Some passages in The Warren Buffett Way by Robert Hagstrom reminded me of this post from a few months ago. I shared that taxes are a successful entrepreneur’s biggest expense. Allocating appropriate time to optimizing that expense, just as entrepreneurs do with all other major expenses, can have a material impact on a company’s ability to reinvest in growth opportunities. Here are the passages:

Except in the case of nontaxable accounts, taxes are the biggest expense that investors face—higher than brokerage commissions and often higher than the expense ratio of running a fund.

In a nutshell, the key strategy involves another of those commonsense notions that is often underappreciated: the enormous value of the unrealized gain. When a stock appreciates in price but is not sold, the increase in value is an unrealized gain. No capital gains tax is owed until the stock is sold. If you leave the gain in place, your money compounds more forcefully.

Overall, investors have too often underestimated the enormous value of this unrealized gain—what Buffett calls an “interest-free loan from the Treasury.” To make his point, Buffett asks us to imagine what happens if you buy a $1 investment that doubles in price each year. If you sell the investment at the end of the first year, you would have a net gain of $0.66 (assuming you’re in the 34 percent tax bracket). Let’s say you reinvest the $1.66 and it doubles in value by the second year-end. If the investment continues to double each year, and you continue to sell, pay the tax, and reinvest the proceeds, at the end of 20 years you have a net gain of $25,200 after paying taxes of $13,000. If, instead, you purchase a $1 investment that doubles each year and is not sold until the end of 20 years, you would gain $692,000 after paying taxes of approximately $356,000.

This is a great mathematical example demonstrating the power of compounding and the impact taxes can have on investment returns over a long period. It reminded me that playing the long game in investing gives you twin tailwinds, which can lead to explosive results.

I’m rereading The Warren Buffett Way by Robert Hagstrom. I enjoyed this book last year, and I decided to read it again after reading Hagstrom’s book Warren Buffett: Inside the Ultimate Money Mind.

The book contains lots of insightful information about Buffett’s investing approach and how he thinks about capital allocations as the CEO of Berkshire Hathaway. One part of the book I found invaluable was the chapter called “Common Stock Purchases.” In this chapter, Hagstrom walks through Buffett’s process to analyze and value nine of his biggest investments: GEICO, Capital Cities/ABC, Coca-Cola, and others.

Many people are familiar with Buffett’s investing strategy, but how he applied it when making investment decisions isn’t always clear. Hagstrom explains how Buffett valued each company and compares his valuations to the prices he paid. He walks through the math and shows how Buffett’s investments were made for prices below the intrinsic values that Buffett calculated. Buying for less than intrinsic value is core to his strategy of investing only when there’s a margin of safety.

I noticed that Buffett sometimes broke his own rules, such as when he invested in GEICO. Buffett usually invests only in companies with a consistent operating history that are generating increased free cash flow. However, when he invested significantly in GEICO in 1976, the company was on the verge of bankruptcy, had zero earnings, and needed a turnaround. Over several years, Buffett bought roughly 33% of the company. Hagstrom does a great job of detailing why he made this seemingly risky investment. Needless to say, Buffett was right, as GEICO is now a household name. This example reinforces that rules sometimes need to be broken when great investing opportunities present themselves. It also shows how Buffett spent decades preparing for this investment by reading and learning about insurance, and how that preparation positioned him to act swiftly when he needed to.

Last week, I shared that I want to learn more about psychology to improve my decision-making and because it seems like a fun topic. Charlie Munger famously studied the failures of others to understand thinking errors. That approach resonates with me, and I decided it’s best to start by regularly analyzing my own failures. I wasn’t sure how, though, so I started looking for ways others have done this.

I started rereading The Warren Buffett Way by Robert Hagstrom and found a great idea. Hagstrom says that Buffett included in his Berkshire Hathaway annual shareholder letter a section called Mistake Du Jour. In it, he “confessed not only mistakes made but opportunities lost because he failed to act appropriately.” He was transparent about his mistakes and shared them broadly.

I’m a huge fan of update emails (see here, here, and here). But I can’t recall ever seeing an update email with a section dedicated to the founder's mistakes. The more I thought about it, the more I thought it’s brilliant. It’s a great way to make a habit of analyzing your own mistakes—and also to build trust with others and maybe even get unexpected advice based on how other people navigated similar mistakes.

My weekly update blog posts are inspired by update emails. Including a mistake du jour–type section in them would be cool. It would check the box regarding forming a habit to analyze my mistakes and force me to crystallize and communicate them concisely. If I also force myself to include the lesson learned, this could be even better. I’m not sure about some things and need to think about them (e.g., will I have enough to do this weekly, or should I do it monthly?). But I like this idea and want to add my mistakes to my 2025 weekly updates.

