Books
The shelf behind the deals. Most of these you have never heard of, which is the point.
These are the books that defined how I think about structuring and dealmaking. No airport bestsellers. If a book is on here, something in it shows up in how I actually put deals together.
Top ten
The ten that changed how I think.
Ranked. The first two are not business books at all, and they are the two that did the most.
The Autobiography of Benjamin Franklin
Benjamin Franklin
The most impactful book I have ever read, and it is a man keeping score on himself in a notebook.
Franklin is about twenty when he decides he is going to become a better person on purpose, and rather than resolving to be good he builds a system. Thirteen virtues, one page each in a little book, a row for every day of the week, and a black mark every time he fails one. He runs one virtue hard per week and cycles the whole list four times a year.
That is the part people miss when they quote him. He is not writing about character. He is writing about measurement, and he is the first person I ever read who treated his own behaviour as an operating problem with a scorecard attached.
The most useful thing in the book is that the system does not work. He never masters Order, he keeps failing it, and instead of hiding that he tells you the story about the man buying an axe who gives up polishing halfway and decides he likes a speckled axe best. Then he admits he is the man with the speckled axe.
I reread the humility section more than any other part, because the move he describes is the single most practical thing in the book and it is not about being humble at all. He stops contradicting people directly, drops every word that sounds like certainty from his vocabulary, and starts saying he conceives a thing to be so rather than that it is so. He says plainly that he never got good at being humble, only at appearing it, and that the appearance did the work.
There is a line near the end about small advantages that I think about constantly when we are arguing about whether some unglamorous operational fix is worth doing. It usually is.
I conceiv'd the bold and arduous project of arriving at moral perfection.
on starting the thirteen virtues forbear all direct contradiction, and all positive assertion of my own
the rule he set himself, on humility, which he says he only ever faked more ready to do you another, than he whom you yourself have obliged
on the man who lends you a book: the maxim he used on a political enemy, who became a friend for life Human felicity is produc'd by little advantages that occur every day
on why the small operational fix is worth doing, against the great pieces of good fortune that seldom happen The Prince
Niccolo Machiavelli
Second, and the one people are embarrassed to say changed anything. It is about what actually happens rather than what should.
Everybody thinks this book is about being ruthless. It is actually about the gap between how people say the world works and how it works, and Machiavelli's whole contribution is that he refused to write the flattering version at a time when everybody else was writing manuals about the virtuous prince.
The passage I have used the most has nothing to do with cruelty. It is the one about introducing a new order of things, where he lays out exactly why change is so hard: everybody who did well under the old arrangement fights you, and everybody who would do well under the new one defends you half-heartedly, because they have not experienced it yet and they do not believe you.
That is every repositioning I have ever done, described in 1513. When we changed what the park sold, the people who lost were certain and loud and the people who would gain did not exist yet. You are always outnumbered at the start, and knowing that in advance is the difference between pushing through it and concluding you were wrong.
The reputation the book has is mostly earned by two or three sentences that do sound bad out of context, and I am not going to pretend they are not in there.
There is nothing more difficult to take in hand, more perilous to conduct
chapter 6, on introducing a new order of things, the passage I use most for enemies all those who have done well under the old conditions
chapter 6, on what the innovator is up against, the rest of the same sentence Men ought either to be well treated or crushed
chapter 3 You Can Be a Stock Market Genius
Joel Greenblatt, 1997
The worst title in finance on one of the best books in it. Spinoffs, restructurings, strange securities, and proof that the odd corners pay best.
The worst title in finance, and I think it genuinely cost the book readers, because it sounds like something sold on late-night television and it is one of the most serious books on this list.
Greenblatt's argument is that the money is in the corners nobody covers: spinoffs, restructurings, rights offerings, bankruptcies, stub stocks and odd securities that no analyst is paid to look at and most funds are not allowed to own. He is not telling you to be smarter than the market. He is telling you to go where the market is not looking.
The spinoff chapter alone changed how I read a corporate action. When a parent spins off a division, the shares get dumped by holders who never wanted them and cannot hold them, and the selling has nothing to do with what the business is worth.
Margin of Safety
Seth Klarman, 1991
Risk first, reward second, and the book that made those one idea instead of a trade-off.
I read a scanned PDF of this before I could afford a copy, which tells you something about how the book gets passed around. It went out of print almost immediately, Klarman never let it come back, and a real copy runs anywhere between $1,500 and $4,000 depending on who is selling.
Most investing books start with what you could make. This one starts with what you could lose and it keeps starting there for three hundred pages. His argument is that the price you pay is the only thing you actually control, and if you pay far enough below what a thing is worth, you do not have to be right about the future to do well.
