Catch of the Week #7
Sam Walton, Steroid Olympics, Henry Singleton's genius, China's capital market reform, Russia's vodka problem and more
Is China's capital market on the brink of a major shift? State Council's 9 new guidelines for capital markets – Aaron Zhou
The context of 2004 was to address the numerous issues caused by non-tradable shares prior to the split share structure reform, a problem unique to the Chinese market that foreign investors may not fully understand. We will not discuss this further for now.
The 2014 policy was implemented to expand the market, including measures to open it up further. In the ensuing years, we witnessed the opening of the northbound funding channels, with foreign investors increasingly buying into China. This period saw A-shares' inclusion in the MSCI Emerging Markets Index and a gradual increase in their weighting — a bull market fueled by foreign capital influx.
The most recent guidelines, issued in 2024, come against the backdrop of several years of declining performance in both A-shares and Hong Kong stocks. This policy round is primarily aimed at bolstering investor protection and enhancing the intrinsic stability of the market…
…The policy directives aim to forge a supportive framework for sustained long-term investment. This includes substantially increasing the proportion of equity funds, promoting the development of index investing, and explicitly enhancing the investment policies of the National Social Security Fund and the basic pension insurance fund. Moreover, the directives encourage the active participation of bank wealth management and trust funds in the capital markets.
Henry Singleton & Teledyne – Twenty Punch Investments
“Our attitude toward cash generation and asset management came out of our own thought process. It is not copied. After we acquired a number of businesses we reflected on aspects of business. Our own conclusion was that the key was cash flow.”
…Singleton: “If anyone wants to follow Teledyne, they should get used to the fact that our quarterly earnings will jiggle. Our accounting is set to maximize cash flow, not reported earnings.”
…High valued shares issued to acquire 130 companies in the 60’s and then repurchased ~90% of shares in the ‘70’s and ‘80’s. Also interesting to see the large EPS jump in 1975, which coincided with the increase in margins. Improved operations combined with 50%+ less shares outstanding caused earnings per share to explode higher.
He’s Starting an Olympics Rival Where the Athletes Are on Steroids – Mark Bergen and Eyk Henning
…“It’s in our DNA,” he says. “The part of our brain which makes you jump up in a football stadium, which makes you cheer—it wants to see peak performance. It is deeply rooted in an ancient need for test of combat skills. Therefore, it doesn’t matter if the performance is natural or enhanced.”
…There’s actually a fourth rule. Athletes must agree to don wearables around the clock after they’ve qualified, until the games are over. Angermayer sees this as a business opportunity—corporate tie-ins from the data collection—and a critical part of the viewing experience. “Think about the one guy who’s winning. We zoom in to his eye. In the moment, we see all his vital stats go up, and you hear his heart rate on TV,” he says. “It’s going to be one of the biggest media spectacles in the world.”
Quiet Compounding – Morgan Housel
“Nature is not in a hurry, yet everything is accomplished,” said Chinese philosopher Lao Tzu.
…Using money to improve your life more than you try to influence other people’s perception of your life. I’d rather wake up and be able to do anything I want, with whom I want, for as long as I want, than I would try to impress you with a nice car.
Soldiering Through Life – Kingswell
Some people just naturally complain and other people just naturally put their head down and soldier through it. Warren and I believe in just soldiering through it without too much fuss. I have the theory that the dumbest thing you can ever do in life is to feel like a victim. Any politician that makes people feel like victims, I automatically dislike. I never saw any good come [from] feeling like a victim. Even if you are a victim, I think it’s a mistake…
Most of the criticism ran along the same lines: What does a billionaire know about being a victim?
In 1953, Charlie’s first wife divorced him — leaving the young lawyer devastated and penniless. “He lost everything in the divorce,” his daughter Molly told Munger biographer Janet Lowe…
Two short years later, Charlie’s 9-year-old son Teddy passed away from leukemia. In the 1950s, this was a disease that afforded the afflicted (and their families) no hope. The diagnosis itself was a death sentence.
