The Smead Book List - Summer 2025

0:02You're listening to A Book With Legs, a podcast presented by Smeed Capital Management. At Smead Capital Management, we advise investors who play the long game. You can learn more at SmeadCap.com or by calling your financial advisor.

0:21Welcome to A Book With Legs podcast. I'm Cole Smead, CEO and Portfolio Manager here at Smead Capital Management. At our firm, we are readers, and we believe in the power of books to help shape informed investors. In this podcast, we speak to great authors about their writings. The late, great Charlie Munger prescribed using multiple mental models and analysis. We analyze their work through the lens of business, markets, and people. Today's date is June 30th, 2025. This is our quarterly book list where we talk about books, books, and yes, more books. Hosting this with me are three of my colleagues, Shamish Sullivan, our senior analyst.

0:57Also, my other two colleagues joining us is Nick Garcia and Will Keenan, also analyst here at SME Capital Management. Guys, thank you for joining me. Great to be here. Thanks for having us. You guys ready to have some fun? Oh, we're ready. All right. So as we usually do, we always start talking about what we've just recently read. So, Nick, I'm going to kick it over to you. What do you just get out of? So I just finished two books. The first one is called Quit. It's by Annie Duke. She's written a number of other books, The Poker Player. She has a very good framework on how to make decisions. And this book in particular is about the connotation – she starts with the negative connotation of quitting, which is just abandoning a venture, right?

1:42So she shows – or she talks about how sticking to something is – has a better positive connotation where you should be evaluating things based off expected value, right? So there is virtue in abandoning something that doesn't have a positive future, right? Sure. So how do we reframe our thinking from quitting is bad and sticking with something is good? She kind of gives us a framework to make that decision. And it could be anything from a bad relationship to a bad job to a bad investment. How do you make that decision to abandon versus stick with it? So part of the problem is the only way to know if something truly is going to work out is sticking with it, which gives us that bias to stick with a losing prospect.

2:41So we have to lay out – it's interesting because she lays out a lot of the different cognitive biases that contribute to this, right? You have sunk cost bias where you don't want to abandon something that you already have time into, money into, effort into. Loss aversion, the idea that a loss hurts more than a win feels good, equal losses. So these sort of things manifest themselves. And she gives some examples, too, that I thought were very interesting, was the career of Muhammad Ali. He persisted in his career theoretically longer than he probably should have. He ended with Parkinson's. It had terrible effects on him.

3:31It's an outcome. So when was the right decision for him to quit? She posits that potentially he missed that window where the world was telling him to quit and he actually should have. But the negative connotation of it drives you to stick with it. Yeah. And also he had some money problems that I think he also stood with it for longer than he should have. Right. So there's outside circumstances that influence that as well, which is why it's not – we're not completely rational actors as we know. So that's why you have to be aware of these biases even though you'll be subject to them. Sure. She gave another good example of people climbing Mount Everest, right?

4:12So your goal is to reach the peak of Mount Everest, but you have to beforehand set out the parameters on which you're going to turn back, a.k.a. quitting your goal of reaching the peak, right? But there are circumstances that you can better evaluate pre your – before you're in the situation. You could better evaluate it. But then you have to stick to it when those circumstances come. So she gave a story of these guys that turned back before they got to the top of Everest. And these other guys that didn't turn back before they got to the top of Everest, the guys that turned back are alive. The guys that didn't, didn't make it.

4:55Sure. So that decision to quit was a positive thing. To your point, I think the worst part of this is it's one thing to lose money on a stock. It's a totally another thing to marry the wrong person. It has all kinds of negative outcomes. What was your other book, Nick? And I think this is a more known title, if I remember correctly. Yeah. So the other book I read was The Man That Solved the Market by Gregory Zuckerman. It gives the story of Jim Simons and how he founded Renaissance Technologies, how he became to get into the financial markets, which I thought was really interesting. Him being a very – like a math wizard, very math-oriented guy in the beginning, going into academia with great success.