That reframing is worth the whole book. I stopped asking what a deal could become and started asking what happens to me if I am wrong about every assumption in it. When I bought the park the question I kept running was not how big it could get. It was what the ground and the buildings were worth if the repositioning failed completely and I had to walk in year two.
The part almost nobody quotes is chapter four, on institutional behavior. He walks through why the people managing most of the money in the world are structurally unable to buy the things you want to buy. Mandates, career risk, quarterly reporting, the size of the position relative to the fund.
Once that is in your head you stop being suspicious of an obvious opportunity sitting there untouched, and you start asking who is not allowed to take it.
Competition Demystified
Bruce Greenwald and Judd Kahn, 2005
The clearest thinking on moats ever written, and the reason I can say that when the thing stopping everybody else is a taboo, the taboo is the moat.
Greenwald's argument is that almost everything written about competitive advantage is a list of nice qualities, and that there are really only three things that keep competitors out: customers who cannot easily switch, costs you have that others cannot get, and economies of scale inside a market small enough that only one player fits.
The scale point is what changed how I look at deals. A moat is not about being big, it is about being big relative to the market you are in, and a regional business that owns its region can be far more defensible than a national one fighting everywhere at once.
For a resort in Jay, Oklahoma the barrier is not brand and it is not technology. It is that almost nobody wants to run a mechanical fleet, a kitchen and a hospitality operation at the same time, because it is unpleasant and it eats capital. Greenwald never says the unpleasantness is the moat. He is the reason I can say it.
Value Investing: From Graham to Buffett and Beyond
Bruce Greenwald, Judd Kahn, Paul Sonkin, Michael van Biema, 2001
The textbook, and the one that put it in my bones that an asset is worth what it earns. Once that is in there, a mispriced asset stands out like a light left on in an empty building.
The textbook, and I mean that as a compliment. It is the one that actually teaches the method rather than telling stories about people who used it.
The core of it is a way of valuing a business in three layers: what the assets are worth, what the earnings power is worth, and only then whether growth is worth anything at all. Most people start at growth, which is the least reliable of the three and the easiest to talk yourself into.
Once the idea that an asset is worth what it earns is properly in your bones, a mispriced one stands out like a light left on in an empty building. That is the sentence I would put on the wall if I had to pick one from this whole shelf.
Breakthrough Advertising
Eugene Schwartz, 1966
You cannot create desire, you can only channel it. That one sentence is most of how we repositioned the park.
If I could keep one book off this entire shelf it might be this one, and it has nothing to do with investing.
Schwartz's central claim is that you cannot create desire. Desire already exists in the market, in enormous quantity, and all copy can do is channel it at your thing.
That sounds obvious until you notice that most marketing is trying to convince somebody to want something, which is the losing version of the job.
Then he gives you the actual tool, which is the five stages of awareness. Somebody who already knows your product needs a different opening sentence than somebody who knows they have a problem but has never heard of a solution, and somebody who does not yet know they have a problem needs a third thing. Most bad advertising is good copy pointed at the wrong stage.
When we repositioned the park the old customer already owned a machine and already knew the category, so the message was about trails and terrain. The new customer did not know this kind of vacation existed. Different stage, different opening line, same property, and revenue went from $1.5 million to $6 million in twelve months without anything physical changing.
Be warned that it is a difficult read and the used copies are absurd. I have a photocopy.
The Boron Letters
Gary Halbert, 1984
Letters from a copywriter to his son, written from federal prison. The starving crowd is in here, and it is the first of the three tests I run before I get interested in anything.
Halbert wrote these to his teenage son Bond while he was serving time for mail fraud, and they got passed around as photocopies for years before anybody published them properly.
Half direct response education, half a father telling his kid how to live. He will explain how to test a mailing list and then tell you to go for a walk every morning and watch your weight, and it does not read as a detour.
The starving crowd is the thing everybody quotes. If you could have any advantage in opening a hamburger stand, he says, take the starving crowd over the best burger, the best location, the best price, any of it.
So before I get interested in anything now I run three tests. Is the problem a need to have rather than a nice to have. Can the buyer pay, and will they. Is anybody actually serving them. I have watched a mediocre offer in front of a hungry market beat an excellent offer in front of a full one enough times that I stopped arguing with it.
The Secrets trilogy
Russell Brunson, 2015 to 2020
DotCom Secrets, Expert Secrets, Traffic Secrets. Nobody with a value investing shelf admits to these and I am going to, because the funnel we run on the resort is built out of them.
DotCom Secrets, Expert Secrets, Traffic Secrets. Nobody with a value investing shelf admits to owning these and I am going to, because the funnel the resort actually runs on is built out of them.
The first one is the mechanics: how a visitor moves from a video to a page to a survey to a call, and what each step is allowed to ask for. The second is about the story and the offer, and it is the one I underlined most. The third is traffic, and it is the weakest of the three now because the platforms have moved.