Charlie was scarcely 30 and he already faced a failed marriage, a dying child, and an uncertain financial future. Not exactly a throne of privilege.
“When his son was in the [hospital] bed and slowly dying, he’d go in and hold him for a while, then go out walking the streets of Pasadena crying,” said Rick Guerin.
[PODCAST] Sam Walton: The Inside Story of America's Richest Man – David Senra
Shamelessly stealing good ideas
…and all throughout his autobiography, all throughout this book, every single antibody that you'll see with Sam, even though he didn't do a bunch of interviews, he talks about the fact that I have no shame in admitting this like I was searching for good ideas. And if I found a good idea, if I found a competitor that had a better idea than I did, I would just adopt.
He didn't care of the origination source of the idea. He just wanted the very best idea. So, he's like he says, if they had something good, we copied it. And it is through this that he says, I was totally fascinated by the idea of discounting and when he discovers discounting in the 1960s, he's blown away…
Think of people’s incentives
…You have to think about the incentives of the people that you're selling to. Sam Walton is trying to sell to them. So, the greatest example that got lodged in my brain many years ago. No one is ever eager to fix a cash machine that isn't broken.
And the person that put that idea into my brain, the fact that you have to think about the incentives of the people that you're selling to, then no one is ever eager to fix the cash machine that isn't broken in James Dyson's autobiography, he invents the world's first cyclonic vacuum cleaner.
That means his vacuum cleaner doesn't need bags. So, before that, if you own a vacuum cleaner, you're constantly having to buy more vacuum bags, right? What is James Dyson do? The first person he tries to go and sell his invention to is a company that is making $500 million a year selling vacuum bags.
He's like, oh, they're going to see how superior cleaning machine that my vacuum is compared to theirs. That is irrelevant. You cannot sell a bag of vacuum cleaner to people to make 500 million a year selling vacuum bags.
You cannot sell the idea of discounting at a lower margin and saying, hey, sell me your stuff at 12.5% and instead of selling it to me at 25%. How do you think they paid for those tailored suits and those custom shoes with that 25% margin. And so, they laughed him out of the room and then there's a great story that is told in this book, it's also told in Sam Walton's autobiography…
Customer satisfaction is king
…And so, what he means by customer satisfaction is always exceeding the expectations of the customer. So, let's say you buy a pair of shoes. They don't fit. You don't like them whatever the case is, you bring them back. Sam would tell his stores.
Not only should you cheerfully replace the shoes, meaning you should be happy, you should be smiling, then you should throw in a pair of socks and stocking for the hassle. He understood the value of a satisfied customer. That customer is going to come back to Walmart, not next week, not just next week, not just next month.
Humans are habitual. They'll probably be shopping there for a decade after decade as long as you don't upset them or let them down...
Having a low resistance to change
…And now we get to one of the most mind-blowing things that happens in the book. At least it is mind blowing to me. Remember, he was talking about the fact that he's not resistant to change. Now he has his principles he's not going to deviate from but he always wants the best ideas. And he repeats over and over again. He says RC is that formula, resistance to change. Like we want a low resistance to change, we're willing to change.
It's a trademark of like the Walmart culture, the Walmart philosophy. Every day is a different situation in the retail business. We have to be flexible. These are the things that Sam Walton would repeat. Now this is insane what they do here, the size of the investment. So at first, this is 1979, okay? At first, his team, his top executives, people he trust are like we need computers, we need help, the businesses is too unwieldy.
We need more organized data to be able to make better decisions. And at first, Sam thought computers were just overhead. But then he listened and he learned and he changed his mind and more importantly, and he invested, he put his money where his mouth was. Finally, his lieutenants educated and convinced Sam and Walmart plugged down $500 million for a modern communications computer system.
And when they say computers at this time of history, it's like giant IBM mainframes. And so now all the Walmart stores, their warehouses and the distribution centers are able to communicate in real time. By 1979, the stores and warehouses could communicate around-the-clock with headquarters. So keep in mind, inside of every single store, there's at least 36 departments in each store, and they're all selling different things.