5:41But in terms of life satisfaction, he wanted more. He wanted more challenging. Yeah. Yeah, and Greg, we did Greg Zuckerman's book, The Frackers, obviously, here on the podcast. And I think the one thing that obviously you're getting at is it's much better to be a mathematician in the business world than it is in academia from a financial incentives perspective. Exactly. Greg's a great writer, and that must have been a fun book. Seamus, what about you? What did you just get done reading? So I got three, and these are probably – I don't think they're very well known. One's The Living Company by Aria de Goss.

6:17And essentially what he talks about is companies that are – that have been able to maintain themselves for hundreds of years. We've talked – we looked at the Japanese trading companies, Itochu, Mitsui. He used those as an example. Shell as an example. I know today it's been in the news. In the news. Yeah. And he actually worked – Well, technically it's not because it's June 30th, remember? Sorry. That's right. Okay, never mind. When you're watching this. But he actually worked at Shell. His dad worked at Shell. He worked there for about almost his entire career. And the focus is essentially saying these companies that are all – that have all survived long periods of time had very distinct characteristics.

6:58Adaptability, knowledge sharing within the company and without and decentralized structures and really kind of the way he looked at the adaptability is – One example is uses in terms of companies not trying to predict the future but throwing out a whole bunch of different ideas and understanding each one of those concepts. So when you try to predict the future, you're narrowing your tunnel, your cone in terms of when something happens, if you haven't gone outside of that cone, it's very hard to adapt. It's hard to address what's going on, change, pivot. If you kind of look at the view of this could happen, this could happen, this could happen and make it broad and address them, it's harder.

7:44But when you get to that point, you're mentally – you're able to address it and recognize it for what you have already thought. So not trying to predict is a huge thing. Adapting is a huge thing. Knowledge sharing, and this is a kind of an example he used, one of many, which I think is really great. In Britain, they have two types of birds. They're both robins. One's a titmore and one's a red robin. And during pre-World War, people brought milk to each door. So the robins figured out they can come drink it. Both of them figured that out. Both of them evolved physically to adapt to that. And then World War II hit and all that happened.

8:30And they started putting – and technology, I guess. They started putting lids on the top of them with tin. One of the birds figured out how to punch a hole in the top, and so did the other one. But the titmore was able to thrive where the red robin actually didn't. And one of the examples is it's very important within cultures, within companies to have an active sharing mechanism. Right. Like so the reason the titmore did very well is because when they are they they go from place to place. They're not territorial and they go in groups and people certain birds will leave that group and go to others.

9:09So they're able to he called it intergenerational learning. And so they were able to teach each other how to do that, where the red robins were territorial. The males stayed in one place. Sure. One or two may have figured it out. But as a group, they couldn't. So they dwindled and the other one didn't. So examples of kind of that, he liked decentralized structures, people. If you had – I think I brought this up in the office. If you had an issue with your superior, they made it very hard to push up the ladder. Everything was dealt with down below and they decentralized and gave power to the people near the base of it.

9:51and very conservative in terms of what they did. They focused on the company surviving. And there's another example. I won't use it here. But when you're in an environment where you're doing something and you're making it extremely efficient and in that environment it works and then that environment breaks or changes, you've dialed it down so tight that when it breaks you don't have any like tensile strength you don't have the ability to adapt and so when you look at companies sometimes if they have things in there that seem like they are distracting or they're weakening let's say the margins the reserve they actually can be longevity enhancers right because they're not good now but when the environment changes when things change they're able to use those to adapt So that was one of them.

10:44Your next book's more exciting in title. This is the kind of stuff that I like thinking about. Yeah, The Courage to be Disliked. No, it's your other one. Which one? Oh, How to Make a Few Billions? Yes. Sorry, okay. Your Courage to be Disliked. That's adorable. I like that one. What is Seamus really trying to tell me, guys? Hey, I picked it. I thought it was a good one. Yeah, we're talking about both of them. Sorry. No, it's okay. Okay. Will brought this to my attention, so I pick it up, and he was actually just in the Wall Street Journal, I think, a little bit ago making a bid. We were just talking about a bid for some of Home Depots or something that Home Depot was looking at.

