Books - Q1 2026

• The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success (5/5) Bought two copies of this, one to read and one for the CEO of a company that is cheap and overcapitalized but inexplicably reluctant to buy back stock. (The book has been on sale for half off on Amazon.) The Outsiders is much better than I thought the first time around, when I got bogged down with how unscientific it is. It is true that there is no control group, but you can learn useful things about the world from small sample sizes. I also did not appreciate back then how persistent business quality is, so while it may be a bad idea for a retailer to buy back stock (Sears / Radio Shack), it will work much better for a company that owns royalties or has a durable business "franchise." The Outsiders has eight case studies of companies with very high total shareholder return (significantly better than S&P 500) over long periods of time that also repurchased large amounts of stock (share cannibals). The cases in the book are: Tom Murphy / Capital Cities, Henry Singleton / Teledyne, Bill Anders / General Dynamics, John Malone / TCI, Kay Graham / Washington Post, Bill Stiritz / Ralston Purina, Dick Smith / General Cinema, and Warren Buffett / Berkshire Hathaway. The youngest of these executives is John Malone, who was born in 1941. Bill Anders was an Apollo astronaut! We really need a more up-to-date and scientific study of share cannibalization. (Some incredible share repurchasers of the past decade: AutoNation, DaVita, eBay, Synchrony Financial, Dillard's, Murphy USA, Allison Transmission, Group 1 Automotive.) An honest assessment should also look at attempted cannibalizations that turned into shareholder wipeouts, such as Sears. Could those failures have been predicted in advance? (Share repurchases are much riskier if a company has leverage, low profit margins, or lacks profitability.) The book was written in 2012 and he picks Transdigm (TDG) as a contemporary analog of an Outsider company. An outstanding choice: subsequently it is up 20x vs 6x for the S&P 500, which is 26% compounded vs 15%. Other highlights: Singleton was the "Babe Ruth of repurchases." John Malone's research project at Bell Labs was "studying optimal strategies in monopoly markets." (Paper: Resource Allocation and the Regulated Firm.) "EBITDA in particular was a radically new concept, going further up the income statement than anyone had gone before." What we are most confident in would be that royalty-like businesses should return capital via share repurchases. But managements of large cap companies are much better at this now, as we noticed when we read the AmEx book last year. It is at the Oddball micro caps and small banks where the managers have trouble understanding the benefit of share repurchases.
• The Art of Spending Money: Simple Choices for a Richer Life (2/5) Always looking for a good personal finance book to give to people with questions about building wealth. The Millionaire Next Door is good in many ways but some of its ideas are out of date now. (In particular, it is much harder to be frugal in buying your primary residence because you don't want to live in an underclass neighborhood.) I should have remembered that the author's (Morgan Housel) previous book was just a blog post turned into a book. Here is the tl;dr summary for this one. Interesting chapter at the end about the lifecycle of greed and fear: "Greed happens when you double down on actions that at one time worked but aren't sustainable, or that cause you to overestimate how influential your actions were on outcomes."
• Landscapes of Extraction: The Art of Mining in the American West (2/5) Nothing more cornucopian than a gigantic open pit copper mine that has been in business since 1906. The Bingham Canyon Mine takes up 0.02% of the land area of the state of Utah. Can we spare the intrusion? To ask an art museum curator the answer would be "no." They think that mines and oil fields are "problematic" and need to be "interrogated" with art. Hey, that energy is keeping the lights on in the gallery. (Also remember: "There would be a lot fewer history professors without cheap energy.") The Works Progress Administration's Federal Art Project (FAP) paid for a lot of this industrial art during the Great Depression. Remember that  there was no demand for artists or writers during the Great Depression and it turned that generation of would-be artists into communists. Some of these paintings are great, though, like the Chasm of the Bingham or Merrill Mahaffey's painting of the Morenci copper mine (owned by FCX).
• In Short Measures: Three Novellas (2/5) They say never meet your heroes. We really like Michael Ruhlman's nonfiction writing. His book The Making of a Chef is a true 5/5 and so is Walk on Water, the book about a pediatric heart surgeon. (The theme in his early books was that the "people who pursue perfection, date-on-a-dime clarity, and impossible high standards are the most compelling human beings alive.") However, this book is a collection of three short novels that he wrote around the time he got divorced. Based on the theme of the first novella (I didn't read the other two), I think that he was working on his own justification for leaving his wife to be with another woman. (Oddly, for a much older and less attractive woman.) Catholic News has a great, based take on the New York Times' story on Ruhlman's second marriage: "I do know that when you are married, it is profoundly dangerous to develop a fast friendship with someone of the opposite sex. Above all, married couples must protect their hearts. One may not be footloose with your heart. In fact, it is no longer yours." "As a final silly coda, the Times reported that crime-novelist Laura Lippman became a Universal Life minister so she could officiate at their wedding in the park. It is all so heart-breaking and, I regret to say, so utterly unserious." Michael had a bad fall last year while drinking. Falls claim a lot of alcoholics. And foodies tend to drink too much.