So this computer system is now telling them daily sales from not only every store, but every single department inside of every store. They tell them what the bank deposit for that day is. They would estimate sales figures. They would flag reports on like hot selling items that they may need to either order more and deliver more to the stores. You'd have up-to-date warehouse inventory. And it just goes on and on and on. So Sam was writing the annual report of Walmart 1979, and he summarized it perfectly.
He says the financial savings and the number of personnel hours saved daily by using the computer center are incalculable even by the computer. So it's one thing to say, yes, we're willing to change. We want the best ideas. Sam is 61 years old when he makes this decision. 61 years old, investing $500 million, $0.5 billion in 1979. That's one of the most remarkable things in the entire book. And this just proves his dedication.
He talked about investing in technologies as huge advantage they had over other discounters too. But he's putting his money and his actions behind this where his mouth is. When he said he was saying with this mouth, "No, we have a low resistance to change. We want the best ideas.” And then it's one thing to say that's a completely different thing to match up his actions in this $0.5 billion investment with that. That's nuts to me.
[VIDEO] Why This New CD Could Change Storage – ColdFusion
…This disc has even more capacity: 1.6 petabits is equivalent to 200 terabytes, or 200,000 gigabytes. The craziest thing is this new disc is about the same size as a normal DVD, but holds 4,000 times as much as a Blu-ray.
…The simplified and brief explanation of it: the secret behind this massive storage lies in layers. Traditional optical discs like CDs or DVDs typically have one or two layers to store data; sometimes, they can go up to four. But this new disc is like a skyscraper with 100 floors – each layer holding precious information. By stacking these layers, the researchers have crammed in more data than ever before.
…These new ultra-high capacity discs are well suited for data centers. These discs could enable data centers to store exabytes of data in a much smaller physical space than current technologies. Think billion gigabits of storage in a room, instead of a stadium…
[VIDEO] Russia is Running Out of People – PolyMatter
…And this is where the two countries really begin to diverge. There, deaths surged at the exact moment birth rates fell, producing what demographers call the “Russian Cross.” And this was not just a temporary phenomenon — deaths have remained high ever since. There’s no silver lining to be found here. This is the bleak story of a nation being squeezed simultaneously from two directions — fewer births and more deaths…
…As the economist Nicholas Eberstadt once observed, the last 16 years of Soviet rule saw 11 million more births than deaths. Over the next sixteen years, it saw 12 million more deaths than births. These are war-like casualties in peacetime. So, what exactly caused all these deaths?
One clue is that heart-related fatalities — the leading kind — seem to spike on the weekend. Another is that — whatever the cause — it appears less common in Muslim-majority regions. All signs, in other words, point to alcohol.
The problem is not simply one of quantity. Though it certainly doesn’t help that in some years Russians have consumed almost double what the World Health Organization considers to be dangerous. The problem, above all, is what kind of alcohol, where, and when. The French sip wine, the British beer, and Russians, overwhelmingly, vodka. Some stereotypes, apparently, are true. Not only do Russians get more intoxicated, faster, as a result, but a deeply embedded culture of social and binge drinking compounds these effects.
…This is an extremely lethal combination. So much so that every Russian male has a roughly 25-30% chance of dying, one way or another, thanks to alcohol. The numbers on screen, bear in mind, are from 2012, but note how Russia’s number is ten times higher than America’s. Researchers estimate that between 1990 and 2001, over half of all adult male deaths in Siberia were caused by alcohol. On top of this, about 30% of all crimes and 72% of all murders in 2017 were related to alcohol, according to the Kremlin.
These are staggering numbers, particularly for one of the world’s most highly educated countries, with an upper-middle income, no less. Unsurprisingly, then, the Russian male life expectancy is just 68 years — closer to Haiti than Germany. The average man in Sweden, Switzerland, or Macau will live a full decade and a half longer.
Thanks for reading TMC’s Catch of the Week! We’ll share interesting finds with you every Sunday.
Disclaimer: Please note that none of the information provided constitutes financial, investment, or other professional advice. It is only intended for educational purposes.