11:23They outbid him. He reminds me a little bit of Ken Langone in terms of how he thinks about things. He talks about ROIC is a big focus for him, data, having your mental health in the right place, going through cycles, going through setbacks is very important. So he talks a lot about that. I was talking earlier about something I use with my kids now. I know you have kids. It's like we always ask them about their day. And he said I do this thing where when they come home, I ask them about the best part of their day. Tell me, like, the one thing that was the best part of your day. and I started doing it and it's funny because it goes from, oh, you know, my day was okay or it was a bad day or it was whatever and it goes to this thing this morning me and my buddy did and it was awesome.

12:08And like it creates kind of an everyday, you're not asking them just for generic up and down stuff. You're asking for them to think about the best part of their day and keep it and it's kind of a positive way of thinking about things. He also talks about being dialectical, which is essentially just being able to perceive other people's viewpoints and other people's reasoning, rationale, and come to a conclusion that may be different than theirs but understanding it. And it's really important in I think what he does, what we do, is you can reason or you can understand where people are coming from.

12:43And if you can grasp that, you can still disagree with it and hold it at the same time. and like ken lungon he talks a lot about being very authentic and honest about dealing with mergers he this guy rolls up companies for a living he did it three different times united rentals as a trading company before that now he's doing building materials i think qxo qxo there we go all right so seamus uh what about your last book supposedly my favorite book I like it because it's it it really goes to kind of I think how we think about ourselves and maybe how we invest in some ways. It's it's the courage to be disliked.

13:27And it's really Aldirian psychology versus Freudian psychology. OK. The focus being you are kind of what you make of yourself at the moment. You're not you're not beholden to what has happened to you before. And a lot of it is focused on not trying to please other people, not trying to get praise from other people. You talked about, I think, the sparrow. What does the sparrow think about the hawk or something along those lines? He's like, he doesn't think about it. Our goal, I think sometimes we get towards focusing on how can I make this person think highly of me? How can I make them like me?

14:05That shouldn't be the goal. The goal should be am I being – am I working hard? Am I doing the best I can? Am I being honest with my family? Am I being a helper to the group or to the community? Those types of things. And that brings, I think, a better sounder structure within yourself. And it goes right to our investing. We are in a position sometimes where we are not favorably looked at. We can't always be. We wouldn't be able to make the profits or we wouldn't be able to make the returns that we do for investors or do as well as we do if we did that. So I think it was a great read for me is just really focusing on who we are, what we do well, and being okay with being uncomfortable.

14:52Sure. Nice. Will, you got a couple titles that I'll kick over to you. Thanks, Cole. To Nick and Seamus' points before, I recently finished In An Uncertain World by Robert Rubin and The Yellow Pad also by Robert Rubin. And Secretary Rubin was Secretary of the Treasury under President Bill Clinton. And previously, before that, ran the risk arbitrage group at Goldman Sachs. It's the next point we are in the decision-making business. And Bob Rubin had a wonderful framework that he used to make decisions during the risk arbitrage group. Since we are in the decision-making business but we cannot predict the future, no one can.

15:34We spend a lot of our time trying to probability weight expected outcomes. And so that was a nice reminder in that framework. And the yellow pad just really goes into greater detail on how he makes decisions. And he used the yellow pad in order to kind of frame his thoughts while he was running his group at Goldman in the 80s. Lastly, I would just say another big part of our business is studying excellence in whatever field you're in to study the greats. And the risk arbitrage group had one of the deepest benches of talent during the 1980s, with many members of that group going on to start great funds on their own, such as, most notably, Tom Steyer and Eddie Lampert.

16:21Sure. Nice. Let's see. A lot of mine are obviously books we had on the podcast here recently. So, you know, like the last few titles we did was American Oasis by Kyle Pallotta, which is a great story of the Southwest. Uncertainty Enterprise by Amar Bidet. Amar's book, it hit me like a rock. And back to your point on the season that we're in, Seamus. So it hit me like a rock because uncertainty is a constant in life. Okay? And the question is how often do we recognize uncertainty to be present really has to do with a lot of the volatility of life. Right. So, you know, there's these things that you just cannot calculate.

