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7/16/2015

Whitney Tilson On Tom Gayner; Misbehaving; Blackberry

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Whitney Tilson On Tom Gayner;


Misbehaving; Blackberry

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Posted By: VW Staff (http://www.valuewalk.com/author/valuewalk-staff/)


Posted date: July 02, 2015 03:38:14 PM In: Business (http://www.valuewalk.com/category/business/)
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Whitney Tilson (http://www.valuewalk.com/tag/Whitney-Tilson/) talks about an


article on Tom Gayner, Richard Thalers new book Misbehaving
(http://www.amazon.com/gp/product/0393080943/ref=as_li_qf_sp_asin_il_tl?
ie=UTF8&camp=1789&creative=9325&creativeASIN=0393080943&linkCode=as2&tag=valueinves08c20&linkId=7BTSLZAE5SDH45GQ), the differences between male and female
investors, Sony Corporation (NYSE:SNE (http://www.valuewalk.com/stock-data/?
stock_symbol=NYSE:SNE)) (TYO:6758 (http://www.valuewalk.com/stock-data/?
stock_symbol=TYO:6758)) hacking scandal, how BlackBerry Ltd (NASDAQ:BBRY
(http://www.valuewalk.com/stock-data/?stock_symbol=NASDAQ:BBRY)) (TSE:BB
(http://www.valuewalk.com/stock-data/?stock_symbol=TSE:BB)) botched its
response to the iPhone.
1) We have exciting plans in the works for Value Investor Media, the company I cofounded in 2004 with John Heins that publishes Value Investor Insight and
SuperInvestor Insight. As a result, we're looking for senior editorial talent to add to
the team. Ideal candidates would be both passionate and knowledgeable about value
investing as well as skilled and experienced writers and editors. If you or anyone you
can recommend fits the bill and is interested, please contact John Heins at
jheins@valueinvestormedia.com (mailto:jheins@valueinvestormedia.com).

Whitney Tilson on Tom Gayner


2) A nice article about Tom Gayner of Markel, a great value investor:

http://www.valuewalk.com/2015/07/whitney-tilson-on-tom-gayner-misbehaving-blackberry/99999/

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Whitney Tilson On Tom Gayner; Misbehaving; Blackberry

Earlier this month, a crowd filled an auditorium to attend a corporate annual meeting
at which a folksy investor spoke about his company and the secrets of success. But
they werent in Omaha to hear Warren Buffett (http://www.valuewalk.com/warrenbuffett/) talking about Berkshire Hathaway (http://quotes.wsj.com/BRK.A) ; this
crowd came to the Altria Theater in Richmond, Va., for the annual meeting of Markel
(http://quotes.wsj.com/MKL) Corp.
One of the speakers, Thomas Gayner, co-president and chief investment officer of the
financial-holding company, has an outstanding record as a portfolio manager. He works
only for Markel and doesnt take outside clients, but every investor can learn from
him.
Over the past 15 years, Mr. Gayners stocks have returned an average of 11.3%
annually, while the S&P 500 index of big U.S. stocks has returned 4.2%, counting
dividends. Last year, when winning portfolio managers were scarcer than vegetarians
at a pig roast, Mr. Gayner outperformed the S&P 500 by 4.9 percentage points. His
portfolio fell 34% in the market rout of 2008, but that was better than the S&P 500s
37% loss.
You never would know any of this from listening to Mr. Gayner. After a good year,
most portfolio managers beat their chests even harder than they beat the market; Mr.
Gayners 2014 report merely said, our overall equity portfolio earned 18.6%,
without even mentioning that the S&P 500 was up 13.7%.
Several of Mr. Gayners peers describe him as a good investor who has become great
by knowing he is just good. He is no Warren Buffett, and he is keenly aware of his
limitations. I tell investors, Youre smarter than I am, but Im managing your
money, Mr. Gayner says. If you see me doing something I shouldnt be, tell me.
But he also makes the most of his strengths.
We interviewed Gayner in the June 2011 edition of Value Investor Insight (attached;
you can subscribe at: www.valueinvestorinsight.com
(http://www.valueinvestorinsight.com)). Also, he recently did a talk at Google
Inc (NASDAQ:GOOG (http://www.valuewalk.com/stock-data/?
stock_symbol=NASDAQ:GOOG)), which is posted here:
http://youtu.be/2sG91e1Wh4I (http://youtu.be/2sG91e1Wh4I)

Whitney Tilson: Review of Richard Thalers new book,


Misbehaving
3) This review of Richard Thalers new book, Misbehaving: The Making of Behavioral
Economics
(http://www.amazon.com/gp/product/0393080943/ref=as_li_qf_sp_asin_il_tl?
ie=UTF8&camp=1789&creative=9325&creativeASIN=0393080943&linkCode=as2&tag=valueinves08c20&linkId=7BTSLZAE5SDH45GQ), led me to read it, which I really enjoyed:
Time after time Mr. Thaler cheerfully reports how many of his most famous papers in
behavioral economics, often written with scholars across enemy lines (that is,
noneconomists), were pure heresy that got peoples blood boiling. One article
directly attacked the core principle underlying the Chicago Schools libertarian
beliefs, namely consumer sovereignty: the notion that people make good choices, and
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Whitney Tilson On Tom Gayner; Misbehaving; Blackberry