• The Renaissance: A Short History (3/5) Paul Johnson says that the Renaissance was the first great cultural war in European history. "Medieval certitude - or credulity depending on your viewpoint - was now faced with Renaissance scrutiny, or skepticism." "In response to the Protestant cult of the vernacular - of simplicity, austerity, and puritanism - the Catholic Church, after its earlier defensive and guilt-ridden response, decided to embark on a much bolder policy of emphasizing the spectacular. With the Jesuits in the vanguard, churches and other religious buildings were to be ablaze with light, clouded with incense, draped in lace, smothered in gilt, with huge altars, splendid vestments, sonorous organs and vast choirs, and a liturgy purged of medieval nonsense but essentially triumphalist in its content and amplitude." His chapter "The Buildings of the Renaissance" would be useful if one were to visit Rome, Venice, or Florence.
• Beyond Banks: Technology, Regulation, and the Future of Money (2/5) There was a great tweet about banks three years ago that we often think back on: "what if everyone's paycheck gets automatically deposited into some dude's credit fund and the government guarantees the deposits if the fund manager makes a mistake?" Banks are a 19th Century technology that attempts to do two different, important tasks: safely store medium of exchange, and also finance long-term productive enterprise. We published the idea in Oddball about eight years ago that you could separate the two businesses, lending and payments. That is what the author proposes here. ("Removing banks as ubiquitous but essentially unnecessary middlemen would help reduce the high cost of payments.") However, we have gotten much better at understanding that things are the way they are for a reason. (Reading Calomiris's book about why we have banks.) Who do you think would win in a political struggle over this, the Trump boys and their crypto schemes, or JP Morgan and Visa?
• The Long Way (2/5) This was tedious - it looks like sailing around the world would be somewhat difficult and dangerous but also quite boring. At least with mountain climbing you have great views, exercise and company. Instead of finishing the 1968-1969 Golden Globe race and returning to England where his wife and stepchildren lived, he sailed on to Tahiti and fathered a child with a new partner. Makes sense that someone who could spend years of life alone at sea is not very tethered to relationships on land.
• A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market (3/5) This was reviewed in a two part review by our correspondent @pdxsag. Thorp was born in 1932 so he's now almost 94. He looks amazing for his age. (Here's a 2024 photo taken with Boaz Weinstein.) No one can figure out how he's aging so well. Tim Ferriss interviewed him and so did Bloomberg, but we really don't know the secret. Apparently he could still do a chin up at age 91. He mentions in the book that "when I wanted to know some organic chemistry to explore ideas for extending healthy human longevity, I learned it as I needed to." Maybe one thing is that, thanks to inventing an options pricing model and various arbitrage techniques, he was able to retire from working pretty young and lived a chill life in Newport Beach. Thorp says that he has maintained his high school weight, takes magnesium, Vitamin K, and Vitamin D, and exercises a lot. Good to know that if you are a blackjack player, removing the 5s from the deck changes the edge from 0.2% house advantage to 3.29% for the player. Talking about counting cards, he observes that playing with edge results in moderately heavy losses mixed with 'lucky' streaks of the most dazzling brilliance: "I learned later that this was a characteristic of a random series of favorable bets. And I would see it again and again in real life in both the gambling and investment worlds." He told an acquaintance to pull money out of Madoff's fund, but the guy didn't listen to Thorp's points, he "would simply poll everyone he knew for their opinion and go with the majority view." He doesn't believe in keeping deposits at mutual banks, either: "Our hundreds of accounts took capital away from other investments." The book is half autobiography and half "Thorp's bland personal financial advice."
• Crossing the Chasm (3/5) The 1990 book about marketing disruptive technology products, explaining the gap (the "chasm") between early adopters and the mainstream market. Technology adoption life cycle progresses through innovators, early adopters, early majority, late majority, and laggards. He says that model came from research on the adoption of new strains of seed potatoes among farmers. Realized that I am probably early majority (which is mainstream), across the chasm, and not an early adopter. ("Conservatives, in essence, are against discontinuous innovations. They believe far more in tradition than in progress. And when they find something that works for them, they like to stick with it.") Something about the visionaries: "likely to be planning on implementing the great new order and then using that as a springboard to their next great career step." That's a principal-agent problem where they may not have to live with downsides of technologies that they buy. That's also why the visionaries may alienate pragmatists, and pragmatists don't reference visionaries in their buying decisions. Interestingly, Everett Rogers who wrote the book Diffusion of Innovations (1962) doesn't believe in chasms: "innovativeness, if measured properly, is a continuous variable and there are no sharp breaks or discontinuities between adjacent adopter categories (although there are important differences between them)." One of the keys to crossing the chasm: "Can you explain your product in the time it takes to ride up in an elevator?"