The criticism people make is that it is repetitive and self-referential and sold hard, and all of that is true. It also works. Our itinerary funnel is a Brunson structure with a Belfort call script on the end of it, and between them they are most of the reason a $2,000 a night cabin sells at all.
Distant Force
George A. Roberts, 2007
Henry Singleton's Teledyne from the inside. Privately published, hard to find, and the best book on capital allocation there is.
Roberts worked alongside Henry Singleton for years and then ran Teledyne after him, so this is an insider writing about the company rather than an analyst writing about the record.
The record is why people hunt for this book. Across the seventies and eighties Singleton bought back something in the region of ninety percent of Teledyne's shares, which is a number that still does not look real written down.
What the book adds is that he had no policy. He issued stock when it was expensive and bought it back when it was cheap, and he would not commit to a programme in either direction, because a programme means buying at prices you would not otherwise pay.
It is a memoir and it reads like one, which means it is warmer about everybody in it than an outsider would be. Roberts says so himself in the first pages.
George, we're going to make a bid for our stock at $20 a share
Singleton to Roberts, May 1972, the morning the buybacks started Henry saw opportunity where most other company heads saw none
Roberts on Singleton, and the book is a loyal witness by construction
Deals and structure
Find the deal
Maurece Schiller, 1955 to 1966
Five originals, long out of print. The authorized reprints edited by Tobias Carlisle and Tom Jacobs, 2016 to 2019, are the findable way in.
Five forgotten books from the fifties, and the ancestor of every strange structure I get excited about.
Schiller wrote five books between 1955 and 1966 about what he called special situations, meaning anything where the return comes from a corporate event rather than from the business getting better. Liquidations, tender offers, spinoffs, rights offerings, recapitalizations, odd-lot arbitrage. Then he was forgotten for about fifty years until Tobias Carlisle and Tom Jacobs put the reprints out.
Most of the specific trades in here are dead and I want to be honest about that, because people get excited and then discover half the structures were killed by rule changes or just got too fast. What survives is a habit of mind. Schiller looks at a corporate event and immediately asks who is forced to sell, who is forced to buy, and what that forcing does to the price. It is the same question I ask about a seller with a balloon payment coming, or a family that has held land for forty years and just had a death in it. Somebody is on a clock and the clock has nothing to do with the asset.
Start with the third one, Fortunes in Special Situations in the Stock Market. If that does not do anything for you the other four will not either.
Mohnish Pabrai, 2004
Grammer Buff, out of print, now scarce and sought after.
Pabrai's first book, written before anybody was listening, and better for it.
Everybody has read Dhandho. Almost nobody has read this one and it is the better book, because he wrote it before he was famous, so he is still arguing rather than summarizing. It collects his essays and columns from the early 2000s, which means you watch him work out the cloning idea and the asymmetry idea instead of being handed the finished version.
What I keep going back to is how plainly he treats copying. Pabrai does not pretend to be original. He finds somebody who already solved a problem, copies the solution, and says so out loud. That is most of my own thesis about acquisition and augmentation, and the hard part was never the idea, it was being willing to run somebody else's idea without needing it to be mine. It took me a long time to get comfortable with that and I am still not completely comfortable with it.
Bruce Greenwald and Judd Kahn, 2008
The Greenwald almost nobody reads. Watch him take a fear everybody repeats and walk it back until it falls apart.
This is not an investing book and I recommend it more than most investing books.
Greenwald takes something everybody in 2008 believed, which is that globalization was hollowing out developed economies, and walks it back to first principles until there is nothing left. Most economic activity is local. Most of what people buy cannot be shipped. The numbers are much smaller than the noise.
Honestly I think he overstates it in places, and some of the manufacturing chapters have not aged well. Does not matter. The method is the thing. He does not argue with the loudest version of a claim, he finds the quiet assumption underneath it and pulls on that.
In the off-road world the assumption was that people want to bring their own machine. Everybody said it. Every operator I talked to said it. When I actually looked, the people with money did not want to own or tow or maintain or fix anything, they wanted to show up, and that one assumption falling over is the entire business I run now.
Martin Whitman and Fernando Diz, 2009
What a balance sheet actually means when the company stops paying, written by somebody who did it for a living.
Whitman ran Third Avenue and he bought things that were falling apart. This is him explaining how the machinery of a restructuring actually works rather than how it looks from outside.
Here is the part that reframed it for me. In a distressed situation you are not buying a company, you are buying a position in a line, and the line decides everything. Where your claim sits. What it is secured by. Who is in front of you and what they want. Whether the thing gets reorganized or liquidated.
Two people can buy paper in the same company on the same day and one of them ends up owning the business and the other one ends up with nothing.
It is dense and parts of it read like a textbook, which is partly what it is, since Diz teaches. I have never finished it and I do not think you need to.
