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Morningstar Summer Reading List – 2020/21

Lex Hall  |  24 Dec 2020Text size  Decrease  Increase  |  
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A search on Amazon of books about covid-19 yields more than 10,000 results. None of them is on the Morningstar Summer Reading list. Understandable, given how much we’ve all read about it this year.

In any case, when we asked Morningstar staff what they planned to read this summer, they responded with a rich mix of business memoir, psychology, artificial intelligence and robotics, Australian history, and of course straight-up investing.

In between running a business during the time of covid, Morningstar Australia managing director Jamie Wickham sought refuge in a memoir by executive chairman of Disney and Time’s Businessperson of the Year, Bog Iger. In The Ride of a Lifetime: Lessons in Creative Leadership from 15 Years as CEO of the Walt Disney Company, Iger recounts how he became CEO of The Walt Disney Company in 2005, during a difficult time. Competition was rude and technology was changing faster than at any time in the company’s history. His vision centred on three clear ideas: Recommit to the concept that quality matters, embrace technology instead of resisting it, and think bigger—think global—and turn Disney into a stronger brand in international markets.

Today, Disney is the largest, most admired media company in the world, counting Pixar, Marvel, Lucasfilm, and 21st Century Fox among its properties. Its value is nearly five times what it was when Iger took over, and he is recognised as one of the most innovative and successful CEOs of our era.

“Easy, entertaining read with lots of great stories and leadership lessons,” says Wickham of the New York Times bestseller. “The courage of his conviction and the way in which he navigated difficult situations was a standout for me; as was the way in which he modernised a business steeped in a long history. The acquisition of Pixar and his friendship with Steve Jobs made for interesting reading.”

Memoir was also on the list of Grant Kennaway, Morningstar Australia director manager research, who pored over Titan, The Life of John D. Rockefeller, Sr, Ron Chernow’s magisterial biography of the man described by some as the Jekyll and Hyde of American capitalism.

“When examples of malicious business monopolies are given you often see reference to  John D. Rockefeller and Standard Oil,” says Kennaway. “Rockefeller was the original robber baron, destroying competitors and buying off politicians to dominate the global oil industry. This book does not sugar coat Rockefeller’s ruthless nature and later life efforts at redemption via philanthropy. Some of the observable parallels between Standard Oil and modern monopolistic tech companies are a little frightening.”

Firstlinks editor and Morningstar Australia editorial director Graham Hand nominated as his favourite for the summer: The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel, former columnist with Motley Fool and the Wall Street Journal. “The fact it’s a business book and not a novel says something about my misguided priorities,” says Hand. “Housel is a great communicator, translating complex ideas into easy-to-read stories. And one reason I loved it is that he agrees with me, although he doesn’t know it. I’ve long worried that despite many of the brightest minds working in finance, there’s no evidence that we are better at investing than we were decades ago. We can’t even design innovative retirement products that millions of our readers need.”

Morningstar global chief content strategist Sylvestor Flood also found 

Our most voracious summer reader is Morningstar Australia senior product manager Mark Lamonica. Lamonica has graded his selection according to your place on the investing path. The first book on his list is aimed at beginning investors: The Little Book that Still Beats the Market by Joel Greenblatt, an American investor and professor at Columbia Business School. “Greenblatt wrote this book, so it was straight forward enough for his kids to understand,” says Lamonica. “It introduces his Magic Formula to Investing which looks at findings shares with a high return on capital and high earnings yield. He also introduces some basic concepts so new investors can understand how they should think about evaluating the underlying companies.” 

Second on the Lamonica list is The Essays of Warren Buffett: Lessons for Corporate America. “One of Warren Buffett's many talents is that he is able to explain investing concepts in a straightforward manner. This is a pretty big contrast from an industry that often makes things sound overly complex to try and intimidate people into thinking they need professional assistance. The Essays of Warren Buffet is just that—republishing some of his best essays that talk about investing of course but also a number of lessons on corporate America.”

Warren Buffett plays ping pong w a giant novelty paddle

One of Warren Buffett's many talents is that he is able to explain investing concepts in a straightforward manner. A contrast from an industry that often makes things sound overly complex to try and intimidate people into thinking they need professional assistance

For intermediate investors, Lamonica has two books to suggest. The first is The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William N. Thorndike founder and a managing director of Housatonic Partners, a private equity firm. Published in 2012, the book presents eight case studies of CEOs and focuses on capital allocation decisions. “Capital allocation refers to the decisions that companies make in deciding what they should do with cash that they either generate or raise from debt or equity markets,” says Lamonica. “The importance of capital allocation decisions is underappreciated by many investors. But at the end of the day owning a share is owning part of a business so the decisions management makes on what to do with the capital of a company is critical—because it is your capital. These decisions can be buying other businesses, investing in growth, paying dividends, paying down debt or buying back shares. The case studies in this book provide a really interesting perspective on CEOs that took un-conventional approaches to capital allocation.” 