Thursday Night Links

• The prospect of a sustained reversion in investment yields likely extends beyond the horizon of bargain-hunters’ binoculars. We may look back at historical returns and wonder why investors ever got to have it so good. We will look back and think how inefficient it once was. Can you believe people earned 8-10% in stocks and thought it should last? We may look at equity returns for the past century the way people now look at home prices. Remember when a house only cost 3x annual income? [Moontower]
• Israel & the GCC are absorbing the kinetic cost of a conflict whose primary beneficiary, counter to the mainstream narrative, is actually America (First). Qatar offline for 5 years reprices the entire global gas market in favor of US exporters for the remainder of the decade. The Gulf states face years of rebuilding. Europe faces its 2nd energy crisis in four years. Sure, the average American might face temporary moderate inflation & higher gas prices. But if you are the architect of the US empire & you view the rise of China & Chinese ASI as an existential winner takes all scenario, the collateral damage is acceptable cost. Whoever controls the energy corridors controls the monetary system. Whoever controls the monetary system & the energy supply simultaneously controls the compute infrastructure that determines which civilization builds ASI first. [_10delta_]
• Positioning Marines on islands off Iran’s coast, rather than inside Iran itself, could be a loophole that would allow Trump to claim he has kept his promise not to put American boots on the ground in Iran. “I don’t see them in Iran proper,” Miller said. “I think if you’re going to put them anywhere, the place where it would be on some of the islands that are around Iran, in the Gulf, that might give you some advantage from a tactical sense for a period of time.” [WSJ]
• EPD’s Q4 ’25 financial results were excellent (one of its best quarters in the last five years), with a positive read on both growth trajectory and return of capital potential. Given the company’s strong balance sheet, it can direct incremental free cash flow to equity holders as capital spending tapers in 2026 and 2027. At the same time, its business is expected to generate mid-single digit cash flow growth over the next two years. EPD is one of KYN’s largest holdings and is a good example of the attributes we seek for the Company’s exposure to liquids-focused midstream companies. [Kayne Anderson Energy Infrastructure Fund, Inc.]
• Contrary to popular perception, recessions are not the inevitable bust that follows an unsustainable boom, and they do not operate like wildfires that clear out economic deadwood. Recessions are caused by adverse shocks like war and energy price spikes; and far from unleashing gales of creative destruction, post-recession economic growth typically resumes the same trend as before—all pain, no gain. [Tyler Beck Goodspeed]
• For all leftists’ talk about the unaccountable power of the Tech Oligarchs, they’re being routed without a fight from their home: a city whose wealth and power they can credibly claim to have built (at least as a class), and which is among the most beautiful places on earth. This is, of course, a death-spiral move for the state of California — but the real puzzle is this: For what they’ll spend on relocation costs alone, the tech exiles could have bought the entire California political system in perpetuity. [EXIT Newsletter]
• Son of a diddly! When we last spoke a smidge over 60 days ago it was looking like REITs might have their day in the sun. Sure enough, by late February the REIT market was up nicely. However, if the REIT rally was Punxsutawney Phil, then it saw the shadow of inflation and the clouds of war and hurried back into its burrow for a continued REIT market winter – giving back all the gains garnered the last two months. [Modiv Industrial, Inc.] 
• The card economic model powers shared investment, backed by active governance, standards and fault-tolerant operations (blog). To compete against Visa, you have to build a better payment system with better economics that overcomes the shared investment of all stakeholders. Open standards are a great technology model but a terrible business one, as commercial exchange requires risk management and a clear definition of terms. Blanket law and mandated payment schemes may create compliance requirements, but they do not provide the incentives to assume risk and invest. [Tom Noyes]

Will Attending an Investment Conference Make You Sad?

Emerging markets investor Harvey Sawikin of Firebird Management has a funny post on his Substack, The Falling Knife, asking whether attending an investment conference makes you sad. His conclusion, after some pseudo-rigorous math farmed out to a fictional AI assistant named "Chet Gepetti," is that it probably does, at least slightly. 

The mechanism is well-known to anyone who has attended an investing idea conference: the asymmetry between the pain of a bad idea that you bought and the regret of a good call that you passed on. Losses feel worse than missed gains feel good, but both sting. Add in the 40% of ideas that are duds, some conference food, and the nagging memory of a General Growth Properties pitch you heard from Bill Ackman in 2009 and then did nothing about, and the math turns against you.

His post resonated with me because in 2014 I attended a value investing conference where twenty-four ideas were presented and I have been tracking them, off and on, ever since. (It's been with some schadenfreude, since the conference organizer wouldn't let me present my idea, a small bank for 63% of tangible book value.) The results are instructive, though not in the way that value investors usually hope.

The 2014 conference's dogs were spectacular in their failure. Civeo Corporation, a workforce housing company, immediately plummeted after the conference and is still around, down roughly 90%. Iconix Brand Group, a royalty-driven brand licensor eventually went to near zero, down 99.7%, a near-total wipeout. Forest Oil merged with Sabine Oil & Gas in December of that year and Sabine filed for bankruptcy the next spring. QR Energy merged with BreitBurn Energy Partners, which also went bankrupt. Resolute Forest Products held on long enough to be acquired for a modest premium, though the Canadian dollar's 20% decline over the period ate much of that.

What is striking about this list is not just the magnitude of the losses but the speed. Several of these companies effectively ceased to exist within twelve to eighteen months of being presented as cheap. 

It was a value investing conference. The central premise of value investing, going back to Graham and Dodd, is the margin of safety: the idea that buying at a sufficient discount to intrinsic value protects you from catastrophic loss. If you are right about the asset value and wrong about everything else, you should at least get your money back. The failures indicate that either the margin of safety calculations were wrong, or that the concept does not travel well to certain kinds of businesses. Perhaps both. Commodity-producing companies, leveraged companies, and companies with deteriorating secular trends have a way of going from "cheap" to "zero" while being "undervalued" the entire way.

