A Book with Legs: The Smead Book List - Summer 2025

Release Date: June 30, 2025
Host/Author: Smead Capital Management

1. Introduction

Cole Smead, CEO and portfolio manager at Smead Capital Management, opens the episode by welcoming his colleagues Shamish Sullivan, Nick Garcia, and Will Keenan. They introduce the episode as their quarterly book list discussion, emphasizing their commitment to value investing through diverse literary insights.

“At our firm, we are readers and we believe in the power of books to help shape informed investors.”
— Cole Smead [00:21]

2. Recent Reads

Nick Garcia’s Insights

Nick Garcia shares his recent readings:

• "Quit" by Annie Duke: Duke, a professional poker player, challenges the negative stigma around quitting. She advocates for decision-making based on expected value rather than societal perceptions of perseverance.

  “There is virtue in abandoning something that doesn't have a positive future.”
  — Nick Garcia [01:56]

  Key Points:

  • Reframing Quitting: Shifting the perspective from viewing quitting as failure to recognizing it as a strategic decision.
  • Cognitive Biases: Addresses biases like sunk cost and loss aversion that inhibit rational decision-making.
  • Real-Life Examples: Discusses Muhammad Ali’s prolonged career and Mount Everest climbers as cases where quitting had significant consequences.

• "The Man Who Solved the Market" by Gregory Zuckerman: Chronicles Jim Simons and the rise of Renaissance Technologies, highlighting the intersection of mathematics and finance.

  “Greg’s a great writer and that must have been a fun book.”
  — Cole Smead [05:35]

Shamish Sullivan’s Selection

Shamish Sullivan discusses three lesser-known books:

• "The Living Company" by Aria de Gosse: Explores companies that have thrived for centuries by emphasizing adaptability, knowledge sharing, and decentralized structures.

  “Adaptability, knowledge sharing within the company and without and decentralized structures.”
  — Shamish Sullivan [06:34]

  Key Points:

  • Adaptability: Companies must embrace diverse ideas to navigate unpredictable futures.
  • Knowledge Sharing: Promotes intergenerational learning and decentralized decision-making.
  • Examples: Japanese trading companies like Itochu and Mitsui, Shell, and even a comparison between titmores and red robins during historical adaptations.

• "The Courage to Be Disliked": An exploration of Alderian psychology, focusing on self-definition and the importance of not seeking external validation.

  “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.”
  — Shamish Sullivan [13:15]

Will Keenan’s Reads

Will Keenan shares his recent books:

• "Uncertain World" by Robert Rubin: Offers frameworks for decision-making in unpredictable environments, emphasizing probability-weighted outcomes.

  “Robert Rubin had a wonderful framework that he used to make decisions during the Risk Arbitrage Group.”
  — Will Keenan [Will's discussion around 05:14]

• "Built from Scratch" by Bernie Marcus: Chronicles the founding and growth of Home Depot, highlighting the importance of understanding a company’s DNA beyond financial statements.

  “Bernie Marcus was the founder of Home Depot, and understanding the DNA of a company beyond public disclosure is very important.”
  — Will Keenan [Will’s discussion around 24:08]

3. Current Readings

Nick Garcia

• "Play Nice" by Jason Schreier: Investigates the business challenges faced by Blizzard Entertainment, detailing the tension between creative passion and corporate reality.

  “Their story is they get caught up in a whirlwind of M and A... eventually they end up being owned by Microsoft.”
  — Nick Garcia [21:06]

Shamish Sullivan

• "Philosophy of Walking" by Frederick Ross: Explores the mental and physical benefits of walking, drawing parallels to personal and professional life balance.

  “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.”
  — Shamish Sullivan [22:39]

• Additional Titles: "The Logic of Human Density" by Robert Wright and "Non Zero" [30:12].

Will Keenan

• "Built from Scratch" by Bernie Marcus: A deep dive into Home Depot’s inception and growth.

• "Made from Scratch": Focuses on Kent Taylor, founder of Texas Roadhouse, emphasizing attention to detail and long-term business success.

  “Attention to detail when he was running the business. They got roughly 2 to 4 inch deep bins to make sure they had the freshest lettuce possible at all times.”
  — Will Keenan [32:19]

4. Book Recommendations

The team shares books they recommend or plan to read:

• Nick Garcia: "The Power of an Idea" by Paul Kachow and "Shoe Dog" by Phil Knight.

  “Teach me about the business and learn that way what you can't learn through financial statements.”
  — Nick Garcia [27:47]

• Shamish Sullivan: "The Logic of Human Density" by Robert Wright and "Non Zero".