I have also never bought distressed debt, so take the recommendation for what it is. What I use it for is the other side of the table. Every time I structure something now I am thinking about what my position looks like if this goes badly, not just what it pays if it goes well.
Kate Welling and Mario Gabelli, 2018
Thirty arbitrageurs explaining what they actually do, in their own words, with the bad deals left in.
This is interviews, which I normally do not love, because interviews let people tell the flattering version. It mostly gets away with it because merger arbitrage leaves receipts. A deal closed or it did not.
Twenty one people, eighteen arbitrageurs and three chief executives, walk through how they size up an announced deal, and then most of them walk through the ones that blew up on them, which is the useful half. What comes out of all of it is an obsession with the calendar. An arb's return is annualized, so the same spread is a great trade over two months and a bad one over fourteen, and almost nobody outside that world thinks about time at all. A cabin that comes online in March and a cabin that comes online in August are not the same asset. One catches a season and one misses it.
Structure it
Mark Stevens, 1993
Out of print. Icahn reportedly hated it, which is part of why it is worth reading.
The structuring playbook, written by somebody Icahn was not cooperating with.
Unauthorized biography. Icahn tried to stop it and then sat down and talked to Stevens at length anyway, which is a very Icahn sequence of events.
You get the early years, the options arbitrage and the first raids, while he was still working the machinery out. The part worth the price is watching how he uses structure. He is almost never the guy with the most money in the room. He worked out early, around Hammermill, that what makes a small position dangerous is not the size of it, it is whether the other side believes you can finance the next step.
Nobody taught me more about the difference between a price and a deal. Anybody can agree on a price. What happens after the price is where the money is: who controls decisions, what happens when somebody wants out, how the thing gets valued and who picked the valuer.
I draft that structure myself now, before a lawyer touches it. Whoever writes the first version sets the default.
Jeff Gramm, 2016
Eight fights between shareholders and boards, told through the actual letters.
Gramm found the real letters. Benjamin Graham going after Northern Pipeline in 1927, Ross Perot writing to the board of General Motors, Dan Loeb doing what Dan Loeb does. Then he explains what was happening around each one.
Reading the primary source does something a summary cannot. You see how the argument gets built, what is said plainly and what is left implied, and how much of the leverage is in the tone rather than the position.
The Graham letter is the one I come back to. He is not emotional and he is not threatening, he lays out a number, explains why the company is sitting on assets it does not need, and makes it faintly embarrassing to disagree with him. He won. I write most of my hard letters that way now, and the piece most people skip is leaving the other side room to take the deal without looking like they lost.
Bryan Burrough and John Helyar, 1989
The best book on how a deal actually gets done, disguised as a story about a cigarette company.
Yes, everybody has heard of it. Most of them have not read it, and the ones who did read it as a story about greed in the eighties.
Read it as a mechanics book. The RJR Nabisco buyout is the most thoroughly documented deal in history and this is close to an hour-by-hour account of it.
You see the financing get assembled. You see how the bidding actually moves, which is nothing like an auction in a textbook. You see information leak and what that does to price. You see a board behave when it is frightened, and a management team talk itself into a number with no relationship to the business.
Ross Johnson is the character everybody remembers. The one to watch is Kravis.
Kravis understands that the auction is not about who values the company highest. It is about who can put certainty on the table, and he is the only person in the book who seems to know that the whole time.
Every deal I have been in since, the seller is buying certainty as much as price. A slightly lower number that will definitely close beats a higher number with conditions hanging off it.
Walker Deibel, 2018
The case for buying a business with cash flow instead of starting one without any.
Practical rather than deep, and I recommend it anyway because it says out loud the thing almost nobody in the startup world will.
Acquiring an existing business and improving it beats starting from zero on nearly every measurable axis. Customers on day one, revenue on day one, a track record a lender will actually look at. The failure rates are not close.
I lived the other version. Enterprise SaaS was the darkest stretch I have had, and I was miserable for most of it. Big valuations, very little revenue, no product-market fit, money to burn and not much to show. What it taught me is that building something nobody has ever built is a one percent game, because most of the time the reason nobody built it is that nobody wanted it.
The seller financing and SBA chapters are worth the whole book if you have never done an acquisition. Not sophisticated, does not need to be.
Alexandra Reed Lajoux and Stanley Foster Reed, 1989
The reference nobody reads cover to cover, and the one I open the most.
Not a book you read. About a thousand pages, organized as questions and answers, and you go to it when you have a specific problem. It covers the parts of a transaction that never make the stories: representations and warranties, indemnity caps and baskets, earnout mechanics, purchase price adjustments, what due diligence actually consists of.