The base rate of public companies going bankrupt in any given year is well under 1%. The proportion of ideas from this conference that ended in bankruptcy or near-bankruptcy within a few years was dramatically higher than that. This is not a random sample, of course. Value conferences tend to attract the contrarian, the beaten-down, the deeply discounted. Which is precisely the problem. There is a selection effect toward the kinds of companies that appear cheap based on flawed metrics.

There were some good ideas too, and one extraordinary one.

General Motors was roughly flat over the decade, which is perhaps the most value-investor outcome imaginable: you do the work, you are right about the valuation, you hold for years, and you end up where you started. U.S. Steel roughly doubled. Visa returned something like seven times your money on a total return basis, which is an excellent result, though it required you to own a wide-moat payments network at a time when you were surrounded by people pitching over-leveraged forest product companies and housing for oilfield workers.

But then there was Nvidia Corporation (NVDA).

Remember that at the time of this conference in 2014, it was primarily a gaming GPU company. (We, of course, had zero interest in anything linked to "gaming," for dorks.) Nvidia has since returned something in the neighborhood of 500 times your money. If you put 4.2% of your portfolio into each of the twenty-four ideas at equal weight, the naive strategy, the math is remarkable. Visa alone would have covered most of the dogs. But then Nvidia would have returned roughly 20 times your entire starting portfolio over twelve years.

The problem is what that looks like in practice. After a few years, a genuinely equal-weighted portfolio becomes anything but equal. Nvidia would have grown to dominate the portfolio so completely that you would have experienced 50%-plus drawdowns in 2018 and again in 2022, watching what was functionally your entire portfolio cut in half, twice, before the final ascent. Almost no professional manager could have survive that. Harvey addresses exactly this in some other Substack posts on art collections and Firebird's early portfolio: even if you have the right positions, the institutional constraints of managing other people's money make it nearly impossible to ride a 75% concentration in two stocks through a bear market without your limited partners concluding that you are a reckless gambler.

The only way to have actually captured the Nvidia return in its entirety was probably to put these stocks in a brokerage account you never checked ("coffee can"). The position sizing problem is not just psychological, it is structural. A manager who communicated to investors in 2022 that they were 70% in a semiconductor stock that had just halved would not have had LPs for long. The money would have left, locking in the loss, before the recovery came.

Sawikin writes about this dynamic in the context of art collections, noting that Keynes' collection at King's College has compounded well precisely because no one was tempted to "trim the Cézanne position." Stocks do not have that feature. You get a price every day, your investors are watching, and the pressure to do something is constant.

I only went to that one conference in the series and have occasionally wondered what I missed in subsequent years. It would be interesting to look at the other vintages. Did the hit rate improve? Did anyone present NVDA again in 2016, after it had already doubled, and catch the remaining 250x? At what point did the energy and commodity ideas, which dominated the 2014 vintage in a way that reflected the zeitgeist of that moment, give way to technology ideas in later years?

I do attend a different annual value investor dinner and have returned for several years now. One pattern I have noticed is that the best ideas (so far as I can judge) are also the ones that are best presented. This is not a coincidence. Clear communication is demonstration of clear thinking. An idea that can be explained simply and directly has fewer moving parts, which means fewer things that can go wrong. The people who can stand up and say quickly and clearly exactly what they own, exactly why it is cheap, and exactly what has to happen for it to work out, are people who have better mental models of the world.

The corollary is that a complicated pitch is often a warning sign. If the presenter cannot explain why a company is cheap without also explaining four offsetting factors that are currently obscuring the value, there is a decent chance that one of those factors eventually wins. The companies that went to zero from the 2014 conference generally had stories: the oil price will recover, the licenses will be renewed, the merger will unlock the discount. The thesis required multiple things to go right. They did not.

The simple ideas, like buy the world's dominant payments network, buy the AI-adjacent chip company when no one cares about AI, turned out to be the ones worth owning. The elaborate restructuring plays and commodity-cycle bets, the ones that required the most slides and the most assumptions, are the ones in the bankruptcy column.

This is not a new observation. But watching it play out over a decade, with a specific set of names and a specific date stamp, makes it more concrete than it usually appears in the abstract.

A Reply on "Places" by PdxSag

[From our correspondent @PdxSag. His previous guest posts on CBS include What I've Learned the Past Decade, A "Wonderlic" Test for Agency, and his supplement regimen.] 

A recent edition of CBS Links quoted Hickman: "there are only a handful of 'place genres' out there, and each is generally produced by geography above all."

Hickman is getting his causality a little backwards here. He is correct that there are only handful of first-tier locales, but that's because there is only a handful of first-tier people in the world. What you need is a critical mass of high-agency people. High-agency means self-selection, and that implicitly requires immigration.

At the fundamental level you need a filter. You want to separate high-agency people from NPC's. Immigration, because it is a formidable barrier in both cost and effort, functions as the ultimate people-filter. Once you realize immigration is an implicit functional requirement, which means people have to make a large effort and move, all else equal, nice geography beats bad geography every single time. Obviously.

