Pender’s Summer Hot List – 2024

What is the book about?

Dear Chairman highlights the evolution and impact of shareholder activism on both corporate governance and the balance of power within companies. The book provides some great case studies of different strategies employed and outcomes achieved highlighting both successful campaigns and challenges faced by activist investors. It provides insights into the motivations and tactics of activist shareholders and the responses from company boards. 

Why do you recommend it?

With small caps depressed and an environment that is ripe for M&A, I decided to re-read the book. Activist investors can wield significant influence on company strategy and operations. They also can pursue a variety of goals from short-term financial gains to long-term improvements in company performance and governance, so it’s very important to understand their goals. I recommend this book as it offers valuable insights into the strategies, motivations and impact of activist investors. 

What is the book about?

Ed Viesturs shares his journey of climbing all fourteen of the world’s 8,000-meter peaks without supplemental oxygen. Viesturs lives by the motto, “Reaching the summit is optional. Getting down is mandatory”. His approach to goal setting, planning and safety and preparation offers valuable lessons for investors about the importance of patience, due diligence, continuous learning, and long-term vision.

Why do you recommend it?

Ed Viesturs’ journey is an inspiring testament to what can be achieved through perseverance, planning and commitment. These principles are equally vital in investing, where success often comes to those who are prepared, patient, and resilient.

What is the book about?

Walter Isaacson shadowed Elon Musk for two years and interviewed his closest friends, families, colleagues and, of course, enemies, building a broad picture of Musk’s ambitious goals and innovative thinking. He included many of the controversial statements that have made Musk a polarizing figure in the business world and popular culture. How did a boy who grew up in South Africa and often got beaten up at a school, become obsessed with mission-critical projects that will change human history? 

Why do you recommend it?

Elon Musk is known for his high risk and stress tolerance. Most notably, when both SpaceX and Tesla were on the verge of bankruptcy during the Great Financial Crisis, Musk refused to give up on either. The fact that both companies survived is probably not purely luck. What fascinates me is his approach to risk and knowing when to be flexible on risk-reduction procedures. For example, at SpaceX, after three failed rocket launches, he imposed increased quality and risk controls but then pivoted and reversed those orders, for the fourth survive-or-die launch, as he has high confidence and clear sense on where exactly the problem is.  

What is the book about?

The transformational journey within Microsoft since the unexpected appointment of Satya Nadella as CEO over a decade ago and the evolving opportunities that will shape the technology landscape for years to come.

Why do you recommend it?

The importance of culture in an organization, and the change within Microsoft from “know it all” to “learn it all” has been critical to its successful transformation under Satya Nadella. A growth mindset centered around obsessing about customers and meeting their unanticipated needs has been instrumental in several successful acquisitions. As an investor looking for companies in growth industries, Microsoft’s success demonstrates the importance of visionary leadership that “brings clarity, generates energy and finds a way to make things happen”.

What is the book about?

A Brief History of Intelligence is a fabulous read for anyone interested in the intersection of AI and neuroscience.

The book tells the history of the brain through five “breakthroughs” in brain development, namely: steering (worm brain), learning (vertebrate brain), simulating (mammal brain, mentalising (primate brain), and language (human brain).

These breakthroughs provide an entry point to understanding brain structures like the amygdala, hypothalamus, basal ganglia and neocortex. The book also provides a fascinating window on how natural selection worked to develop our brains. The other theme is how AI researchers have attempted to model the brain, including some great stories where AI and neuroscience have driven each other forward.

The author, Max Bennett is an AI founder (Alby, Bluecore) who started dabbling in neuroscience and ended up taking a sabbatical to write this book. His tone is accessible and he has a knack for storytelling, much like Siddhartha Mukherjee.

Why do you recommend it?

To understand what is happening in AI, which is important for our work at Pender Ventures, it is extremely helpful to understand more about how actual human intelligence works.

What is the podcast about?

Radiolab is an obscure publicly funded podcast from WYNC. Journalists are given free reign to dive into the most obscure topics about anything and everything. One recent favorite episode was “The Right to be Forgotten”, that dived into how a small Cleveland newspaper was forging the way in creating a process that allowed them to delete previously written content. Quickly this episode pulls at your moral compass as you consider the case for wrongly convicted people trying to clear their names or the harm a small drug offense can cause years after an arrest.

Why do you recommend it?

I am in the investing business because I am a naturally curious person. While I don’t resonate with all the episodes, every now and again I’ll listen to an episode that enlightens, entertains and keeps me thinking about an obscure topic for weeks. What more could you want!

What is the podcast about?

Business Breakdowns focuses on dissecting companies at a fundamental level. For both public and private companies, each episode breaks down a company’s history, business model, market, financials, any “secret sauces” to success and future path.

My favourite episode has been “Intuitive Surgical: Robotic Precision [EP.155]”, which enhanced my understanding of the robotic surgery market in healthcare, the finances underlying Intuitive Surgical with high recurring revenue resulting from its leasing model, and the upcoming Da Vinci 5 generation.

Why do you recommend it?

The podcast has helped me understand businesses not just as an investor but also as an executive, supplier, client, and customer. The variety in each episode—from breaking down the NBA to Duolingo—has helped me make critical judgments on how business models compare across individual companies. Whenever I listen to an episode I always feel like I’ve learned something new. If you are looking for a convenient podcast with manageable episodes that can help you to understand businesses better, Business Breakdowns provides great perspectives.

What is the book about?

The Fish That Ate The Whale is a biography about Samuel Zemurray, an immigrant who started from nothing to controlling the biggest banana company in the world. The book explores his innovative business strategies, his involvement in Central American politics and the significant influence he wielded in the banana trade and global commerce.