The tax structure chapter deserves its own paragraph, so here it is. The same deal at the same price can be worth very different amounts to a buyer and a seller depending entirely on how it is structured, and if you do not understand that you are negotiating with one hand behind your back. Some of the best terms I have ever gotten cost the other side nothing. They were worth more to me than they were expensive to them, and it took reading a boring reference book to find them.
Build the engine
Claude Hopkins, 1923
A hundred years old, free online, and still more useful than most of what got published last year.
Ninety pages, written in 1923, readable in an evening. Ogilvy said nobody should be allowed to touch advertising until they had read it seven times and he was not being cute.
Hopkins made advertising measurable. Coupon codes, split tests, tracking which version of an ad produced a sale. Before him it was taste and after him it was arithmetic.
What has aged best is his refusal to let you say a product is the best. He makes you say the number instead. His Schlitz campaign did not claim the beer was purer than anybody else's, it described the steam cleaning of the bottles in detail, and every brewer in America was doing exactly the same thing. Nobody had bothered to say it, so Schlitz owned it. That is most of what we do organically. Show the real thing, say the real number, do it again next week, and in six and a half months it did 136.8 million views with nothing behind it.
Jordan Belfort, 2017
The straight line system, which is the method every closer in my business is trained on.
You have to get past who wrote it and I understand if somebody cannot. He went to prison for exactly what you think he went to prison for, and some of the self-mythologizing in here is embarrassing to read.
The system is still the clearest one I have found.
A call runs from the open to the close along one line and your job is to keep it there while you build three certainties: certainty about the product, certainty about you, certainty about the company. Almost every objection is one of those three being low, and if you know which one it is you know what to say next.
The part people skip is the front. He spends a lot of time on the first four seconds, on tonality, on how you sound rather than what you say. He is right about that and it is the least fun part to train, because you cannot fix it with a script. Our closers lose deals in the opening far more than in the objection handling.
We run the whole method at AOAP. The itinerary call is a closing call, not a discovery call, and the structure a closer uses to get to the $500 credit comes straight out of this book.
David Ogilvy, 1983
Better than his famous one, because this is the one where he shows his work.
Everybody reads Confessions of an Advertising Man. This is the better book because the actual ads are in it and he tells you what each one did.
Ogilvy's position is that advertising exists to sell, not to win awards, and he is unpleasant about it in a way I enjoy. He wrote long copy when everybody said short copy, because long copy tested better. He put the headline under the photograph because that tested better. Everything he believed, he believed because it produced a number.
The chapter on research is the one that cost me something. He is scathing about people who trust their own taste, and the point is that your taste is a sample of one and you are not the customer. Our viral reach is men 25 to 44 across the country. Our actual buyer is a two-guest, three-night couple at about $1,800, and the $7,000 family trip everybody on my team pictures is under half a percent of bookings. My taste said build for the family.
Sell premium
Thomas Nagle and Georg Müller, 1987
Price is not a number you land on at the end. It is the decision everything else has to agree with.
A textbook, priced like one, and still the single most directly profitable thing on this shelf. The core argument is that most businesses price by taking their cost and adding a margin, which is backwards, because your cost has nothing to do with what the thing is worth to the person buying it.
You price against the value delivered and against what they would otherwise have to do, then go find out whether you can build it for less than that. Add up a high-end cabin, a premium side-by-side rented for several days, private guides, and feeding a group the traditional way, and you spend more than $2,000 a night and you inherit all the planning. I did not get to our price from our costs. I got to it from their alternative and then had to go build an operation that could deliver it, which took two years and nearly did not work.
Danny Meyer, 2006
How a premium experience actually gets delivered, by somebody who had to do it every night.
Meyer built Union Square Cafe and Gramercy Tavern and then Shake Shack, and the useful part of this book is that he treats hospitality as an operating problem rather than a feeling.
His distinction between service and hospitality is the thing I quote most. Service is whether the food arrived correctly. Hospitality is how the person felt while it happened. You can be perfect at the first one and still have somebody leave unhappy.
Then he gets specific about producing that at scale, which turns out to be hiring, and his ratio is roughly 51 percent emotional skills to 49 percent technical. You can teach somebody the menu. You cannot teach them to notice.
I did not understand this early enough and it cost us. We did not necessarily hire managers when we should have. That was a very big mistake and I am still cleaning it up. The reviews that actually hurt are never about the trails or the machines.
Christopher Mayer, 2015
What lets something go up a hundred times, studied case by case, and the same move I run on physical assets.
Mayer went and found the stocks that returned a hundred to one and worked backwards through what they had in common, which is the right way to do this and almost nobody bothers.
The answer is less exciting than people want. You need a business that can reinvest its own profits at a high rate for a long time, you need to start small, and you need to not sell. That last one does most of the work and it is why the list is short, because almost everybody who owned a hundred bagger sold it somewhere around the third double.
