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Being Cheap, Best of Munger, a Rare Bezos Interview, and Other Links

I was catching up on some links and articles this weekend. Sometimes, things that are interesting but not time sensitive get pushed to the back burner. In these cases, I sometimes create a file filled with things that I’d like to read and the early morning Saturday hours are sometimes a good time to catch up on these things.

Anyhow, here are some things I’ve read recently that I read that I thought readers might be interested in taking a look at.

The Advantage of Cheapness

This is a piece from 1997 on the then-CEO of Fastenal (now Chairman) Bob Kierlin. The article discusses his incredible appetite for low costs at all costs, and how his cheapness helped foster the culture at Fastenal, and helped it become lean, profitable, and sustainably competitive.

Some Ivy League MBA professors will say cost cutting is not a “sustainable competitive advantage”. In other words, these skeptics will say: yeah, a frugal management team is great, but if keeping a lid on costs is the only advantage one company has over competitors, soon those competitors will cut their costs also and erase this edge.

Once again, I think this calls for the great Yogi Berra quote: “In theory, there is no difference between practice and theory. In practice, there is.”

There aren’t many CEO’s worth a quarter of a billion who are renting vans to drive themselves on business trips, eating fast food, staying in motels, and eschewing the stationary store’s scratch pads in favor of homemade notepads made from used paper and glue. Maybe this passage takes the cake:

“And then there are his suits. At a discount store, they’d probably go for $200 apiece. But Kierlin didn’t buy them there. He got them from the manager of a men’s clothing store. Not from the manager’s store. From the manager. The suits are used. “Luckily, we’re the same size,” says Kierlin, a triumphant smile crossing his face. “I picked up six of those suits for 60 bucks each.”

Cheapness might be a personality trait, but there are some who can use this to foster a culture that leads to increased profitability. And the reason this is sustainable is simply because being cheap often means not taking the easy route (i.e. the company paying for your private jet is much more comfortable than driving yourself for 5 and a half hours in a rented van). In practice, most CEO’s aren’t willing to do what in theory they would.

Read the full article here.

Munger Complilation

For you Charlie Munger fans, here is a document I came across a few weeks ago that is a nice compilation of the Wesco annual meeting notes as well as a number of other transcripts and articles written by or about Munger.

The title of the compilation is “Best of Charlie Munger” or something to that effect. But any compilation of Munger isn’t complete without this one: The Art of Stock Picking. I might highlight a passage or two from this piece some other time: it’s a great discussion on behavior, mindset and investment philosophy.

Jeff Bezos Interview

This was a great discussion with Jeff Bezos. The Amazon.com CEO rarely gives these types of at-length interviews, and it’s worth watching if you have some time. I’ve never invested in Amazon, but I really admire Bezos’ ability to stay focused on the long term mission of building value at his company with complete disinterest for what short term traders, analysts, and observers think about him or his strategy. Time will tell if Bezos’ strategy of investing “profits” back into the business is successful, but it is refreshing to listen to a CEO who really doesn’t care about short term results and pays more than just lip service to “thinking for the long term”.

Other Odds and Ends

Here are a few other interesting articles that I came across recently…

I hope a few of these are interesting. Have a great week!

6 thoughts on “Being Cheap, Best of Munger, a Rare Bezos Interview, and Other Links

  1. This is really an inspring blog for a value investor. I just once again want to say thank you for your most generous sharing.

  2. My only experiences with Ivy League professors were a few classes that I dropped in on at Princeton. I saw Burton Malkiel teaching about mostly efficient markets. And a professor in ORFI teaching about Pareto frontiers, Black-Scholes, and about portfolio optimization. It occurred to me that these theories probably broadly fit the data. But as an investor per se, one’s job is to take advantage of where the theories break down, e.g. quasi-arbitrage situations, obscure mispricings. So I stopped going to those classes because they didn’t seem very useful. If everything is efficient you just index, and diversify, it’s not so hard.

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