I’m reading Warren Buffett: Inside the Ultimate Money Mind, which is a book about the mindset of Warren Buffett and other investors. One of the things it discusses is how Buffett and other investors make decisions. Robert Hagstrom points out that to understand psychology is to understand human decision-making. That’s why successful investors like Charlie Munger studied psychology to improve their own decision-making.

I’ve never thought much about psychology,  but this book got me thinking about it in relation to entrepreneurship—specifically, entrepreneurial wisdom. In this post, I shared that wisdom is the ability to apply knowledge in a manner that aligns with the outcome you desire. Wisdom means changed behavior and improved decision-making—knowing what to do and when to do it.

I’m always looking for ways to improve my decision-making (and share what I learn). But I’ve never really thought about trying to understand psychology to accomplish this until now. Hagstrom has me interested in learning more about psychology.

I’m going to try to find one of two books about psychology and add them to my reading list.

I’ve been learning more about marketing recently. Last week I finished reading the second book about David Ogilvy. He was a famous advertising entrepreneur who founded the agency Ogilvy & Mather. One of the points stressed in both books is how important a headline is.

Most people will read an ad’s headline, and then some percentage will read the rest if the headline catches their attention. David focused on the headlines because he understood that people will never read the body of an amazing ad if the headline isn’t effective. Great ad content alone doesn’t sell products—there must be a great headline too. Most people focus on the former, but the latter is equally, if not more, important.

I want to improve at thinking about and writing the equivalent of headlines. I’m going to practice with titles for my blog posts. I write these daily, so it’s a good way to get reps of something that David said matters more than people realize. If I get good at this skill, I’m sure it’ll pay off in ways I can’t imagine.

I have a goal to read a biography or autobiography every week. I set the goal in April and have been pretty good about it, especially the last two months. But this past week, I didn’t finish the biography I was reading, Master of the Game: Steve Ross and the Creation of Time Warner by Connie Bruck.

I got annoyed with myself when I realized I wasn’t going to finish in time. Looking back, I probably could have if I’d been more strategic with my time earlier in the week. To compensate, I spent extra time reading this past weekend and accepted the failure. It is what it is—but I definitely don’t want this to become my norm. I enjoy reading and have benefited tremendously from this habit since I set my goal in April.

This week is pretty busy, but I want to finish the book I’m reading plus a new one. It’s aggressive, but I think it can be done.

Wish me luck!

Last week, I finished reading At Random: The Reminiscences of Bennett Cerf. It’s Bennett Cerf’s autobiography, and it details how Cerf founded and grew book publisher Random House. Cerf was a colorful entrepreneur who lived an exciting life. Being one of the few people who influenced the distribution of knowledge by choosing what books to publish put him in a unique position. If Cerf and other publishers didn’t publish a particular book, the public never had the opportunity to read it. People were attracted to him and his influential knowledge distribution, which allowed him to build relationships with notable people, including U.S. presidents and movie stars.

Cerf founded Random House in 1927, and he died in 1971. Things have changed drastically since then. Companies such as Scribe Media and Amazon’s Kindle Direct Publishing now make it easy for authors to publish their books. More books are being published, but discovery is more challenging for books that don’t have significant marketing resources.

After reading Cerf’s book and thinking about how the industry has changed, it’s clear to me that people who curate and help others discover books can bring immense value to readers. Those who excel at this can build powerful magnets that attract others to them. By attracting others to them, they will likely also attract unique opportunities and build relationships with notable people like Cerf did. Said differently, curation and helping others with discovery is a way to create magnetic luck.

I finished reading Newspaperman: S.I. Newhouse and the Business of News by Richard H. Meeker. The biography is about Samuel Irving Newhouse Sr., who founded Advance Publications. At Sr.’s death, Advance Publications owned multiple newspapers and Condé Nast, which publishes famous magazines such as Vogue, Vanity Fair, GQ, and The New Yorker. Since then the company has grown rapidly, and it owned 26.5% of Reddit when Reddit began trading on the public stock market this year (see here, page 194). Reddit’s market capitalization (i.e., valuation) is just under $12 billion as of this writing.

This book and Newhouse: All the Glitter, Power, & Glory of America's Richest Media Empire & the Secretive Man Behind It by Thomas Maier detail one key strategy the Newhouse family used to grow their wealth: they optimized their tax liability and maximized the compounding of their wealth. The family studied the tax laws and implemented strategies that reduced their tax liability. This gave them more capital to reinvest in growing their companies or acquiring new companies.

