Practical analysis for investment professionals
02 March 2018

Weekend Reads for Investors: Free Lunch Edition

As I write this edition of Weekend Reads, I am overlooking the Bosphorus in Istanbul, on the last leg of a trip through the region to present an interactive workshop based on the Meditation Guide for Investment Professionals.

By the time you read this, I will have conducted the workshop 23 times across the globe. The forum has proven quite popular. Thanks to each CFA society and event organizer for their hospitality in hosting me. What this means is I have received many free lunches and dinners over the last year — and free lunch is my theme this month.


First up are two stories whose center of gravity is the tax code “reform” in the United States. I use quotes because though some are calling it “reform,” I see the tax code as a rich playground for legislators of both major US political parties to purchase votes from among their constituents. Yes, many citizens received a tax cut. But by now, don’t we all know there is no such thing as a free lunch? In particular for us investor types, the new tax law creates earnings distortions that analysts need to understand.

While on the subject of idealistic zero-cost meals, the US intelligence chief is describing runaway debt as a security threat. What, you mean we have to finance all of those tax breaks?


Ace French analyst Alejandro Acosta, CFA, one of the many investment pros I talk with regularly, sent me this excellent piece about how there are few things “as dangerous as economists with physics envy.” This reminds me of comments from Emanuel Derman in his excellent book Models. Behaving. Badly. pointing out the investment profession’s dark obsession with all things artificial and math-y. It may sound harmless, but algos and their more iterated cousin, the big data-enabled machine-learning analyst, look poised to unnecessarily displace human beings from investment analysis.

Those of you who read my stuff regularly are familiar with this theme. Those who are not: Just know that I am a champion of human capability, but I believe our industry has shown little interest in more fully developing what humans do well. What’s the incentive when profit margins are so high?

But I digress. Let me return to the free lunch theme and yet another Silicon Valley truism, this one about the power of networks. Surely you have heard of the network effect? Well, it turns out that there is “Scant Evidence of Power Laws Found in Real-World Networks.” What, you mean tech talk could be hyperbole?


Don’t get me wrong, I think that the wise application of technology in our industry is likely to lower costs for end clients and upend many of finance’s old lions. One noteworthy effort is Tencent’s social credit scoring, which is among many new ways of underwriting loans.

Last month, my statement that the equity risk premium was the lowest it had been since just before the Great Recession attracted quite a lot of attention, including two newspaper stories. Wowza! Frothy financial markets are a type of free lunch. Or maybe like drinking alcohol for the glee of being hammered only to then face the hammerhead of a hangover. Many are starting to talk about some of the oddities of the current investment landscape. Bloomberg’s Matt Levine notes the economy is full of crypto and collective delusion.

Environmental, Social, and Governance (ESG)

Another story with a free lunch slant is a piece of investigative journalism about price fixing by German automakers. <sigh!> Because I am a conscious capitalist, this kind of story infuriates me. When price is not reflective of value, there is misallocated capital that has only faceless victims. But among them are many more worthy goods, investments, and charities.

While in the neighborhood of governance issues, juicy tidbits about the culture of Silicon Valley are revealed in Uber’s former CEO Travis Kalanick’s testimony in the Waymo v. Uber court case.

Here is a cool story about gigantic batteries at long last reducing the need for “peaker” power plants. These are the mostly inefficient power plants brought on line during peak energy periods to cover surging demand. Think: during crazy weather.

Fun Stuff

Long-time readers know that I follow developments about the human mind and brain pretty closely. Usually, the stories I share are about advances in our understanding of how the mind and brain work. (And why I think our industry needs to wake up and concern itself with natural intelligence as much as artificial intelligence (AI).) But this one is about something a little different and kind of cool: the development of wearable scanners that could potentially read our minds. The applications here are practically endless. Imagine putting these scanners on prospective clients, running simulations about their portfolios, and eliciting responses from them. It would give us important insights into how they’d react to gyrations in the value of their portfolios, and we could respond accordingly.

Last, the closest thing to an actual free lunch that I know about is meditation. How? Because other than the time it takes you to meditate, there are zero costs. Yet the benefits far outweigh the minimal costs. Here I am talking about stress relief, better thinking, the ability to overcome behavioral biases, and help resolving ethical dilemmas. Bon appetit!

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/ fandijki

About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Voss also sub-contracts for the well known firm, Focus Consulting Group. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

Ethics Statement

My statement of ethics is very simple, really: I treat others as I would like to be treated. In my opinion, all systems of ethics distill to this simple statement. If you believe I have deviated from this standard, I would love to hear from you: [email protected]

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