The next thing that follows from immigration as a filter is that that filter is lowest for rich people. So first-tier places will have the most rich people and the rich people that are there will have the lowest agency, which is to say most NPC-like mentalities. If that doesn't describe the world, I don't know what does. Yogi Berra famously meme-ed this phenomenon with the line “nobody goes there anymore, it’s too popular."

Once a fist-tier place is established, its high cost creates a self-reinforcing cycle that drives away low-agency people that through whatever hereditary luck landed them there. As cost to be in a place goes up, the pay-off for leaving goes up. If you’re an NPC, there is an easy and obvious arbitrage for selling and moving elsewhere. For people immigrating, whether high-agency or NPC's, the relative high cost dissuades both, the exception is the high-agency people that are into whatever specific scene makes that locale first-tier.

As more proof, the self-reinforcing cycle creates an interesting failure condition at the extreme. If cost gets so high that it becomes the sole barrier, high-agency people won't even immigrate there any more. The place becomes a rich-person amusement park. It is no longer a “real” place. It becomes a “place genre” where rich NPC’s just act out their genre programming. Examples: NorCal (to a lesser extent — it’s a big place), Sedona (obvious because it’s so much smaller), Martha’s Vineyard (smaller still), Aspen (tiny), Monaco (tiniest, relative to the whole planet from which it draws). Each place is smaller, and as it gets smaller price becomes a bigger barrier, until it is the only barrier.

Finally, we can test our assertion that immigration is the ultimate people-filter by looking at what happens when we subvert that filter through financial subsidies and perverse incentives. It so happens this is the nature of third-world to first-world immigration today. Third world immigrants the last several years are the worst of any cohort in history. This cohort has the most criminals, the least skills, and the least interest in assimilating. Immigration is not selecting for agency of any kind, rather it is selecting for criminals fleeing prosecution and grifters looking for easy social services scams and retail theft rings. These are not even high-agency thieves. These are ethnic fraud rings that often just need bodies to show-up and run a farcically simplistic scam that is only possible because the host countries are willfully ignoring the scams for political purposes.

And where are these immigrants moving to? All things equal, it should be the best, or at least the better half. Yet, it is almost the worst in the United States: Minnesota, Michigan, Maine. The implication is obvious: the immigrants are not choosing their destination, it is being chosen for them. There is one notable geographical exception too: Texas. Why Texas? If Democrats can flip Texas, Republicans will never again win the White House. The one good state with the most need for foreign immigrants to flip it for Democrats is the one state with the most H1B immigration from the Middle East and India. This is so glaringly obvious only an NPC could miss it. These are not high-agency immigrants. These are NPC's serving a political purpose for the Elites sponsoring the whole project.