Why do you recommend it?

Besides being extremely interesting, I recommend this book because it is inspiring. It is a reminder of something we often forget: that hard work actually is and should be hard. Samuel Zemurray is a role model for boldness, persistence and innovation.

What is the book about?

The book outlines the genesis and development of Singapore from the perspective of its former Prime Minister who led the country after its independence in 1965. It explores many areas that were critical to the country’s survival, and ultimately how it thrived after independence, from building its defense force, to priorities in education, building international relations, and much more.

Why do you recommend it?

The book helped me understand the importance of acting on your core values and how those values are embodied in the results you achieve. Lee Kuan Yew had to be decisive on many critical and complex issues with uncertain outcomes, like opening up their private sector, ensuring English was a language citizens were well-versed in, among many other matters. I recommend it because it will provide any reader with a greater appreciation of the national interests of a number of countries, how decisions have impacted their present state, as well as how to create a competitive advantage when it seems improbable. The book showcased a long-term vision and tremendous devotion to one’s nation.

What is the podcast about?

Odd Lots takes deep dives into complex topics that impact markets, investing and the real economy. They do a great job of finding interesting guests who are thought leaders in their field. One of their best episodes was Sam Bankman-Fried and Matt Levine discussing crypto, where SBF essentially admitted that the market is a pyramid scheme.

Why do you recommend it?

Time is a precious resource; I find that I rarely have the bandwidth to dedicate to learning new subjects in a comprehensive manner. Odd Lots often delves deeply into subjects that would otherwise be difficult to understand, like the current market conditions for new nuclear power plant construction which could be an essential piece of learning for the upcoming energy transition.

What is the podcast about?

I’ve followed Andrew, for years as he is a passionate investor who provides timely insights and takes on interesting investment opportunities. The podcast format is typically a 60-90 minute conversation with a skilled investor providing a deep dive into a stock or company they are currently working on or investing in.

Why do you recommend it?

The podcast is a great source of potential ideas with the investors he brings on providing a concise overview of the company, their thesis and insights on why the opportunity exists. Andrew is a skilled and well-prepared host and is always ready with questions to challenge their thesis. While I have a preference for investment podcasts that cover more evergreen topics and mental models, YAVP is a great source for timely insights into currently available investment opportunities.

What is the book about?

Thinking, Fast and Slow by Daniel Kahneman explores the dual systems of human thought: System 1, which is fast, intuitive, and emotional, and System 2, which is slow, deliberate, and logical. This dual-system approach provides a robust framework for understanding the cognitive biases and heuristics that can significantly impact our judgement and actions.

Why do you recommend it?

Thinking, Fast and Slow is not just a book about psychology; it is a valuable resource for people seeking to refine their analytical skills and decision-making processes. The book provides a comprehensive foundation for understanding behavioral finance, a crucial aspect of equity research. Gaining behavioral edge is an important part of the investment process at PenderFund. We work hard on being self-aware of our biases and mitigating the impact of these biases on investment decisions. For instance, overconfidence can lead to overly optimistic forecasts, while anchoring might cause one to rely too heavily on initial price targets. By understanding and applying Kahneman’s insights into cognitive biases and dual-system thinking, we can improve our ability to forecast, assess risk, and make more rational investment decisions.

What is the book about?

Devil Take The Hindmost is a well-researched history of speculative financial bubbles dating back to the great tulip mania of the 1630’s. Chancellor also explores many other speculative excesses including the South Sea Bubble, the railway mania of the 1800s, and the Japanese bubble of the 1980s.

Why do you recommend it?

Looking back through a series of similar “market mania” histories, Chancellor manages to demonstrate the common elements of these episodes. In a way, financial manias are as natural to human populations as swarming is to bees or stampeding is to horses. While no one is immune from being influenced by social narratives, the ability to detach oneself from a prevailing financial euphoria can be very important for long term success as an investor. By laying bare the falseness of specific narratives that drove past bubbles (and a lot of bubbles were, for instance, “big to fail”) Chancellor provides useful inoculation against financial bamboozlers of the future.

What is the book about?

This book was written by John Calamos who launched one of the first convertible bond funds in the 80s. It discusses convertible evaluation, strategies, portfolio management and hedging, and suggests that convertibles may, in certain situations, allow an investor to achieve above average returns via optionality while reducing risk, given their fixed income component.

Why do you recommend it?

The book was written during the 1980s which was a period characterized by volatile markets and significant levels of inflation. It suggests that convertibles performed well through that period – preserving capital during market corrections and participating on the upside through periods of strength. Insights from this past period are noteworthy today given the current inflationary environment and the inherent market volatility.

What is the book about?

Featuring 50 timeless insights from luminaries such as Lord Krishna, Charlie Munger, Socrates, Warren Buffett, Lao Tzu, Nassim Taleb, Steve Jobs, and Naval Ravikant, The Sketchbook of Wisdom serves as a modern guide to virtue, happiness, and the pursuit of wealth and a fulfilling life.

Why do you recommend it?

I occasionally get asked by friends to provide advice about wealth or financial literacy for their children. In a world where information is abundant but genuine wisdom is rare, The Sketchbook of Wisdom stands out as a beacon of timeless truths for young people eager to learn not only about wealth creation, but also about happiness and success. It’s the book I wish I had read as a teenager (if it had been published back then!).

By presenting these insights in an engaging and accessible format, it offers practical guidance on achieving a fulfilling and prosperous life. The blend of philosophical musings and modern advice makes it a valuable tool for anyone starting their journey toward personal and financial growth.