The next selection for intermediate investors is the classic One Up On Wall Street by Peter Lynch. More than one million copies have been sold of this seminal book on investing in which the legendary mutual-fund manager explains the advantages that average investors have over professionals and how they can use these advantages to achieve financial success. “Lynch was the portfolio manager for Fidelity’s Magellan fund which famously outperformed the S&P 500 for 11 straight years,” says Lamonica. “One Up on Wall Street articulates Lynch’s investment philosophy which includes his famous call to invest in only what you understand. He also preaches that investors should do their homework and research an investment thoroughly and stresses that investors should focus more on a company's fundamentals than the market as a whole. Finally, Lynch encourages investors to focus on the long run and discard short-term market gyrations. All great lessons for investors who are trying to improve their knowledge.” 

And for more advanced investors, Lamonica suggests another classic: Philip A. Fisher’s Common Stocks and Uncommon Profits. First published in 1958, and never out of print, this manual, by one of America’s most influential investors, outlines the 15 points that investors should look for when evaluating a company. “Fisher was focused on finding great companies that would compound investor’s wealth over the long term and his 15 points are a way to find well managed companies with great growth prospects.” 

The award for choosing the best book title goes to Morningstar Canada senior editor Ruth Saldanha. Behaviour Gap: Simple Ways to Stop Doing Dumb Things with Money is by Carl Richards, the author of the 2015 manual, The One-page Financial Plan: A Simple Way to be Smart about Your Money.

“Richards uses simple sketches to help explain complex ideas,” says Saldanha. “He is a Certified Financial Planner and explains how to invest in a way that would work for you. A good read, especially for someone who doesn’t like thinking about money too much!”

Saldanha has an additional selection, which she admits is a little unusual. This Is All I Got: A New Mother's Search for Home by Lauren Sandler. “On the face of it, it has nothing to do with money, or finance or economics,” says Saldanha. “But in reality, it has everything to do with all three. In it, a journalist follows a pregnant lady in New York for a year, as she tries to get access to secure housing for herself and her child. The book challenges what we think we know about personal finance, what money means to different people at different levels of the social and economic hierarchies, and what we see as being ‘important’ when it comes to money.”

Closer to home, Morningstar Australia director of equity research Mathew Hodge also has two suggestions. The first carries a somewhat imposing title which nevertheless distils the message: Doing Good Better: How Effective Altruism Can Help You Help Others, Do Work that Matters, and Make Smarter Choices about Giving Back by 33-year-old William MacAskill, a Scottish philosopher, ethicist, and one of the originators of the effective altruism movement. “It’s about taking an objective view to doing the most good,” says Hodge. “How do we choose to influence good outcomes in the world in the most effective way? The answers are not obvious, and humans are wired in ways which lead to less than optimal outcomes.”

Hodge also found nourishment in a more concise and well-known title: Influence: The Psychology of Persuasion by award-winning behavioural scientist Robert B. Cialdini. Originally published in 1984, Influence has topped the bestseller lists and sold more than five million copies.

“In it,” says Hodge, “you’ll learn the six universal principles, how to use them to become a skilled persuader—and how to defend yourself against them. Perfect for people in all walks of life, the principles of Influence will move you toward profound personal change and act as a driving force for your success. Here are the six main principles explored in this book: 1. Reciprocation ; 2. Commitment & Consistency; 3. Social Proof; 4. Authority; 5. Liking; 6. Scarcity.”

And in the spirit of diversification, our final selection—James Cook: The Story Behind the Man Who Mapped the World by rugby international turned historian Peter FitzSimons—is not strictly about finance or investing. But as Morningstar Australia equity analyst Alex Prineas notes, it nevertheless has some insights into the acumen of the British navigator and cartographer, who one fine day in late January 1788 stumbled on a lump of land, hitherto known as Australia.

 “Usually dry history is retold as an engaging story, starting with Cook’s early life and voyages, and his rise up the ranks in the navy,” Prineas says. “FitzSimons’ covers Cook’s involvement in the siege of Quebec, and eventually his famous adventures in the Pacific. The author offers insights into Cook’s character and motivations, his good fortune in being exposed to experts from whom he could learn navigation, cartography and astronomy, and Cook’s ability to make the most of it all. There’s a lot to reflect on, especially because the author contrasts Cook’s life with the Endeavour’s botanist, Joseph Banks, who was a wealthy aristocrat, and in some ways the antithesis of Cook. I would say this is a page-turner, except that I’m listening to the well narrated audiobook.”

And allow me to round out the selection with another engrossing read: The AI Economy: Work, Wealth and Welfare in the Robot Age by Roger Bootle, the founder and chairman of Capital Economics. Did you know “electric brain” is the Chinese translation for “computer”? Did you know that in 1998 Newsweek led with an article headlined "The internet? Bah!"; and I bet you hadn’t heard that if advanced societies switch rapidly to new technology, by 2030 as many as 700 million people could be displaced by robots.

These are just some of the things I learnt reading The AI Economy. Written with his characteristic flair and wit, Bootle's illuminating and at times disquieting survey examines the rise of AI and how it will change our lives. After a few pages, I interrupted my reading to plonk some money into the nearest AI/robot-themed ETF I could find.

a man looks at a robotic hand

The AI Economy: Work, Wealth and Welfare in the Robot Age by Roger Bootle is an illuminating and at times disquieting survey examines the rise of AI and how it will change our lives

 

is content editor for Morningstar Australia

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