I. Brief Summary
A book on investment legends. William Green is a well-known financial journalist and has access to many of the world's best investors. He shares lessons learned from his interviews of superinvestors. The book is filled with gems of wisdom and clonable concepts. If emulating these investors to become rich is nice in theory but tough to execute, emulating the way they live to become happy might not work even in theory because of their cold and difficult personalities. Nonetheless, the lessons can be fine tuned to lead a great investing and personal life.
II. Big Ideas
- Many of the investors talk about how they have created systems to mitigate risk but every system is doomed to fail because there is so much randomness that it can drive you insane.
- The lessons shared can also be conflicting because some invest almost all of their money in just a few stocks, but that’s contrary to the advice given by Benjamin Graham (value investor legend), who says diversification is key.
- Investors covererd in this book:
- Sir John Templeton
- Templeton bought stock in 104 U.S. companies, trading at $1 or less, in 1939 at the brink of WWII based on the theory that companies would see huge demand if war broke out. He invested $100 per stock. He made money on 100 out of 104 stocks—a total of 5x his money. Templeton shorted 84 internet stocks, selling at triple its IPO price during the Dotcom Bubble on the theory that insiders would dump their shares after the lockup period ended. He bet $2.2 million on each stock ($185 million total) and made $90 million when the bubble burst. His strategy was to place short bets 7 days before the lockup expiration and cover the bets 10 days after expiration. He also had a rule in place to cover if the stocks rose a certain amount (to protect from excessive losses).
- You have to buy at a time when other people are desperately trying to sell.
- It’s a human failing to even put your mind on a question of which stock market is going to go up or down. No one knows that.
- Six Guiding Principles:
- Beware of emotions.
- Most people get led astray by emotions in investing. They get led astray by being excessively careless and optimistic when they have big profits, and by getting excessively pessimistic and too cautious when they have big losses.
- To buy when others are despondently selling and to sell when others are enthusiastically buying is the most difficult. But it pays the greatest rewards.
- Beware of your own ignorance.
- So many people buy something with the tiniest amount of information. They don't really understand what it is that they are buying. The one with the greatest information is likely to come out ahead. It takes a huge amount of work and study and investigation. Templeton claimed that diligence had played a much greater role in his success than innate talent.
- He often spoke of his determination to give the extra ounce - to make the extra call, to schedule the extra meeting, to take the extra research trip. He was similarly dedicated to his lifelong programme of continuous self-education.
- You should diversify broadly to protect yourself from your own fallibility.
- Investing is so difficult, that even the best investors should assume that they'll be right no more than two-thirds of the time, however hard they work.
- Invest in a company only if it falls within your circle of competence.
- The best way to find bargains is to study whichever assets have performed most dismally in the past five years, then to assess whether the cause of those woes is temporary or permanent.
- Most people are naturally drawn to investments that are already successful. Templeton took the opposite approach asking "Where is the outlook worst?"
- One of the most important things for an investor is not to chase fads.
- The best way for an investor to avoid popular delusions is to focus not on outlook but on value.
- Beware of emotions.
- Irving Kahn
- Investing is about preserving more than anything.
- Considering the downside is the single most important thing an investor must do. This task must be dealt with before any consideration can be made for gains.
- If you achieve only reasonable returns and suffer minimal losses, you will become a wealthy man and will surpass any gambler friends you may have. This is also a good way to cure your sleeping problems.
- Bill Ruane
- He learned his investing principles from Albert Hettinger.
- Do not borrow money to buy stocks. You don't act rationally when you're investing borrowed money.
- Watch out for momentum. Proceed with extreme caution “when you see markets going crazy”, either because the herd is panicking or charging into stocks at irrational valuations.
- Ignore market predictions: I firmly believe that nobody knows the market will do....The important thing is to find an attractive idea and invest in a company that's cheap.
- Invest in a small number of stocks that you have researched so intensively that you have an informational advantage. I don’t know anybody who can really do a good job investing in a lot of stocks except Peter Lynch. It was the most important principle for Ruane, according to Green.
- You don’t act rationally when you’re investing borrowed money.
- Most people would be much better off with an index fund.
- Marty Whitman
- Jack Bogle
- Don’t take excessive risk.
- Keep your costs low.
- The crowd is always wrong.
- Charlie Munger
- Avoid stupidity. Other people are trying to be smart. All I’m trying to be is non-idiotic.
- Common errors:
- Listening to market predictions.
