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Sunday Briefing: On China, Charlie Munger, and Li Lu

Sunday Briefing: On China, Charlie Munger, and Li Lu

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Welcome to the Sunday Briefing newsletter where we share some of the interesting lessons in life, business, and investing that we’ve come across during the week.

Latest on Junto

This week, I promised Junto members that I would publish my deep dive company note on Alibaba by the end of the week. Unfortunately, I’m going to have to push that to the coming week. Trying to get the note down while vacationing in Italy was an overestimation of how fast I could type. I promise you the wait will be worthwhile.

What we’ve been reading

Dan Wang’s 2020 letter (on China).

China is neither a Marxist fundamentalist regime nor a universally-surveilled open-air prison, in which one is free to do nothing but worship the party and carry out its edicts. That is however the impression created by quite a bit of the media. I think that’s not the fault of individual journalists, instead more structural explanations are at work. News bureaus are highly concentrated in Beijing, due in part to natural corporate consolidation, but mostly because the government maintains a strict cap on foreign journalist visas. As a result, the bulk of journalists are based in the part of China that has the most politics and the least sense of growth. Everything here is doom and gloom, a fact well conveyed to the outside world.

Yesterday, I saw a tweet asking, “What is the best thing on investing you’ve ever read?” Here are my best non-book suggestions:

Charlie Munger’s “The Art of Stock Picking”.

So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.

Li Lu’s “The Practice of Value Investing”.

When you start looking at business with an owner’s mindset, your perspective will be completely different. The ideal is to be able to look at something as if you owned it without having to actually go and buy it. Unfortunately, this is very hard psychologically without using a few tricks. Why do we treasure our own things even if they aren’t the best? It’s just human nature once something becomes ours. Therefore, once you start seeing yourself as an owner, you will instantly be full of the energy needed to go and study the business. When I ask my analysts to look at a company, the first thing I tell them is to assume they have a long-lost uncle who died suddenly, leaving the entire company to them. What must they do next?

Quote of the week

Blaise Pascal on knowledge.

“Knowledge is like a sphere; the greater its volume, the larger its contact with the unknown.”

A thought

Outlier success in investing does not come from conventional thinking. If one thinks conventionally, one is statistically destined to become average.

Have a great coming week,
Oliver Sung

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