Allocating capital is one of management’s most important jobs. Still, many decisions are suboptimal for shareholders. Why is that? In this episode, Jake Taylor - author of The Rebel Allocator - shares valuable insights on capital allocation and investment strategy. We also talk about biases, pricing power, and how to use a multidisciplinary approach in life and investing. For more info about the podcast, go to the episode page.

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Episode Chapters

Intro

(00:23) Intro with Eddie and Niklas

(03:18) Charlie Munger calling and movie status

(07:02) Feedback on and purpose of the book

Capital Allocation

(09:21) Rational capital allocation

(11:42) How to assess good capital allocators?

(15:34) Incentives and suboptimal allocation

(21:36) Analyzing a company’s capital allocation decisions

(24:11) Thoughts on M&A stories

Investing, Portfolio, and Strategy

(26:06) Investing in capital allocators and Farnam Street Investments

(32:06) Cheapest things on Earth vs. M&A machines like $CSU

(34:51) Living and dying a value investor

(37:32) Investing biases and Jake's systematic approach

The Multidisciplinary Life Approach

(43:33) Stretching your mind by using Truths

(49:45) Advantage of focus 4h of dedicated work

(53:34) Importance of solitude and patience

(58:12) Going on the Information Onion Diet

Pricing Power and Company Valuation

(1:01:30) Competition, differentiation, and pricing power

(1:06:42) Financial modeling and price sensitivity

Book Inspiration

(1:12:09) A door stopper better than any MBA or finance class

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Articles Mentioned

Text interview with Jake Taylor - Investing by the Books (2018)

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Books Mentioned

(20:52) High Output Management - Andrew Grove (1983)

(31:27) Intelligent Fanatics - Sean Iddings, Ian Cassel (2016)

(45:08) The Half-Life of Facts - Samuel Arbesman (2012)

(50:33) The One Thing - Gary Keller (2013)

(53:34) Subtract - Leidy Klotz (2021)

(1:13:36) The Complete Financial History of Berkshire Hathaway - Adam Mead (2021)

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Companies Mentioned

(20:25) GEICO

(29:16) Coca-Cola, Procter & Gamble, Dollar Shave Club, Gillette

(31:29) Berkshire Hathaway, 3G Capital, Capital Cities / ABC (Tom Murphy)

(32:06) Constellation Software, Vitec Software

(38:03) Berkshire Hathaway

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More on Jake Taylor:

Jake's book: The Rebel Allocator

Jake's podcast: https://twitter.com/5_GQs

Jake's podcast: https://greenbackd.com/value-after-hours-podcast/

Jake's twitter: https://twitter.com/farnamjake1

Jake's website: Farnam Street Investments

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What is Investing by the Books?

Investing by the Books was founded by Henrik Andersson, Bo Börtemark, Mats Larsson and Michael Persson. It has published hundreds of book reviews in the past 10 years and operates on a non-profit basis.

Visit the website: http://www.investingbythebooks.com/

Follow on Twitter: https://twitter.com/Investbythebook

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What is Redeye?

Redeye is a research-centered boutique investment bank from Stockholm. Founded in 1999, Redeye cultivates investors through timeless knowledge, a humble attitude, and a strong focus on quality.

Visit the website: https://www.redeye.se/

Follow on Twitter: https://twitter.com/Redeye_

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Disclaimer

Notice that the content in this podcast is not, and shall not be construed as investment advice. This information is meant to be informative and for general purposes only. For full disclaimer, visit Redeye.se