thought it would be fun to wrap up the year with some recaps of a couple of books I enjoyed this year. Again a mixed bag here across investing, business, economics, science and sci fi. Hopefully you can find some good ideas for your reading list.

Why We Sleep
Matthew Walker
Rating: 5/5

I was thinking carefully about the order in which to put these, and decided that Matthew Walker’s Why We Sleep was simply too important to not put at the top. Despite being an activity which we spend almost a third of our lives doing, sleep is still often neglected and misunderstood. Matthew Walker is a scientist who has spent his career researching sleep, and the passion with which he writes and speaks on the subject is enough to turn the most high octane ‘don’t need sleep’ people into sleep advocates. At the very least it will scare you by making you realise how many aspects of your health and life are adversely impacted by sleeping less than 7-8 hours each night. Everything from cancer, Alzheimer’s, heart disease, diabetes, obesity, depression, mood swings, car accidents - the list is endless.

The most interesting argument I found in defense of sleep was from an evolutionary standpoint. While we are sleeping we are in an incredibly vulnerable position, as we are not eating or being productive, we are open to attack, unable to respond etc. At face value it doesn’t seem like something that would make sense for a living creature to evolve to do. Despite this, this activity is so important that nature figured the benefits far outweigh the costs, and hence there isn’t a species on earth that doesn’t sleep.

This makes all the finance and business bravado around lack of sleep due to crazy work hours seem all the more ridiculous. Science has definitively proven that insufficient sleep is not only costly to employees, but to firms themselves due to dramatically higher error rates, productivity losses, and emotional instability which has a profound impact on decision making.

The chapters on dreaming and its function in connecting past memories and random thoughts/ideas was also fascinating and actually dovetails nicely to the next book on the list.

I will say that while this book is very good, it is somewhat dense, so you can also listen to Matthew Walker on various podcasts like with Joe Rogan here for a distillation of the key takeaways.

Where Good Ideas Come From
Steven Johnson
Rating: 5/5

I really enjoy books that can weave a thread across seemingly unrelated disciplines. Where Good Ideas Come From is very interesting book on the nature of innovation and idea generation. Essentially its key point is that most good ideas are rarely conjured out of thin air, but are developed incrementally from connecting the dots from existing, sometimes unrelated, ideas, thoughts or experiences. It’s a view of innovation that is very much grounded in reality. By using various cross-disciplinary case studies from Darwin/evolution to coral reefs, cities, internet and big tech companies, Steven Johnson explores several patterns and environments that most commonly lead to the formation of innovative new ideas: exploring the adjacent possible, liquid networks, the slow hunch, serendipity, errors, platforms, and exaptations (when a trait that is developed for one use gets hijacked for a completely different function - I can’t help but think of Nvidia completely transforming its business by figuring out that GPUs are perfect for doing matrix arithmetic needed for AI/machine learning). A thought-provoking book that is highly relevant for business and investing.

The guys from the This Week In Intelligent Investing podcast discussed some of ideas from this book on this episode, which is what prompted me to add it to my list.

Misbehaving: The Making of Behavioral Economics
Richard Thaler
Rating: 4/5

I enjoy anything that has a dig at traditional economists and their imaginary world of rational economics, and this book is entirely devoted to it. Richard Thaler is a Nobel Prize winning behavioral economist who is probably most famous for his work with Daniel Kahneman and Amos Tversky on cognitive biases, as well as advising governments and companies on applying behavioral research to things like retirement savings plans (his other famous book, Nudge, is all about this topic). In particular he is known for his research into the concepts of myopic loss aversion, mental accounting, sunk cost fallacy, endowment bias, and various other behavioural biases. This book is part review of his body of work on all these ideas, part memoir, part history of behavioral economics.

If you’ve read Thinking Fast and Slow some of the concepts here will be familiar to you, but it also goes much deeper into various behavioural issues prevalent in finance which cause market inefficiencies. Through the exploration of all these ideas Thaler provides a historical account of how the field of behavioural economics emerged from nothing a few decades ago to mainstream acceptance today. Also, he is a very good writer who effortlessly blends in academic research with personal anecdotes and a good dose of humour. I found this book to be a much easier and more entertaining read than Thinking Fast and Slow. Highly recommended for anyone interested in this area.