certainly better choices than anyone else could make for them. By empirically
demonstrating that consumers often do precisely the opposite, because rationality and
self-control are bounded by human perceptual distortions, their paper undercut this
principle. This was treacherous, inflammatory territory, he writes. In 1998,
Christine Jolls, then an assistant law professor at Harvard, Cass Sunstein, a law
professor at the University of Chicago, and Mr. Thaler published their groundbreaking
paper, A Behavioral Approach to Law and Economics, which infuriated members of
both professions in one blow.
Mr. Sunstein and Mr. Thaler then collaborated on another scandalous claim, that
human beings are susceptible to cues in the environment that affect their behaviora
fact that governments and businesses can use to promote healthy behavior and wiser
choices. Needless to say, many economists and others were outraged by the
implication that the authors were promoting paternalism and intervention by
government bureaucrats. Not at all, says Mr. Thaler. They were simply noting that
the knee-jerk claim that it is impossible to help anyone make a better decision is
clearly undercut by the research. No matter how often they added that bureaucrats
are Humans, with their own biases, their critics wouldnt listen, even when Mr.
Sunstein kept repeating that they were not pro-paternalism but rather anti-antipaternalism. Mr. Thaler preferred the term libertarian paternalism, but that didnt
catch on either. Eventually they found the right word to capture the gist of their
argument, using it for the title of their book Nudge.
Accordingly, the final chapters of Misbehaving take on the key issue of nudging:
Could we use behavioral economics to make the world a better place? And could we
do so without confirming the deeply held suspicions of our biggest critics: that we were
closet socialists, if not communists, who wanted to replace markets with bureaucrats?
Yes, he argues, and yes. Because people make predictable errors, we can create
policies and rules that lower the error rate, whether it has to do with reducing driving
accidents, getting men who use public urinals to aim better or enticing people to save
for retirementand do it in a way that makes people themselves happier with the
results.

Whitney Tilson: The differences between male and


female investors
4) An interesting article about the differences between male and female investors:
Men also tend to trade more, which can be a disadvantage. In 2014, according to
Vanguard, 11% of men made an exchange among mutual funds in their accounts,
compared with 7% of women. By trading less often, women are less likely to trade at
the wrong time, explains Jean Young, senior research analyst at Vanguard.
Different horizons
The studies show that women might have a lot to teach in other areas, as well. They
are more likely than men to participate in employer-sponsored retirement plans (73%
at the end of last year, compared with 66% for men in Vanguard plans) and save a
greater percentage of income (7% compared with 6.8% for men, according to the
Vanguard data).

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Whitney Tilson On Tom Gayner; Misbehaving; Blackberry

(http://www.valuewalk.com/wp-content/uploads/2015/07/image016.jpg)
Women have a longer time horizon, they have a goal in mind and they are more
willing to seek professional advice, says Rosanne Rog, a financial planner in Bohemia,
N.Y., whose clients include men and women. Its the men who ask to keep some
money on the side to manage on their own; they want to shoot the lights out.
5) Following up on the in-depth look at the Sony hacking scandal in yesterdays email,
here are two more in-depth articles on important topics: how companies respond to
activists (which was also a part of the Sony story) and to revolutionary new products
by competitors. Heres the first:
A behind the scenes look at the bruising four month battle between the chemical giant
and hedge fund Trian, which will be decided this week, offers a new window into
whether shareholder activism is good for corporate America, or crippling it.
(DuPont ended up defeating Peltz.)

Whitney Tilson: How Blackberry botched its response


to the iPhone
6) And heres the second, about how Blackberry botched its response to the iPhone:
RIMs chiefs didnt give much additional thought to Apple Inc. (NASDAQ:AAPL
(http://www.valuewalk.com/stock-data/?stock_symbol=NASDAQ:AAPL))s iPhone
for months. It wasnt a threat to RIMs core business, says Mr. Lazaridiss top
lieutenant, Larry Conlee. It wasnt secure. It had rapid battery drain and a lousy
[digital] keyboard.
If the iPhone gained traction, RIMs senior executives believed, it would be with
consumers who cared more about YouTube and other Internet escapes than efficiency
and security. RIMs core business customers valued BlackBerrys secure and efficient
communication systems. Offering mobile access to broader Internet content, says Mr.
Conlee, was not a space where we parked our business.
The iPhones popularity with consumers was illogical to rivals such as RIM, Nokia
Corporation (NYSE:NOK (http://www.valuewalk.com/stock-data/?
stock_symbol=NYSE:NOK)) Corp. and Motorola (http://quotes.wsj.com/MSI) Inc.
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The phones battery lasted less than eight hours, it operated on an older, slower
second-generation network, and, as Mr. Lazaridis predicted, music, video and other
downloads strained AT&Ts network. RIM now faced an adversary it didnt
understand.
By all rights the product should have failed, but it did not, said David Yach, RIMs
chief technology officer. To Mr. Yach and other senior RIM executives, Apple changed
the competitive landscape by shifting the raison dtre of smartphones from something
that was functional to a product that was beautiful.
I learned that beauty matters....RIM was caught incredulous that people wanted to
buy this thing, Mr. Yach says.
8) Random tip: I book a lot of flights and have recently discovered what I think is by
far the best search engine: Google Flights (https://www.google.com/flights
(https://www.google.com/flights)). Its fast, easy to use and customize, and has a
brain so it shows you the best flights right at the top, based mostly on price but also
shortest travel time, etc. It also tells you that you can save X dollars if you fly a day
earlier or later, etc. And because it doesnt actually book flights and charge the airlines
a commission (like Orbitz, Travelocity and the other travel sites), it has nearly every
airline (except Southwest, which nobody has).
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