Invested | Review & Highlights

Danielle Town & Phil Town. Invested: How warren Buffett and Charlie Munger Taught Me to Master My Mind, My Emotions, and My Money. William Morro, 2018. (319 pages)


80-90% of this book is filled with personal anecdotes by Danielle on her family, her love life, her friendships, her inner monologue, and other random intimacies. While I think I appreciate the strategy–being real, transparent, approachable… in other words, being human–it was painful grudge work to have to skim though so much of that to get to the real meat of the lessons, explanations, and principles, the main reason you buy a book such as this. So, let me list the key takeaways that I do appreciate, then my main highlights below, and, well, that’s all you really need to know about this book.

  • A company’s story is really important, and I appreciated the focus on getting that part down as a first step to investing.
  • The summation of “hoarding” and “abdicating” was a helpful categorization.
  • Being “mission-based” in your investment is also a worthwhile consideration, ensuring that your money is in alignment with your values.
  • Learning about “Moats” was new for me, and extremely insightful.
  • I admit, I lost focus during the more involved math.

I’m sure there may be more gems in there, but they’re hidden in the verbose narration. I’m off to find a more concise book on the ideas. This one looks promising.


A lot of this book is about fear:… (1)

The financial-industrial complex tell me that there are only two options to generate more money:

  1. HOARD. Stop buying anything fun or extra to save, save, save, and make only the most conservative investments; or
  2. ABDICATE. Give my money over to a money manager, to whom I should pay fees for the privilege of handing over my money, regardless of whether or not he loses my money. (20)

Stock markets, however, typically rise with inflation because company revenue and earnings typically rise commensurately. In sum, inflation hurts savings but helps stocks. (31)

You want (54) to decide what is speculation and what is an investment. An investment is determined by its certainty. (55)

Basically there are four pretty straightforward mathematical components to achieving financial freedom:

  1. Minimum annual spending
  2. Years remaining to invest
  3. Money to invest
  4. Required rate of return on the investments (59)

As I do my research into a company I naturally concoct in my head a tale of how that company came to be, who runs it, and why it does what it does. I call this tale a Story. I follow a kind of simple outline to create a Story about a business: meaning, management, Moat, Margin of Safety. (79)

Efficient Markets Hypothesis (EMH) says that if people are rational actors who (85) buy and sell based on a what a stock is worth, then a stock’s price is completely rational and–here’s the key–fully reflects all available information at any given moment in time. All of the possibilities of a stock going up or down are immediately factored into the price by thousands of smart people who have all the information and are bidding on the stock, all at the same time. The theory says that the pricing of stock based on information available at every given moment makes the market efficient. Therefore, the price of the stock at any given moment is exactly the same as its underlying value. (86)

…Benjamin Graham’s investing strategy of “mentally, always buying the business, not buying the stock” at a lower price than its value. (88)

For Charlie Munger to put money into a company:

  1. it must be a business he is capable of understanding
  2. it must be a business with sone intrinsic characteristics that give it a durable competitive advantage
  3. he would like it to be a business that has management with integrity and talent and
  4. it must be a business that he can buy for a price that makes sense and gives a Margin of Safety (99).

[A “Moat” is] an intrinsic competitive advantage that is durable. (121)

BRAND. When a company has a brand that is so strong that it would be very difficult for another company to create an equally strong brand to compete with them. Sometimes created by being the first mover into an industry and thereby having that industry identified with them. (123)

SWITCHING. When it is very difficult, expensive, or painful for a customer to switch away from using a company’s products or services. (123)

NETWORK EFFECTS. A subset of the Switching Moat, when a company provides an exclusive network to which the user wants access. The act of switching itself is not difficult, but switching away from the network would mean losing that access. (123)

TOLL BRIDGE. When a company has a monopoly or near monopoly in their industry. That is a Toll Bridge is the only product in a big niche. This is usually created by government regulations or intervention, which of course can change. Other kinds of Toll Bridge Moats are geographic or driven by the unbelievable cost to enter a market. Or all of the above. (124)

SECRETS. When a company has proprietary secrets that protect tit from other companies copying it. These might take the form of patents, or trade secrets, or other forms of intellectual property. (124)

PRICE. When a company is the low-cost provider because it can make its product, or provide its service, more cheaply than anyone else, and it is intrinsically able to sustain that advantage. (124)

Big Four Numbers

  1. Net Income (also called Net Profit or Net Earnings)
  2. Book Value (also called Equity) + Dividends (if any)
  3. Sales
  4. Operating Cash (131)

…you should only invest in a business an idiot could run, because one day an idiot will. – Warren Buffett

RETURN ON INVESTED CAPITAL (ROIC) = NET INCOME / (EQUITY + DEBT) | The Wilshire GDP ratio tracked by the Federal Reserve Bank of St. Louis (the FRED).

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