Thursday Morning Links

• Trump has escaped other predicaments of his own making, but there is something different about this one. The attack on Iran is so wildly inconsistent with the wishes of his own base, so diametrically opposed to their reading of the national interest, that it is likely to mark the end of Trumpism as a project. Those with claims to speak for Trumpism – Joe Rogan, Tucker Carlson, Megyn Kelly – have reacted to the invasion with incredulity. Trump may entertain himself with the presidency for the next three years (barring impeachment), but the mutual respect between him and his movement has been ruptured, and his revolution is essentially over. [The Spectator]
• Trump could evoke Truman’s precedent against the Japanese – a rationale widely accepted by American historiography on similar arguments: The need to avoid a US ground invasion against a fanatical enemy. Moreover, in the current atmosphere of total contempt for the very concept of “international law”, he could take the pragmatic view and ask what actual blow-back would he actually face? US allies have already been brutalised over Greenland and other issues in far more direct ways, and still don’t dare to break with Washington. As for US enemies, this live demonstration of nuclear resolve might even strengthen deterrence against them. [Brussels Signal]
• Firms are smart money, and when firms sell equity, that’s a sign that equity is overpriced. Currently, we do not see positive net issuance across the entire market – i.e., firms are not net sellers of equity to external investors. This fact is evident in Figure 2, which shows the sum of dollar net issuance in the past year, normalized by the stock market’s total capitalization. For much of the 1990s, issuance was positive, and at the peak of the bubble in 2000, issuance was more than 5% of market cap, meaning that 5% of the market had been newly issued in the past year. After that bubble collapsed, issuance turned negative and has largely remained so, with the notable exception of the COVID bubble of 2021, when issuance peaked above 2%. But today, issuance is decidedly negative at -0.9%; the supply of shares is shrinking. Ballpark figures, the value of U.S. common stock is around $65T, and every year companies are buying around $500B more equity than they’re selling. [Acadian Asset Management]
• In a construction materials market affected by soft demand and economic uncertainty, Titan America delivered all time high revenue, Net Income, Adjusted EBITDA and operating cash flow in 2025. This achievement reflects the strength of our business model, disciplined decision-making, skillful execution across our operations, and an unwavering focus on serving our customers. It showcases once again Titan America’s ability to grow organically and deliver strong results, even in challenging environments. Our Florida segment delivered a robust performance with strong penetration in infrastructure and private non-residential construction segments offsetting a soft residential end-market. Our investments in increased aggregates capacity, expanded capabilities, and self-help operational excellence initiatives delivered record full year revenue and Adjusted EBITDA in 2025. Our Mid-Atlantic segment was impacted by a combination of soft demand in Metro New York and New Jersey, the introduction of tariffs, and weather affecting Virginia and the Carolinas. Resilient pricing, and continued growth in infrastructure, private non-residential construction, including data centers, and cost containment initiatives partially mitigated the impact from the headwinds in the region. [Titan America SA]
• Paul R. Ehrlich, an eminent ecologist and population scientist whose best-selling book, “The Population Bomb,” was celebrated as a prescient warning of a coming age of food shortages and famine but later criticized by conservatives and academic rivals for what they called its sky-is-falling rhetoric, died on Friday in Palo Alto, Calif. He was 93. [The New York Times]
• For a young single person, the economic and social advantages of urban network effects clearly outweigh the dangers of life in the city. You can make more money. The social opportunities are a lot more interesting. The food generally is better. (This is why liberals in Portland and San Francisco love to ostentatiously pretend not to know what you’re talking about when you describe the problems of living there: it’s a flex.) But when people have kids, they quickly lose their confidence that they can fly above the social dysfunction indefinitely. All sorts of abstract, macro policy problems suddenly don’t feel so abstract. Regardless of where they live, Americans are forced to spend colossal amounts of psychological and economic resources acting as private security for their kids — which is at least as inefficient and silly as building a private pool in every backyard. Not only does it exhaust parents, but it prevents kids from developing autonomy, and the physical fitness that naturally comes from running around the neighborhood. [EXIT Newsletter]
• Recent events have interrupted operations at major facilities in Qatar, a significant global supplier. Industry observers note that this situation raises the prospect of widespread shortages, potentially marking the fifth global helium shortage in the past 20 years. These recurring challenges highlight the risks associated with concentrated production, particularly from large projects linked to hydrocarbon operations in geopolitically sensitive regions. [North American Helium Inc.]
• What you’re seeing in the remarkable chart above is that private sector spending on AI in 2026 is forecast to exceed $700 billion, which is not a number that is easy to think about. As a share of GDP, companies are currently devoting more resources to AI than the combined peak annual capital spending on key 1930s public works projects and the Manhattan Project and the 1940s electricity boom and the Apollo Project and Interstate highway construction. It’s important to note that AI spending is overwhelmingly financed by the private sector, whereas most of those infrastructure projects were financed by the largesse of the federal government. Once again, nothing like this has ever happened before, and if you feel extremely confident about how this is going to turn out, I think you might be crazy. [Derek Thompson]

Natural Gas-Fired Memos

A friend of ours recently used Claude, the LLM built by Anthropic PBC, to draft a letter to a public company CEO with suggestions for improving a struggling subsidiary after a disappointing Q4 2025 earnings report. It was not quite an activist letter, more like a thoughtful memo from a concerned shareholder.

When he sent us the draft, we winced a little. It was obviously AI-written. Chatty and breezy. It used the CEO's first name repeatedly in a way that felt like a car salesman working a showroom floor. We assumed that he would let us help edit it before sending. Instead, he fired it off on a Friday afternoon, as-is.

We thought he had blown his credibility by sending it, so we were shocked that the CEO responded to his correspondence the same day. They had a two hour, candid phone call to share ideas the following Monday morning. Six months ago, "AI-written" was unambiguously a pejorative. Apparently that is changing faster than we thought.

As Luddites who don't like change (we own coal royalties!), we have been AI skeptics for most of the past several years. We chuckled at Phil Greenspun's recent post, Why Johnny LLM can’t read web page source code. We read Stephen Wolfram's book a year ago. He was impressed with LLMs but doubted they would make it all the way to artificial general intelligence. These seemed like reasonable positions.

What started to shift our thinking was The Scaling Era, which pointed us to a 2019 essay called The Bitter Lesson by Richard Sutton. His argument was that general methods for artificial intelligence that leverage computation always win when competing with methods that attempt to take advantage of domain-specific human knowledge. Historically, AI researchers have always tried to build knowledge into their systems by encoding rules, designing expert systems, and programming in domain expertise. 

The pattern in the past is that this domain-specific structuring has helped in the very short run but it always plateaus and then is outcompeted by brute force computational methods. In the games of Chess or Go, search and learning are the techniques that have worked, using as much computational power as possible. Sutton says that these are the only two methods that seem to scale to arbitrarily large degrees.

This reminded us of a book by psychologist Paul Meehl (1920-2003), who argued essentially the same thing sixty-five years earlier in a completely different field. His book Clinical vs. Statistical Prediction (published 1954) showed that actuarial rules (statistics applied to data) consistently outperformed clinical judgment by professionals. Whether they were doctors, parole boards, or admissions officers, human experts with years of training were consistently beaten by simple models. (This has been called The Robust Beauty of Improper Linear Models in Decision Making.) 

Meehl and Sutton had the same insight. Systematic data processing beats human intuition, and the gap widens as the amount of data and especially the computation available to mine it grows. LLMs are like Meehl's simple linear models for decisionmaking, except scaled to the size of trillions of tokens now available for training.

