I usually only "read" books these days in Audio format as it suits my learning style and how I like to use my time. I'm glad I bent that rule with this one, which only comes in hard copy (link below to ebay that was the cheapest place I could find it)

We discussed with @mikebrisy @lowway @tomsmithidg @Chagsy @steno @Stannis at the recent Brisbane meet up.

For those that like to buy and hold for long periods of time, then the insights here on how capital cycles and supply/demand typically work, was simple but very eye opening for me having never really thought about a cycle in that way. Well worth a read if this is how you invest. It covers the supply/demand equation and how businesses and investors often do the wrong things for that point in the cycle.

https://www.ebay.com.au/itm/146606294096?chn=ps&_ul=AU&_trkparms=ispr=1&amdata=enc:1zf4cVmA-S2uTJOsEvxjh2g10&norover=1&mkevt=1&mkrid=705-173151-935305-0&mkcid=2&mkscid=101&itemid=146606294096&targetid=2367800370202&device=c&mktype=pla&googleloc=9068963&poi=&campaignid=21776442415&mkgroupid=173963205248&rlsatarget=pla-2367800370202&abcId=10047386&merchantid=7364522&gad_source=1&gad_campaignid=21776442415&gbraid=0AAAAAD97CxRLQXJ7sPTK26km_roy9GYoP&gclid=CjwKCAjwk7DFBhBAEiwAeYbJsXKjUbt6IT7r_I5B7zEA2w4zMLX8sUm2xZ8eEpRpbAqd6xw3iF7NvhoCI6UQAvD_BwE

Investing in Hidden Monopolies - Why Customer Loyalty Creates Superior Moats and How You Can Profit by Patrick Wierckx

This book is on my list but I've not got or read it yet. Looks super interesting, so thought I'd share it here while I think of it.

I heard about it on this pod - https://www.theinvestorspodcast.com/episodes/hidden-monopolies-w-kyle-grieve/ which goes through the key themes in some detail.

The book essentially gives a different approach to assessing and measuring moats including their direction.

Rather than looking at competition as a starting point, the focus here is on customers and specifically customer loyalty.

Asking AI about the book give you a more structured break down of the content too. Here's some AI generated highlights:

The book presents a groundbreaking approach that shifts investment analysis from traditional competitive advantage frameworks to customer-centric evaluation. 

Rather than focusing on how companies compete against each other, Wierckx argues that investors should analyze companies through the lens of customer relationships and loyalty

Key insight: A company's value is fundamentally rooted in its future cash flows, and those cashflows come from customers. Therefore, understanding customer loyalty and switching costs is crucial for predicting long-term investment success.

The book presents an alternative to Porter's 5 Forces by outlining The Customer-Centric Investment Framework, details Five Types of Customer Loyalty Moats and The Three Barriers Creating Customer Loyalty.

It applies all of this through The Moat Strength Index (MSI), a scoring system that allows investors to objectively measure and track a company's moat strength overtime.

This MSI tool helps investors:

Quantify competitive advantages rather than making binary assessments

Monitor moat progression - whether strengthening or eroding

Compare companies across different industries

Increase conviction in high-quality businesses

Just finished reading an interesting book called The Halo Effect by Phil Rosenzweig.

The book was first published in 2007 and some of the company examples are a little dated but the underlying concepts are still applicable to the modern world.

The book was probably aimed at managers however there is plenty that resonates for investors.

The central delusion the book discusses (the halo effect) is that so many of the things we commonly think contribute to company performance are often attributions based on performance.

And this leads onto the delusion of correlation and causality:

For example take something as basic as employee satisfaction and company performance. It's logical to think having satisfied employees will led to high performance... say we take the rate of employee turnover and we find a high correlation with performance. Now the challenge is to untangle the direction of causality.... does a company with a stable workforce be able to provide more dependable customer service, spend less time on training and so forth. Or does higher company performance lead to lower employee turnover?

Rosenzweig does go on to answer the question What leads to high performance?

On the way there is probably my favourite quote from the book which is a quote he includes by James March of Stanford University:

Post hoc recnstruction permits history to be told in such a way that 'chance' either in the sense of genuinely probabilistic phenomena or in the sense of unexplained variation, is minimized as an explanation.

In other words retrospectively looking backwards the outcome seems obvious but going forwards in real time, like all of us are now, the future is cloudy, uncertain and luck has a role (collapse of the wave function if anyone is interested in quantum mechanics!).

Chance does play a role, and the difference between a brilliant visionary and a foolish gambler is usually inferred after the fact, an attribution based on outcomes.

So then what leads to high performance? Strategy and execution.

Strategic choices involve risk because we don't know how our choice will turn out says Rosenzweig. This is because customers are uncertain. Competitors create a dynamic enviromnment. It is possible for a company to get better but fall further behind at the same time. Disruptive technology is unpredictable. The final risk discussed is uncertainties surrounding internal capabilities. Execution in uncertain because what works well in one company may not have the same effect in another.

For us as investors what we are left with at the end of all of this is probabilistic decision making.

Those interested in resources or history would highly recommend ‘Material World’ by Ed Conway.

Tells the story of iron ore, steel, salt, sand, semiconductors etc - was one of the FT business books 2023 finalists.