Both books contain numerous examples. Their estate tax strategy especially caught my attention. When someone dies, their estate is transferred to heirs and a tax is due on the value of the estate being transferred if it exceeds that year’s federal threshold. When Sr. died in 1979, his sons filed a return valuing his ownership in Advance Publications at roughly $182 million and showing an estate tax due of roughly $49 million. The IRS said his estate was worth somewhere between $1 billion and $2 billion and that the estate tax due was, at a minimum, $600 million, and as high as $1.2 billion. At the time, Advance Publication owned thirty newspapers and various magazines. Its two most prosperous newspaper properties alone were worth more than $182 million.

Sr. had studied other publishing families to understand how death and estate taxes negatively impacted their family empires. Families often had to sell all or some of the company’s assets to pay the estate tax upon the founder’s death. Sr. developed a dual-share-class strategy to avoid that outcome. Sr. owned common shares in Advance Publications but issued preferred shares to his siblings, wife, and sons. His common shares carried voting rights and, essentially, control of company decision-making, but the preferred shares gave holders the right to vote on a company liquidation or sale. Said differently, if a buyer wanted control of the company, the buyer had to get the approval of the preferred shareholders first. The result was a gray area in the tax law. It could be argued that the fair market value of the company—the price a willing buyer and seller would transact at—was significantly lower than the IRS’s figure because there would be fewer buyers willing to buy a minority stake in a family-owned company that had such a bizarre ownership structure. Most buyers spending that kind of money would want majority ownership so they could have control. To gain control, they’d have to convince multiple family members to sell, a prospect many buyers would rather avoid. There’s more to this, but that’s the gist of it.

The IRS took the family to court, and the family prevailed. The result was that the family paid an estate tax bill that was a fraction of what it would have been if Sr. hadn’t planned so carefully. It wasn’t a material amount for the company, so it didn’t have to sell any assets to pay the tax. The Newhouse family’s empire could continue compounding for another generation and grow exponentially under Samuel “Si” Newhouse Jr.’s leadership for the next forty years.

I haven’t been a fan of books that tell the history of a company or a group of people (i.e., a family). These books introduce numerous people but don’t go very deep into any of their journeys. I enjoy biographies more because the in-depth coverage of a single person’s journey usually includes challenges encountered, lessons learned overcoming adversity, and details about how they applied lessons learned to achieve their goals. Biographies get me thinking and often lead to new ideas and insights, which excites me.

Though books about the history of a company or group of people aren’t my favorite, I now recognize they’re useful for something: links to other people or companies in an industry or time period.

I’m currently reading Newhouse: All the Glitter, Power, & Glory of America’s Richest Media Empire & the Secretive Man Behind It by Thomas Maier. It’s about the Newhouse family and their media empire. But because it covers so many decades and so many people, it’s introduced me to other companies and founders I wasn’t aware of. I’ve ordered biographies about several people mentioned in this book.

My thinking on the value of reading this type of book has changed. While I’m not learning as much about an individual as I’d like, I’m being introduced to more people in the publishing industry and can read about each person’s journey. These books are good discovery mechanisms and help me understand industry periods. I don’t want these to be the majority of my reading, but they’re a helpful supplement to biographies.

I had a conversation with an entrepreneur who’s an avid reader and history buff. He pointed out something that stuck with me: biographies and autobiographies about business founders are the most challenging historical books to write. He based that on a few insights:

• Authors who write about entrepreneurs aren’t entrepreneurs and don’t usually understand business. They focus on telling a compelling story and don’t deep dive into an entrepreneur’s actions or why they took them. This leaves entrepreneurs who read their book craving more details about some parts of the journey.
• Entrepreneurs who write autobiographies usually aren’t gifted writers. They know all the details about their journey, but putting it down on paper is challenging for many of them, and they need help. If they move forward with the book, many will get a coauthor to fill the gap.
• The more time that passes, the harder it is to piece together exactly what an entrepreneur did and why they did it. This isn’t as true of other historical events, such as wars.

The details of what an entrepreneur did and why they did it are what make a journey resonate with me and help me figure out how to apply it to my situation. When that’s missing from a biography, I tend not to enjoy it as much. My favorite books are autobiographies. Reading them is the closest you can come to getting inside an entrepreneur’s mind without talking to them. They usually include the nitty-gritty, reasoning, and emotions.

This entrepreneur made a great point today. I’m going to think about this more.