Capital Returns: Investing Through the Capital Cycle
Marathon Asset Management, Edward Chancellor
Rating: 5/5

Off the back of Capital Account which I read last year, Capital Returns is the second and perhaps more widely known book where Edward Chanceller compiles the investment letters of Marathon Asset Management together with his editorial. This book covers the period from 2002 to 2015, which like the dotcom boom previously, was a great period to explore Marathon’s capital cycle framework as it captures the build up of excesses in the lead up to the GFC, the bust, and the subsequent the QE-fueled boom.

Essentially the capital cycle framework states that sectors experiencing upswings and periods of high returns tend to attract attention, investment, new entrants and competition, which ultimately leads to oversupply of capital, reducing returns, and the inevitable bust, following which consolidation and outflows of capital inevitably occur. This book explores this through the lense of the boom and bust of financials, real estate, commodity sectors and China stocks around the GFC, but also the extent to which the functioning of capital cycles was distorted by government and central bank policy.

Through this period, Marathon’s approach also shifted to becoming more focused on quality. Whereas previously their strategy was almost entirely about finding stocks where supply side conditions were changing (i.e. bombed out industries on the verge of consolidation/rationalisation), the emphasis shifted to identifying companies and sectors where the forces of competition were blunted, the process of mean reversion was drawn out, and the strong became stronger and could generate high returns on capital and strong cash flows for an extended period of time. This led to investments in more internet companies such as Amazon and Priceline as well enduring wide-moat businesses such as McDonalds, Nestle and Unilever.

I think this is a very insightful book that all investors should have on their reading list.

Richer, Wiser, Happier
William Green
Rating: 4/5

This book is a compilation of life and investing lessons from some well known long-term investors. It covers Monish Pabrai, Sir John Templeton, Joel Greenblatt, Howard Marks, Nick Sleep and Zak Zakaria, Charlie Munger. If you’ve read enough value investing books then a lot of this content may be familiar to you, but I found the chapters on Nick Sleep as well as Matthew McLennan (little known investor behind the First Eagle Global Fund) really interesting.

I posted a Twitter thread summarising some of my notes from this book earlier in the year.

The Luxury Strategy
Jean-Noël Kapferer
Rating: 4/5

No surprise that this is on the list after I spent some time writing about it in my LVMH article. Jean-Noel Kapferer is the authority on brand management who spent his career studying and advising companies in this area. I think I captured a lot of the book’s essential ideas in the article, but I would further add that it made me think more broadly about consumer marketing and brand positioning outside of just luxury. It’s interesting to see how companies across non-luxury industries implement some of these strategies to set themselves apart, e.g. Apple, Nespresso, boutique hotel chains etc. I would recommend this book for any consumer analysts, luxury company investors, or people just generally interested in understanding brand marketing.

Exhalation
Ted Chiang
Rating: 5/5

Last year I read the first of Ted Chiang’s excellent compilations of short sci fi stories, Stories of Your Life and Others (the title story was the basis for the film Arrival). Exhalation is the second book, and I thought was as good if not better. Continuing in the same vein, Ted Chiang explores various scientific concepts and societal themes in highly imaginative settings in a way that is incredibly soulful and emotive. The title story Exhalation is an evocative story about an alien scientist who discovers a break in the fundamental law of entropy governing their world, which will lead them to inevitable extinction. Other stories explore ideas of fate and determinism (The Merchant and the Alchemist’s Gate, What’s Expected of Us), relationships between humans and AI (The Lifecyle of Software Objects), and parallel universes and choice (Anxiety is Dizziness of Freedom). There is a bit of a Black Mirror feel to this anthology as a lot of the stories are subtle warnings about the dark side of technology. In true Ted Chiang fashion though all the stories are very intelligent, thought-provoking and beautifully written. This is a strong recommend.

2001: A Space Odyssey
Arthur C. Clarke
Rating: 5/5

As a big fan of sci fi, I’m not sure why I haven’t read this classic book until now. Arthur C. Clarke wrote 2001: A Space Odyssey in the 1960s specifically as the basis for Stanley Kubrick’s famous and rather psychedelic film of the same name, which I also haven’t seen until now, so I really didn’t know what was coming. I was expecting a meticulously documented depiction of space travel as imagined at that time, and for most of the book that’s what it was, together with some classic AI/human conflicts thrown in for good measure. And then came that unexpected ending, which just blew the whole thing up into a story of the most epic proportions. Many who’ve seen the movie know how out-of-this-world that last sequence is. This Clarke - Kubrick one two combo created something truly iconic.