17:03If you can calculate it, you know, those are calculable risks and we can price those like an insurance. OK, what's the likelihood I, you know, get get I run over another person in a car or hit another car or, you know, anything like that. We can price it because, you know, we have quite a bit of data around that. It's the uncertainty of life that you can't really predict. And because you can't predict it, it's tough to price. And what I find really interesting is not necessarily that uncertainty is ever present. It's that the way the humans, you know, undulate up and down around uncertainty, you know, suddenly uncertainty hits and they're more aware of it than ever.

17:42And then uncertainty isn't, you know, perceived or experienced for a long time. And therefore they forget about it's uncertain. And it has a lot to do with like their view of the future. If there is no uncertainty, they're very optimistic about the future. If there is a lot of certainty, they become very negative about the future. And so I thought a lot about that, but I think that wasn't the most important thing out of Amar's book. Amar said, ultimately, you can't reduce uncertainty. And because you can't reduce uncertainty, you have to meet the human and the person that's dealing with that with prose and art and language and really the humanity.

18:21And when I think of humanities, I mean broad humanities like we think of it from a subject and college perspective. It's your writing. It's your ability to communicate, things like that. And the thing that just ruminated out of that book was Buffett's Buy American I Am piece that he wrote in the New York Times as an op-ed. Because effectively, he wasn't saying, you know, with all this uncertainty around us, I know X, Y, Z. He walked people through his way of thinking. thinking and the fact that you could connect with that thinking and understand, okay, here's how another human's dealing with this.

18:53That was seminal, I think, for a lot of people to read what Buffett said and said, you know what? Based on what he's saying, that makes sense. And I can't change the uncertainty of today, but that's helpful for me to frame what I have to deal with in the uncertainty. So I really like that book for thinking about Buffett's letter because I think in my career, that was a seminal piece he wrote. You know, a couple others. I've been in New York for a little bit here, you know, doing business meetings and taking Manhattan by Russell Shorto is a wonderful, really history of why New York's a melting pot.

19:23Very fun book. The other one, Mellon versus Churchill in this world where we have all these like I call it the two big F's, as I'm sure you guys know, fiscal and foreign policy. And in this world where we have foreign policy issues and we have fiscal issues. Well, that's a lot like us coming out of World War One, where our Western allies owed us money and we were going to hold them to it in some ways. and yet the Germans own them money. And so you kind of have this like mix between fiscal problems and foreign policy. And you walk into the book kind of liking Churchill. I naturally do. And you walk out actually really liking Andrew Mellon because he was such a pragmatist, back to your points earlier, Seamus, in terms of how do you address these things and have an aperture where it's open, it's not set because he had to deal with politicians, not a shocker here, that have a set aperture.

20:10It's very narrow. And if you don't fit that, guess what? That's what their constituents, as they say, believe. Hi, I'm Cole Smead, CEO and Portfolio Manager here at Smead Capital Management and host of this podcast. If you enjoy this podcast, I'd like to invite you to check out SmeadCap.com. At our firm, we are stock market investors. We advise investors who play the long game with a discipline that has proven success over long periods of time. Learn more about our funds at SmeadCap.com. past performance is not indicative of future results. Investing involves risks, including loss of principle.

20:46Please refer to the prospectus for important information about the investment company, including objectives, risks, charges, and expenses. Read and consider it carefully before investing. Smead Funds distributed by Smead Funds Distributors, LLC, not affiliated. Let's pivot. Let's talk about what you're currently reading. I'll kick it back over to Nick. Yeah, so I'm currently reading, I started this book called Play Nice by Jason Schreier. He's sort of an investigative journalist. He does like deep dives on different topics. So he did this piece. This book is about a company called Blizzard. And they made this video game company.

21:24It's about these three guys, Adam, or Alan, Michael, and Frank, who created this company. And they're very passionate about what they do. But what's interesting about it to me is they're not business people, right? They are these video game creators. That's their primary job. That's what they're interested in. But they were met with the realities of business and how do they fund their business. So their story is they get caught up in a whirlwind of M &A. They have an interest owned by them in Davidson Associates, which then goes to Vivendi, which creates an interesting relationship where they're this company in Los Angeles, but they're associated with this French company that they don't have much connection to other than financial.