The case I go back to is Monster. It was Hansen Natural, a sleepy juice company, and it did not invent an ingredient or build a factory. It took a product that already existed and repackaged it into something premium for a different customer. Same dirt, same steel, four times the revenue, except in a can.
Find the deal
Benjamin Graham, 1944
McGraw-Hill, 1944. Long out of print and almost never mentioned alongside the two everybody knows.
The Graham nobody knows exists, and he is not talking about stocks at all.
Everybody has read The Intelligent Investor and a smaller group has actually got through Security Analysis. Almost nobody knows that in between writing them Graham spent years on a monetary proposal, which is that a currency should be backed by a basket of the raw commodities an economy actually runs on rather than by gold.
He is not hand-waving about it either. He works out the storage, the warrants, how redemption would function, what happens when one commodity in the basket moves against the others. It reads like a man doing engineering rather than economics.
What I took out of it has nothing to do with currency. Graham does the same thing here that he does with a company, which is that he never argues about what something ought to be worth, he works out what it can actually be exchanged for and builds everything on top of that number. Once you have watched him do it to a currency, doing it to a resort in Oklahoma stops feeling like a big leap.
Benjamin Graham, 1937
McGraw-Hill, 1937. The earlier and more practical of the two forgotten Grahams.
Written in the Depression, about surpluses nobody wanted, by the man who later wrote the book on buying what nobody wants.
This is the same argument seven years earlier and it is the more useful of the two, because in 1937 he is not designing a world currency, he is trying to solve a specific problem: farmers producing more than anybody would buy, prices collapsing, and the surplus rotting while people went without it. His answer is to build reserves in the good years and release them in the bad ones.
The thing that stuck with me is the timing of it. He is writing this in the middle of the Depression about commodities nobody wanted at any price, and twelve years later he publishes the book that tells you to buy exactly the things nobody wants. It is the same instinct pointed at two different problems, and I do not think he ever framed it that way himself.
Harry Eisenberg, editor, the 2000 edition
Published annually. A physical directory, now largely obsolete, which is exactly what makes it worth owning.
A phone book of companies nobody could find, and the most on-thesis thing on this shelf.
This is not a book you read. It is a directory, company after company, of American businesses whose shares traded but which were too small or too strange to be listed anywhere you could look them up. Each one gets its financials and not much else.
Before the internet indexed everything, this book was the only practical way to find these companies at all. You bought it, you sat with it, and you went through hundreds of boring entries looking for the handful that were absurdly cheap because literally nobody else had bothered to open the page.
The edge was never analytical. Nothing in here requires a clever model. The edge was that the information was physically difficult to get, so the only people who had it were the people willing to do something tedious for a long time.
That is still true and it is most of what I do. The deals I get are not the ones with a broker and a data room. They are the ones where somebody had to drive out and look, or sit through a county meeting, or read a chain of title nobody had opened in forty years.
John Brooks, 1987
The Brooks book nobody brings up, about the decade that invented the modern hostile deal.
Brooks is the man who wrote Business Adventures, which is the book Buffett lent Bill Gates and which both of them have called their favourite, and which is now on every reading list in the world. This one came out a few years later and almost nobody mentions it.
It is about the takeover wave of the eighties, the raiders and the poison pills and the greenmail and the junk financing that made all of it possible. Brooks is not cheerleading and he is not moralising either, he is explaining the mechanics of how a company gets taken from the people running it.
Read it next to Barbarians at the Gate and you get the same decade from two heights. Barbarians puts you in the room for one deal. Brooks shows you the machinery that made every deal in that decade possible, and honestly the machinery is the more useful half.
Ben Branch and Hugh Ray
The procedure manual that sits next to Whitman's argument.
Branch is an academic who also served as a bankruptcy trustee, and Ray is a bankruptcy lawyer, and you can feel both of those jobs in the writing. Where Whitman gives you the investment case, this gives you the process: what actually happens, in what order, who files what, who gets to vote on what.
It is drier and I have never read it cover to cover. What I use it for is looking something up when a situation gets complicated, and for that it is better than the more famous books, because the famous books tell you why distress is interesting and this one tells you how the machinery grinds.
Barrie Wigmore, 1985
Greenwood Press. Reference-dense and long, and it has never had a popular edition.
Everybody has read a story about 1929. This is the price data.
Wigmore was a Goldman partner and this is not a narrative history, which is the whole point of it. There is no drama, there are no scenes on Wall Street, there are no ruined men jumping out of windows.
What there is instead is a reconstruction of what actually traded across those four years. Which securities, at what prices, at what yields, month by month. It is closer to an archive than to a book and it is very long.
I like it because almost everything written about 1929 is a story with a moral attached, and once a thing becomes a story people stop checking the numbers underneath it. Wigmore just puts the numbers down and lets you find out that a lot of the received version is loose.
