Several of you sent thoughtful counterpoints to Less’s analysis yesterday, including links to this by William J. Bernstein. I’ve passed them on to see what he thinks. So – having waited a lifetime on this – wait another day or three before taking the plunge.


Long-time readers know I’m a fan of this book, by Joel Greenblatt. One of you recently wrote to say he’d been following the book’s system and the results had been only so-so. What did I think?

I thought he should be patient, but I asked Joel what he thought. And he replied:

‘Each investor who picks 5 or 6 stocks every quarter will have varying results over the short term (meaning a couple of years). However, I gave a class on the results from the large cap model that I reported in the book. During that very successful 18-year period (basically doubling the market’s return), there was a point-to-point 4-year period and a totally non-overlapping 3-year period when the model did not outperform the market averages. That means there were long periods that the model did not beat the market. Yet, looking backward, it is very clear that the strategy (double the market’s return) was a good one. So…what can be learned by one person’s picking a few stocks over a year and a half? Nothing. It either makes sense to buy above average companies at below average prices or it doesn’t. If it does, that still means you need a 3 to 5 year horizon to bear that out.’


Monday I linked to a story designed to make any FMD shareholder nervous (but not nervous enough to make me a seller). Herewith a knowledgeable comment addressing – and dismissing – that story. There are no guarantees, of course, but if you own the stock, you’ll feel much better after reading this.


Patience, Jackass, patience! (For those new to this page, click here.) The drilling continues, with encouraging results – most recently, this press release. The WheelTug work and all the rest continues as well. May this all amount to naught? Sure. But patience is my middle name.


Well, of course, as some of you pointed out, it would be better not to use them at all – just use real glasses and rinse them out.

But out by the pool, where they could break? Or tailgating at the football game? And what if you have 100 people dropping by, but don’t happen to have 200 glasses? (No way is everyone going to keep the same glass throughout a party.)

Now, I know: you are appalled I have a pool, skeptical I attend football games, and completely disbelieving I could get 100 people to come by for a drink – especially after asking them all for money for the past 9 years.

But leave that aside. YOU might have a pool or a stationwagon or friends.

So the question remains: WASH AND REUSE? Or CONVERT TO REFUSE?

I say: reuse!

Mark Centuori: ‘Where was Charles when all this trash retrieval was going on?’

☞ Rolling his eyes to the point of near sprain.

Lindsay Leveen: ‘A couple of weeks ago my understudy, Ajay Kshatriya, a brilliant young Chemical Engineer here at Genentech, prepared the following [essay for my weekly Thermo Thursday newsletter].’

As I sleepwalked towards the coffee machine Monday morning I grabbed a paper cup to pour that sweet elixir, I wondered what was the thermo implications of using this paper cup rather than bringing a coffee mug to work?

For starters, we need to determine the cost of production of a standard ceramic mug (~300g) to a paper cup (~10g).

Source: Hocking, Martin B. “Reusable and Disposable Cups: An Energy-Based Evaluation.” Environmental Management 18(6) pp. 889-899.

Now, we need to also take into account the mechanical energy of moving water for washing a ceramic mug with ambient water (~10 sec from a 1.5GPM sink) versus tossing the cup in the trash and sending it off to the landfill. So we will assume a per use basis, the water is coming from Hetch Hetchy, and the trash (according to South San Francisco Scavengers that contracts with the city) is dumped in Ox Mountain Sanitary Landfill in Half Moon Bay.

Assuming the downward flow of water from the mountains to sea level does not require booster pumps, the cost of moving .25 gallons of water from our reservoir in San Mateo is roughly 200kJ/wash. Moving 1 cup from the South City to the landfill is 4.2kJ/cup. So 48x more energy is required to move water than to move a cup. However, we need to take into account mechanical efficiencies – even if we assume a 25x efficiency in moving water than moving a cup (due to less friction losses), the disposable cup is still 2x more energy efficient per use!

So from an energy of manufacturing standpoint, ceramic mugs will beat paper cups after 25 uses, but once you start washing your coffee mug every use, the 2x more energy expense from washing mitigates any savings of going ceramic. From a thermodynamics perspective, the disposable cup is the winner!

Why then would we decide to use the ceramics? SUSTAINABILITY. Even though the energy expense is more for ceramics we’re not logging forests or clogging landfills when we reuse our coffee mug. The disposable Ecotainer we use at Genentech tries to mitigate these problems by using a biodegradable liner and sustainable forests, but their environmental footprint is still not zero.

So what’s the solution? — If you don’t wash your ceramic cup every cup of coffee (but wash it every other use) than the ceramic will win out in 25 uses. Not only did we learn thermo today, but we have a great excuse not to do our dishes!

☞ Did you follow that? Neither did I. But big plastic cups are tougher on the environment than paper cups, and rinsing them out has to be a better plan than tossing them.

Don’t worry: I’ll get off this. Tomorrow: politics!


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