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C&B Notes

The purpose of C&B Notes is to pass along ideas, concepts, stories, and information that are informing and influencing our worldview and thought.

Details, Details, Details
May 31, 2017

A requirement of a concentrated portfolio like ours is that the rule of law is sufficient (i.e. we feel like outside capital will be treated fairly) in the places in which we invest. The typical developed, emerging, and frontier market categorizations loosely address this issue, but this distinction is a blunt instrument. Our approach requires a more refined, ground-up assessment of geopolitical and legislative condition of each market, and new research hints more closely at the subtleties that we believe are important to our decision-making process on this front.

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Wal-Mart Retools E-Commerce
May 29, 2017

Richard was recently quoted in a BloombergBusinessWeek story on Wal-mart’s re-positioned e-commerce strategy and the new leadership for these online efforts, headed up by Jet.com’s Marc Lore.

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Peering Into The Future
May 27, 2017

The usefulness of CAPE as a valuation metric for broader markets has become a religious argument. CAPE clearly cannot be used to market time (what can?) and this time could always be different, but this EconompicData chart illustrates what we consider a fundamental “law” of finance – price and returns are inversely related. That is, the higher the valuation of an asset, the lower the expected return should be for that asset (and vice versa).

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Too Much of a Good Thing
May 16, 2017

Good and effective governance is not primarily a result of an exhaustive set of rules and regulations, but rather a product of a strong and clear culture of accountability and doing the right thing on behalf of all stakeholders. For some companies, good board governance practices have swung way too far towards independence, which is far from a cure-all.

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Are Retailers Overpromising?
May 10, 2017

Consumers are being conditioned to enjoy a very expensive solution (for the retailers) to the complicated problems of look and fit when shopping for many product categories online. Over the longer-term and in order to be profitable, the retailers will need to be compensated for this service. We are dubious that consumers will be willing to pay for it.

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Pricing in the Internet Age
May 8, 2017

The internet has revolutionized retail across a large swath of categories partially because it promotes vastly superior price discovery and comparison shopping. These benefits have mostly accrued to the consumer, but e-commerce retailers are also using the data trail from online shopping to try to optimize their sales and profits through superior price discrimination, something that cannot be done nearly as effectively in physical stores.

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Oxford Comma to the Rescue
May 5, 2017

We are fans of the Oxford comma. Clarity can save money and heartache.

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Erdogan Wins The Battle
April 28, 2017

Recep Tayyip Erdogan continues to consolidate his power in Turkey with his recent election win, dimming what was once a bright democratic light in the region and moving the country toward an authoritarian state. With eroding support in important parts of the country, there is perhaps some hope that Erdogan’s moves will ultimately fail.

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Boilermaker Boldness
April 20, 2017

In a bold move, Purdue University – a public/state institution – will acquire for-profit Kaplan.  We have long talked about the need for innovation in higher education in the Internet era, so this entrepreneurial experiment is one we will follow with great interest, particularly with the unique financial structure of the transaction.

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If You Can’t Beat ‘Em, Join ‘Em
April 15, 2017

Google has been against ad-blocking software in the past, but its position is evolving.  The potential integration of this service into its Chrome browser – as the default setting – seems to be an attempt to deliver some of what consumers want while simultaneously minimizing the impact on its core advertising businesses. 

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On-Shoring Shoes
April 13, 2017

Advances in robot technology, the desire to imitate the success of fast fashion, and rising labor costs in Asia are leading Adidas to develop ways to bring shoe manufacturing to Germany and the United States in its high-tech Speed Factories.  Adidas has been unable to fully automate production, however, as engineers have not quite figured out how to get robots to lace shoes.

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A Curious Case Study of Incentives
April 10, 2017

Incentives matter, and they can lead to any number of intended and unintended consequences.  Ultimately systems deliver the behavior that they reward.

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Wage Inflation in China
February 27, 2017

While a rise in wages has been good for the Chinese economy and the companies offering goods and services in the country, the increase in labor costs is eroding China’s economic advantages for manufacturing.  Productivity gains have enhanced the value of man-hours, but total cost considerations (including shipping costs) will continue to lead manufacturers to look elsewhere for production. 

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A Bad “Recep”-e for Turkey
February 27, 2017

At the direction of President Recep Tayyip Erdogan, Turkey's government continues seizing and nationalizing private assets, particularly from political foes.  Erdogan's growing ambitions are troubling both for the populace's civil rights and the country's once-promising economy.

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Lies, Damn Lies, and Statistics
February 15, 2017

It is hard to trust any macroeconomic numbers coming out of China.  As Charlie Munger likes to remind everyone, always follow the incentives.

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Shoot the Messenger
February 7, 2017

Political leaders in Greece are perpetuating a classic case of shooting the messenger.  Greece is doomed to its current dismal financial state until it addresses fundamental structural problems.

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