Library / Other Great Books

Date of review: March 2020
Book author: Jacob Taylor
Вook published: 2018

The Rebel Allocator by Jacob Taylor (2018)

Jake runs Farnam Street Investments firm and hosts a few podcasts. According to a WSJ article, Charlie Munger called Jakes after reading a copy that Jake sent him and provided comments for 20 minutes. Having listened to Jake's podcasts for a while and after reading the WSJ article, I decided to finally read it during the summer holidays.
I liked Jake's boldness – instead of summarising key lessons of value investing in a traditional way, he took the risk of writing a fiction book about a student and a famous investor.

The book is very easy to read and has an interesting plot that makes you want to finish reading it quickly.

The content is based on the key principles that governed Berkshire Hathaway's investments and broader life beyond finance. I cannot say I learnt many new things I had not known before, but reading about them in such a format is definitely new and refreshing. I should also admit that I skipped about a third of the book, which describes the personal circumstances of a young character, his relationship and his early career.

Key ideas presented in the book

  • The importance of competitive position ('Moat') and cumulative effect ('Compounding') of daily actions on competitive positions (including positions of humans). If you get 1% better every day, you are 37x better within a year. If you get 1% worse every day, you are 97% worse within a year.

  • Strong brand or low costs are the basis of a competitive position.

  • Growth does not automatically generate value, returns on capital are more important.

  • Capital allocation provides important flexibility, but not all companies can fully enjoy it.

  • Sometimes, investing in the existing business is less profitable than buying a minority stake in an undervalued and unrelated company.

  • Scale matters for businesses with a high share of fixed costs.

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