  “Despite the setbacks, history directionally focuses towards integration and complexity.”
  — Shamish Sullivan [29:49]

• Will Keenan: "Made from Scratch" and "Non Zero".

  “Non0 is a terrific book. I would highly recommend that.”
  — Will Keenan [30:18]

• Cole Smead: Upcoming titles include "Empire of the Elite" by Michael Grunbaum and "Anointed" by Tony Stewart.

  “These books are going to be coming out. 'Empire of the Elite' is about Conde Nast and their media trajectory.”
  — Cole Smead [32:19]

5. In-Depth Discussion: Homebuilding Business

The hosts delve into the current state of the homebuilding industry, addressing challenges and opportunities amidst changing market sentiments.

Question Addressed:
“How do you look at the current low sentiment in the homebuilding market with factors like high mortgage rates and slowing markets?”

Will Keenan’s Response

Will emphasizes the cyclical nature of the industry and the importance of fundamental business improvements:

“A longtime mentor of mine, Bill Miller, said in this business that you make the money at the turns.”
— Will Keenan [35:04]

Key Points:

• Quality Improvements: Transition from capital-intensive models to land-light models, freeing up cash and enhancing return on capital.

• Countercyclical Investing: Similar to Texas Instruments, homebuilders reinvest during downturns to drive economic value over cycles.

• Economic Scaling: Large builders like Lennar and D.O. Horton benefit from economies of scale, reducing costs and increasing margins.

  “They have switched to a land light model where they use options, which freed up a very significant amount of cash on the balance sheet.”
  — Will Keenan [36:04]

Nick Garcia’s Perspective

Nick views low investor sentiment as an opportunity:

“Dour investor sentiment isn't a reason for us to not be in the space. It's actually a reason to be interested in the space.”
— Nick Garcia [39:37]

Key Points:

• Differentiated View: Recognizing opportunities where others may not see them due to pessimism.
• Demographics: Continued household formation supports long-term demand despite short-term challenges.

Shamish Sullivan and Cole Smead’s Additions

Shamish highlights the resilience of top builders and the importance of market share acquisition during downturns:

“Every time this happens, you're just building up more market share and you're slowly consolidating to the point where smaller players aren't able to compete.”
— Shamish Sullivan [43:09]

Cole connects the discussion to broader economic principles and investor behavior:

“The implied value of owning the S&P 500 the next 10 years is to plausibly lose money, you have to account for that in making your decisions.”
— Cole Smead [44:14]

6. Current Events and Market Analysis

The team briefly discusses the impact of geopolitical events, such as the "12 Day War," on oil prices and their investment strategies.

• Hedging Strategies: Ensuring that companies are hedged against temporary price fluctuations.

  “Our investment thesis isn't based on short term move in oil prices.”
  — Shamish Sullivan [48:12]

• Long-Term Outlook: Maintaining a focus on robust free cash flows and superior capital allocation irrespective of short-term volatility.

  “We think it's going to be higher for longer over the long term.”
  — Will Keenan [46:44]

7. Conclusion and Future Engagements

Cole wraps up the discussion by encouraging listeners to recommend books via email and social media, promising shout-outs in future episodes.

“If you have a great book that you'd like to recommend, email podcastmeadcap.com or reach out to us on X.”
— Cole Smead [51:32]

The team expresses enthusiasm for future episodes, highlighting the value of ongoing literary exploration to inform investment strategies.

Notable Quotes

• "There is virtue in abandoning something that doesn't have a positive future."
  — Nick Garcia [01:56]

• "Adaptability, knowledge sharing within the company and without and decentralized structures."
  — Shamish Sullivan [06:34]

• "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."
  — Shamish Sullivan [13:15]

• "Dour investor sentiment isn't a reason for us to not be in the space. It's actually a reason to be interested in the space."
  — Nick Garcia [39:37]

• "Our investment thesis isn't based on short term move in oil prices."
  — Shamish Sullivan [48:12]

Key Takeaways

• Strategic Quitting: Understanding when to abandon unproductive ventures can lead to better decision-making and resource allocation.
• Business Longevity: Companies that prioritize adaptability, knowledge sharing, and decentralized structures are more likely to thrive long-term.
• Cyclical Investing: Recognizing and acting upon cyclical patterns in industries like homebuilding can unlock significant investment opportunities.
• Continual Learning: Ongoing engagement with diverse literary sources enhances investment strategies and business understanding.

For more insights and to explore Smead Capital Management’s investment strategies, visit smeedcap.com.