It is also the only book on this shelf I would describe as boring, and I am not going to pretend otherwise.
Richard C. Sauer, 2010
Wiley.
An SEC lawyer explaining why the frauds he could see were the hardest ones to stop.
Sauer was an enforcement lawyer at the SEC and then went to work at a hedge fund, and the book is his account of investigating securities fraud from inside the agency that is supposed to stop it.
It is not flattering about the agency, and that is what makes it worth reading rather than a complaint. He is specific about why cases died: resources, internal politics, the difficulty of proving intent, and the fact that the people committing the fraud were often better funded than the people investigating it.
The lesson I took is uncomfortable and I think it is right. Somebody noticing a problem is not the same as anybody being able to do something about it, and if you are relying on a regulator to have caught something before you buy it, you are relying on an organisation with a budget and a queue.
Lawrence A. Cunningham, 2002
The Cunningham that is his own rather than an edit of Buffett's.
Cunningham is the law professor who assembled The Essays of Warren Buffett, which is the book he is known for and which is really Buffett with Cunningham arranging it. This one is his own argument and it sold a fraction as many copies, which is usually how it goes.
It is a book about why the professional money is constrained in ways an individual is not, and I would put it next to Klarman's chapter on institutional behaviour rather than treating it as a standalone. Between the two of them you stop being surprised that an obvious opportunity is sitting there untouched, and you start asking which category of buyer is not permitted to take it.
Robert A. Haugen
Prentice Hall. Two related books, usually found together and usually found secondhand.
A man who spent thirty years telling finance academia it was wrong, and was.
Haugen spent a career arguing against the efficient market hypothesis from inside finance academia, which is roughly as comfortable as it sounds. His evidence was that low-volatility stocks and cheap stocks kept outperforming what the theory said they should, consistently, for decades.
He largely lost that argument while he was alive and he has been substantially vindicated since, and both of those facts are worth sitting with. The consensus in a field full of very intelligent people, with enormous amounts of money riding on being right, was wrong about something central for about thirty years.
I do not read him for the stock conclusions. I read him because he is a case study in how long a wrong consensus can hold when everybody in the room was trained by the same people.
Structure it
Dave Greber, 1987
Out of print.
A holding company almost nobody outside Canada can name, built by a man who started with a bus line.
Desmarais took over a failing bus company and built it into Power Corporation, which ended up as one of the largest holding companies in Canada with insurance and media and financial services underneath it. Outside Canada almost nobody can tell you the name.
The structure is the interesting part. A holding company is not a conglomerate and the difference matters: a conglomerate tries to run the businesses, a holding company owns them and leaves them alone, and the discipline is entirely in what you buy and what you pay.
This is the closest thing on the shelf to what I am actually building, because Odyssey Resorts is a holding structure rather than an operating brand, and the question of how much you leave alone is the one I get wrong most often.
R.M. Lala
Fifty years running a group whose owner is a charity, which changes every incentive in it.
JRD Tata ran the Tata group for more than fifty years and founded what became Air India, and Lala knew him well enough that this reads as conversation rather than biography.
The structural fact is the thing to take: the majority of the Tata group is owned by charitable trusts, which means the ownership is not a family and is not a market, and that changes what the business is allowed to optimise for. I do not know of another group of that size built that way, and I keep coming back to it when I think about what Odyssey should own and who should own Odyssey.
David L. Sokol
Self-published, and largely given away rather than sold.
An operator's book, by the man who was going to run Berkshire and then was not.
Sokol ran MidAmerican Energy and later NetJets under Berkshire and was widely assumed to be Buffett's successor, and then in 2011 he resigned over his personal purchases of Lubrizol stock before Berkshire acquired the company. I am putting that in the second sentence rather than leaving it out, because anybody who knows who he is knows it, and a book recommendation that steps around the obvious thing is worth less than one that does not.
The book itself is about operating. It is short, it is self-published, and it is almost entirely about standards: what you measure, how often, what you do when the number is bad, and how quickly.
The title is the whole argument. You can be pleased with a result and unsatisfied with it at the same time, and the day those two collapse into each other is the day the business stops improving.
I run our numbers that way now and it is the least popular thing I do internally.
Marquis James and Bessie Rowland James, 1954
Marquis James won the Pulitzer twice. This one is almost never read.
A bank built on the customers every other bank had already turned down.
A.P. Giannini opened the Bank of Italy in San Francisco in 1904 and lent to immigrants, small farmers and working people that the established banks would not deal with, and that institution became Bank of America.
The version of this story that gets told is a nice one about a man helping people nobody else would help. The version in the book is more interesting, because those customers were not a charity, they were an underpriced market that everybody else had written off without doing the work to price it properly.
