Episode Details

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 M