Here are some good reads from the week. 

Innovation

Jeff Bezos talks about how Amazon (AMZN 0.92%) innovates: 

Our product development process always starts the same way. We don't start out by saying, "We have to build an X." We say, "If we were going to build an X, how would it be different? How would it be better?" And it can't just be different. It has to be different constrained by customers caring. It's easy to be different if you don't constrain it that way. But it has to be useful.

Incentives

This is predictable, but still awesome. Since Apple (AAPL -0.46%) introduced kill switches on iPhones, thefts have plunged: 

In New York City, robberies and grand larcenies from a person involving Apple products dropped 19% and 29%, respectively, in the first five months of this year, compared with a year earlier. In San Francisco, iPhone robberies declined 38%. In London, Apple thefts declined 24%. 

FAIL

This is one of the saddest studies I've seen in a while:

We find evidence that CEO pay is negatively related to future stock returns for periods up to three years after sorting on pay. For example, firms that pay their CEOs in the top ten percent of excess pay earn negative abnormal returns over the next three years of approximately -8%. The effect is stronger for CEOs who receive higher incentive pay relative to their peers. Our results appear to be driven by high-pay induced CEO overconfidence that leads to shareholder wealth losses from activities such as overinvestment and value-destroying mergers and acquisitions.

Compounding

Ben Carlson shows Berkshire Hathaway's (BRK.B -0.70%) volatile side: 

Roughly every 6-7 years, Buffett's investment vehicle suffered a rather large crash in its stock price. Yet since 1980 the stock compounded at a rate of 21% per year, good enough to double your money every three-and-a-half years.

Advantage

Leave your morals at home, and successful investing is easier than it looks:

A quarter of all public company deals may involve some kind of insider trading, according to the study by two professors at the Stern School of Business at New York University and one professor from McGill University. The study, perhaps the most detailed and exhaustive of its kind, examined hundreds of transactions from 1996 through the end of 2012.

Opportunity

You can poke a lot of holes in this concept, but I like the idea: This is the space required to hold enough solar panels to power the entire world:

Risk

The Psy-Fi blog talks about safe withdrawal rates:

There is no such thing as a Safe Withdrawal Rate and believing otherwise is dangerous. What there is are investors who know what they're doing and those who believe in mythical rules. On balance I'd recommend being one of the former, but there's no accounting for taste.

Summer reading

I'd recommend reading these books this summer: 

Enjoy your weekend.