22:10And eventually they end up being owned by Microsoft. So it's kind of a business meets these guys just want to do this thing, which is make games, but they have to meet the business reality. So that's kind of what brought me to that book. So it's pretty interesting so far. It's very well written. Yeah. Well, so you're saying you can't just have passion? You can't just have passion. It meets economic reality, right? Yeah. And that's what they found out. Gotcha. Okay, Seamus, how about you? What are you currently in? I'm on the Philosophy of Walking by Frederick Ross. And I don't know where I got this.

22:46It might have been from another book that I was reading. I'm early on in it. But it was interesting because it reminded me of we lived in Pasadena and Caltech's over there. And on my afternoon walk with my colleague, we'd bump into a guy, a professor over there is well-renowned, and he walked eight miles every day from North Pasadena to Caltech. And I thought about it afterwards after I started reading it. Walking is something people don't think a lot of, but it kind of just forces you to get out of the everyday grind of stuff, reset your brain. There's a lot of physical, mental stuff that it helps you just work through.

23:29Like he starts talking about just the physical motion of walking. You don't have to think about it. You're just doing it. You're out in either nature or wherever, and your brain – it's fun. Our colleague Connor, I was talking to him because he's on the phone. He's walking back and forth, and he talks and walks at the exact – and I go, I do the exact same thing. And my wife always yells at me because I'm walking and I'm yelling in the house and I can't sit still. And so, yeah, this book just talks about kind of a little bit about motion, people, you know, how people think, helping them get through stuff.

24:02And so it's kind of interesting. Gotcha. Will, how about you? What are you in? I'm currently reading Built from Scratch by Bernie Marcus. As we know, Bernie Marcus was the founder of CEO along with the aforementioned Ken Langone. And as long term. Of Home Depot. fame. And as long-term, qualitatively-oriented value investors, we really want to do our homework. We've owned Home Depot, I believe, since the inception of the fund back in 2008. And just trying to get incremental knowledge any way you can on a company is very important. We like to do our homework. Buffett famously mentioned that when he purchased Bank of America, he could make the decision quite quickly because he read a book on it probably four decades ago.

24:46So really understanding the DNA of a company beyond public disclosure is very important. So just enjoying that story. It's always fun to read books about American capitalism and entrepreneurship. Yeah. And back to connect that up with our prior thing, when we read Greg Zuckerman's book on the frackers, it taught us a lot about who the players in the oil and gas business were back then to ask, to your point, Will, what's their history? What's their track record? Can they take a punch? Things like that. So the book I'm in, I just cracked it. I'm just in it right now in the first few pages, but it's Meltdown by Duncan Maven.

25:22It's the downfall of Credit Suisse, which Credit Suisse at this point, I know this is going to probably be offensive to some people, but like Seamus said in his prior book, I have the courage to be disliked. So Credit Suisse at this point, it's obviously now combined into UBS, but it reminds me of kind of like a footnote. I remember in Too Big to Fail, if you guys go back and read the book, Washington Mutual's downfall and effectively them being bought out was like a footnote in that book. And I wanted to go back to kind of go through the history, Will, to your point of what were the places this business made missteps all the way?

26:05Who were the people? Why were those decisions made? not in many cases by a person, but accepted by wider groups of people. Because I think it's a business that won't be as remembered as it probably should be because it's not a major U.S. bank. It does not sit on the East Coast. Yes, it was big in Switzerland. So I kind of want to touch that. I think these guys know this, but I was in London on the Sunday that the merger between UBS and Credit Suisse was announced. And so I have kind of like just strong feelings about kind of being there. And I was doing some back-of-the-envelope analysis back then, and these guys could tell you about my frustration with that.

26:46But so that's the book I'm currently in, and it's a new book that was just recently published here. So let's jump over to books that – Cool. I'll add a quick aside to that that you might find interesting. Chris Hohn, who's one of the best concentrated value investors in the world today, has had a very interesting story. At Smead, back to disclosure, we're quite wary of businesses that are black boxes that we can't really understand the inner workings of. Chris Hohn has a story of going to Brady Dugan, who was running Credit Suisse at the time. I believe this is right before the 2008 financial crisis.