The clincher for us was the conclusion of The Scaling Era. The author believes in what we have been calling the Gods of Straight Lines: "the GPUs keep improving, the training runs keep scaling, and on a log-log graph everything is eerily, perfectly linear. Next year is simply this year, plus a known rate of change multiplied by delta-t."

We've learned not to fight straight lines on log charts. We now take it for granted that solar panels and batteries will continue to get cheaper every year. Not only have the learning curves been relentless for decades but they have even gotten steeper. The curves governing LLMs look the same. Whether or not we or the AI researchers fully understand why their models work, the scaling curves don't care about our epistemology.

That, in turn, virtually assures that the Mag 7 companies (Zuck) and the AI "labs" (Elon doesn't like that term) will spend their planned trillions on capital expenditure for GPUs and data scenters. Leopold Aschenbrenner is a former OpenAI researcher who published a widely-read series on AI trajectories last year. He has sketched out scenarios involving trillion-dollar compute clusters drawing 100 gigawatts of power. That number seems outlandish until you look at the capex announcements from the past six months and realize the industry is already on that trajectory.

We have started calling our friend's memos his "natural gas-fired research." (Natural gas is the largest source of electrical generation in the U.S., meaning that is what most likely powers any given GPU writing memos.) Which is why we keep coming back to the natural gas pipelines owned by Kinder Morgan (KMI) and Energy Transfer (ET). There is an important distinction between producing natural gas and transporting it. Producing it is a lousy business, but transporting it via pipeline is something else entirely. The pipes are already in the ground. Permitting and right-of-way acquisition to build new ones is enormously difficult. Customers sign take-or-pay contracts that guarantee payment regardless of whether they actually use the capacity. It is a toll road, not a commodity business.

Kinder Morgan operates about 58,600 miles of natural gas transmission pipeline, more than any other company in the country, moving roughly 40% of U.S. natural gas production. Around 96% of its cash flows are take-or-pay, fee-based, or hedged, making the commodity price of natural gas nearly irrelevant to its earnings. Energy Transfer's latest presentation is explicit about what is driving new growth. Its 2026 capital plan lists "natural gas pipeline projects serving data center facilities" as a priority in both its intrastate and interstate segments. It has a long-term agreement with Oracle to supply roughly 900,000 MMBtu per day to three U.S. data centers, and began flowing gas on its first lateral to a data center campus near Abilene, Texas earlier this year. 

The pipeline companies collect a toll on natural gas movement, and their inherent operating leverage will makes incremental throughput for data centers highly profitable. Beyond data centers, there are coal plant retirements, Sun Belt population growth, and manufacturing reshoring all adding to the natural gas story. Kinder Morgan points out in their investor presentation that U.S. natural gas supply has grown more than 70% since 2010 with prices remaining largely range-bound, suggesting no supply constraint on the horizon.

As AI infrastructure spending scales, the competition for land near power infrastructure will intensify. A wind or solar farm on a large tract with good resource potential can supply a data center directly via long-term power purchase agreement, or feed into a grid that increasingly needs it.

We've also seen some overwrought pessimism surrounding AI-induced disruption. The Citrini piece (The 2028 Global Intelligence Crisis, published February 22nd) triggered a software selloff the following day. We think that was overdone. As Fred Liu pointed out, software companies don't really sell code. They sell convenience, trust, reliability, and institutional knowledge. The devil is always in the details like maintenance, security patches, compliance, and integrations. Most businesses would rather pay someone else to handle all of that than own it themselves. 

Our Docusign subscription just auto-renewed. We're still using Quickbooks and Turbotax. Last week we chose to fade Citrini's pessimism with a basket that included the payment networks (Visa, Mastercard, Amex), the bank core processors (FIS, Fiserv, Jack Henry), Booking Holdings, Intuit, and Schwab.

Visa's experience has been that potential competitors just become customers of their (four-sided!) network, which is the biggest and the best. The bank core processors (i.e. the software back-end of almost all banks) have contracts that define "sticky": five to ten year commitments by the banks, plus existential risk to the bank's business if an attempted switch goes poorly. 

Futurist James Pethokoukis (previously) articulated two possibilities for AI: either it is a powerful general-purpose technology (like the PC or the internet), or it advances all the way to AGI, capable of performing essentially every economically valuable task humans perform.

Vaclav Smil's book Growth points out that exponential growth, natural or anthropogenic, is always only a temporary phenomenon, to be terminated due to a variety of physical, environmental, economic, technical, or social constraints. Eventually every exponential growth curve becomes logistic. 

Whether that happens at "very powerful tool" or at "AGI" is the question. If it's AGI, our stock portfolios will not matter. What will matter is who controls it and what they decide to do with the rest of us.

But if AI lands at "powerful general-purpose technology," and that is the scenario we currently find most likely, then the implications are good. A sustained productivity boost would push the economy onto a higher growth path. That makes the debt and entitlement problems of the developed world more manageable. And to the extent that AI advantages incumbents with established distribution and customer trust, the companies in our basket look like reasonable places to be. 