That is the same argument I make about our own guest, and I did not get it from this book, but reading it in a 1904 form made me much more confident it generalises.
Peter Starr, 2002
A commissioned history, which is a real limitation and still worth the shelf space.
This was commissioned around the centenary of Citibank's first Asian branch, and a commissioned corporate history is friendly by construction. Nobody writes a hostile account of a company that paid for the book, and pretending otherwise would be silly.
What you get anyway is a hundred years of one institution operating across a set of markets that went through occupation, independence, currency crises and several complete reinventions, which is a longer continuous run than almost any business you can study. Read it for the endurance rather than for the judgement, because the judgement is bought and the endurance is real.
Sell premium
Margaret Moos Pick, 2005
A company history, sold mostly in the shops. Not a business book and not shelved as one.
The company Buffett calls his best purchase, written as the kind of book nobody reads.
This is a corporate history of a candy company, written warmly, with photographs of shopfronts and women in white aprons. It is not trying to teach you anything, which is why it is useful.
What you are actually looking at is the clearest example there is of pricing power in a physical product. See's raises its prices a little every year, the customers do not leave, and the reason they do not leave is that nobody buying a box of chocolates for somebody else wants to be the person who brought the cheap ones. The gift is the product, and the price is part of the gift.
I think about that constantly with the resort, because an all-inclusive trip for a family is also a gift somebody is buying for other people, and the same rule holds. The person paying is not optimising for cost. They are optimising for not being the one who cheaped out on the holiday.
Karl Schriftgiesser, 1955
Out of print since the fifties.
How State Farm got built by insuring the customers every other insurer had already priced as bad.
George Mecherle was a farmer who noticed that farmers were being charged city rates for car insurance despite driving less, on emptier roads, with fewer accidents. So he started an insurer that only took farmers, priced them on their actual risk, and let everybody else keep the customers he did not want.
That is the entire play, and it is the same one the Bank of America book describes from a different industry in a different decade: find the group that has been priced by reputation rather than by evidence, and go and check the evidence yourself.
Randall L. Patton, 2002
Carpet. A commodity nobody can tell apart, and somebody built a moat in it anyway.
An academic history of a carpet company in Dalton, Georgia, and I am aware of how that sounds.
Shaw became the largest carpet manufacturer in the world in a product where the customer genuinely cannot tell one roll from another, which by every rule in Competition Demystified should have been impossible. The way they did it was not the product at all. It was owning more of the chain than anybody else, from the yarn to the truck, so that their cost per yard was structurally lower and nobody could follow without rebuilding the whole thing.
There is a version of this available to almost any unglamorous business and it is the least discussed kind of advantage there is, because it is boring to build and it does not photograph well.
I bought this one because of Berkshire's interest in the industry and expected to skim it. I did not.
Build the engine
Robert L. Bacon, 1956
Long out of print and quietly famous. It gets passed between investors far more than between gamblers.
Horse racing, 1956, and a cult book among people who have never placed a bet.
Bacon is writing about how to bet on horses and he is really writing about how a crowd prices anything.
His central idea is what he calls ever-changing cycles. Whatever method the public has caught on to has already stopped working, because the money moving toward it has changed the odds. The public is permanently one race behind, and the professional's job is not to be smarter but to be earlier and then to move on before everybody arrives.
The one principle he actually states is to bet against the public at all times, and he is explicit that it applies to any game with a house percentage taken out of the pool, which includes the one I am in. That is true of every market I have ever looked at and it is not a comfortable thing to sit with.
It is a strange book to own and I would not lead with it at dinner.
Structure it
Terry S. Reynolds and Virginia P. Dawson, 2011
A hundred and fifty years of one company surviving an industry that killed almost everybody in it.
Iron ore is about as brutal a business as exists. The price is set by somebody else, the capital costs are enormous, the assets cannot be moved, and the cycle can stay against you for a decade.
Cleveland-Cliffs went through all of it, repeatedly, from the 1840s onward, and the book is largely an account of how a company survives conditions it cannot control. The answer is mostly balance sheet and patience rather than brilliance, which is not the story anybody wants to hear.
I read it while we were working through our own debt and it was more useful than anything written about turnarounds, because the companies in those books always have a lever to pull and this one frequently did not.
Build the engine
Colin Cameron, 2009
Somebody built a market where there had only ever been a middleman, and the middlemen have still not forgiven it.
Betfair let people bet against each other directly instead of against a bookmaker, which meant the bookmaker's margin, the thing the entire industry was built on, became a fee on a transaction rather than a spread nobody could see.
What I take from it is that the best version of attacking an industry is not doing the same thing cheaper. It is removing the position the incumbent occupies, so that competing with you means dismantling themselves.
Not on the shelf
The Little Book That Beats the Market
Joel Greenblatt, 2005
A fine book, and that is the problem.
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