And pipelines will profitably go "ssssssss" transporting natural gas to power the computation, at least until battery and solar get cheap enough to take over. (But we can own the land where that will happen.)

Our friend got instant followup from the CEO of a billion dollar company because a machine wrote a persuasive memo on a Friday afternoon. That's not AGI, but it might be enough.

Saturday Morning Links

• Imagine that every day you wake up in your left-bank apartment, and the city has meaningfully morphed into some magically strange variant of Paris. On Tuesday, the streets and boulevards no longer meet at their old familiar intersections. On Wednesday, the Louvre moves to another arrondissement. The Arc de Triumphe turns upside-down on Thursday and floats in the sky on Friday. Now we’re talking. Now that is more like parenting. To be a parent is to be a permanent tourist in a constantly evolving foreign city, which also happens to be your home. The baby you bring home from the hospital is not the baby you rock to sleep at two weeks, and the baby at three months is a complete stranger to both. In a phenomenological sense, parenting a newborn is not at all like parenting “a” singular newborn, but rather like parenting hundreds of babies, each one replacing the previous week’s child, yet retaining her basic facial structure. “Parenthood abruptly catapults us into a permanent relationship with a stranger,” Andrew Solomon wrote in Far From the Tree. Almost. Parenthood catapults us into a permanent relationship with strangers, plural to the extreme. When you become a parent, you meet your child. And then you meet your child again. And again, every day after that. You will never stop meeting your child. That is one reason to become a parent: To have a child is to fall in love with a thousand beautiful strangers. [Derek Thompson]
• Douglas maintained that he could assume judicial senior status on the Court and attempted to continue serving in that capacity, according to authors Bob Woodward and Scott Armstrong. He refused to accept his retirement and tried to participate in the Court's cases well into 1976, after John Paul Stevens had taken his former seat. Douglas reacted with outrage when, returning to his old chambers, he discovered that his clerks had been reassigned to Stevens and when he tried to file opinions for cases in which he had heard arguments before his retirement, Chief Justice Warren E. Burger ordered all justices, clerks, and other staff members to refuse help to Douglas in those efforts. When Douglas tried in March 1976 to hear arguments in a capital-punishment case, Gregg v. Georgia, the nine sitting justices signed a formal letter informing him that his retirement had ended his official duties on the Court. It was only then that Douglas withdrew from Supreme Court business. [William O Douglas]
• Esoteric reading, being very difficult, requires one to slow down and spend much more time with a book than one may be used to. One must read it very slowly, and as a whole, and over and over again. It will probably be necessary to adjust downward your whole idea of how many books you can expect to read in your lifetime. [Mr. and Mrs. Psmith’s Bookshelf] 
• The true burden of debt is not the size of our national debt, but the cost of servicing that debt as a percent of our national income. Today that burden is significantly less than it was during the 1980s, mainly because interest rates are far lower than they were back then. If Congress exercises even modest restraint and the Fed doesn't have to raise interest rates (which they won't have to if inflation remains under control), then we can gradually reduce our deficits and the burden of our debt. [Scott Grannis]
• If I insisted upon elbowing my way into the metropole — so that I could pay dearly for the very comforting feeling of being only 30+ subway stops from where the Real Action Happens — I’d be broke, overworked, and essentially unable to write for a living. And so it is that by virtue of my incorrigibly low station in this world, I must confine myself to wherever’s dirt cheap — and that, my friends, is the hinterlands. It comes at a cost, of course. The isolation is extreme; it’s distressing that 100% of my intellectual life has to happen online. The winters are brutal. Pollen season is a nightmare. The summers are sweaty. My neighbors watch me — they’ll never really accept me even though I grew up just two counties away. We are a long way from Santa Barbara here. But what makes Santa Barbara, Santa Barbara? What makes a Manhattan? And why will there never be a hub of elite culture in Guymon, Oklahoma? I suppose I am a bit of a “hard geographical determinist.” It seems to me that, so far as we are speaking broadly and with an eye toward recognizing patterns, there are only a handful of “place genres” out there, and each is generally produced by geography above all. [Hickman's Hinterlands]
• But, beginning in 2000 – and perhaps because of Buffett’s age – Berkshire regrettably abandoned that discipline. It has since invested hundreds of billions of its hard-won cash into many businesses that no one can handicap. Worse, it has repeatedly bought whole businesses with very average economics, even when partial stakes of excellent businesses were readily available on the public markets, perhaps because of a mistaken belief that the resulting tax efficiency would prove more valuable than simply buying the better business. (Analysis to follow.) Berkshire has now become what Buffett mocked for decades: a conglomerate built for the ego of its management team, not for the benefit of its shareholders. [Porter & Co.] 
• South Bow Corp. says it is in the “early stages” of gauging customer interest in capacity on a cross-border pipeline linking Alberta’s Hardisty oil terminal to U.S. oil markets in Oklahoma and along the Gulf Coast — a project it is dubbing the “Prairie Connector.” The company said Friday it has commenced an open season — industry parlance for inviting potential customers to reserve capacity on a proposed project — using existing infrastructure and Canadian federal permits that are believed to have been originally issued for the cancelled Keystone XL project. [Financial Post]