- Buying cyclicals at the top of the cycle or poor businesses at market tops.
- Being close-minded.
- Doing things because “other people do it.”
- Rush to decisions.
- Ego, overconfidence, overoptimism.
- If you would persuade, appeal to interest and not to reason. This maxim is a wise guide to a great and simple precaution in life: Never, ever, think about something else when you should be thinking about the power of incentives.
- A systematic process of studying counterarguments, taking a devil’s advocate approach, or writing premortems (assuming disaster) are ways to limit biases and improve decisions.
- Lists of your biggest biases, emotional tendencies, and mistakes serve as a good checklist before making a decision.
- If you’re going to be in this game for the long pull, which is the way to do it, you better be able to handle a fifty percent decline without fussing too much about it. And so my lesson to all of you is, conduct your life so that you can handle the fifty percent decline with grace.
- You have to be like a man standing with a spear next to a stream. Most of the time he’s doing nothing. When a fat juicy salmon swims by, the man spears it. Then he goes back to doing nothing. It may be six months before the next salmon goes by.
- Ed Thorp
- As far as gambling is concerned, if I don’t have an edge, I don’t play.
- He heavily relied on the Kelly Criterion to size positions.
- Had a chance to invest in LTCM but passed because they were taking too much risk....So the probability of their ruin appeared substantial to me.
- Howard Marks
- Howard Marks runs Oaktree, famous for their low-risk, value oriented investing with superb results. Buffett says when he sees a Marks memo in his email, it’s the very first thing he reads.
- In 2008, when the credit collapse happened, Lehman announced the biggest bankruptcy in US history. It was greatest panic of Marks career. He turned bullish for the first time in years. On the day Lehman died, Marks started invested half a billion a week. He wrote to his investors — we only have one choice — to assume this isn’t the end, but just another cycle. You can simplify every downturn to — either the world ends or it doesn’t, and if it doesn’t end and we didn’t buy, then we didn’t do our job. That makes the decision awfully straightforward.
- Efficient markets theory (that all assets are always fairly priced) is a valuable theory, but cannot always be true in reality.
- Our performance doesn’t come from what we buy or sell. It comes from what we hold. So the main activity is holding, not buying and selling. It’s more likely that it applies mostly to large cap stocks, which are analysed by thousands of funds and investors constantly. In smaller caps, markets will be less efficient. For this reason, if you want to invest in large caps it’s better to index, because chances of finding something undervalued are poor.
- Skepticism is a huge asset. Always be skeptical. But skepticism isn’t just being pessimistic when people are excessively optimistic. It’s also being optimistic when people are excessively pessimistic. You can use cyclicality to your advantage by behaving countercyclically.
- Change is inevitable. Even if things are always changing, we are not powerless. We can make our portfolios unfragile. Don’t use leverage and don’t try to maximise everything. Simply spending less than you make, living within your means. Never operate at the very limit. Never put yourself in a position where you’re forced to sell or do the wrong thing.
- The only constant is impermanence. We have to accommodate to the fact that the environment changes. We cannot expect to control our environment.
- Marks reminds himself of the role luck has played in his life. He keeps a list of the lucky breaks he’s had to help him stay humble. Luck is always a factor. Hard work alone is not enough, and intelligence is not enough. There are many intelligent people who worked very hard and just got unlucky.
- The more a market is studied and followed and embraced and popularized, the less there should be bargains around for the asking.
- He asks himself questions such as:
- Is it cheap?
- Are investors appropriately skeptical and risk-averse or are they ignoring risks and happily paying up?
- Are valuations reasonable relative to historical standards?
- Are deal structures fair to investors?
- Is there too much faith in the future?
- How much optimism is priced in?
- Where is the mistake? Is the mistake in buying or not buying?
- Markets are cyclical. Markets, the economy, etc. follow a pattern of cycles. Yet investors tend to expect the current trend to continue in a straight line. They fail to see the trend reverting.
- Of all the cycles Marks has studied, none seems to him more predictable than the credit cycle. Prosperity brings expanded lending, which leads to unwise lending, which produces large losses, which makes lenders stop lending, which ends prosperity, and on and on.
- I’m convinced that everything that’s important in investing is counterintuitive, and everything that’s obvious is wrong.
- He avoids forecasters (they can’t predict the future), market timing, and fads (rarely cheap). No value in macro forecasts. The future is influenced by an almost infinite number of factors, and so much randomness is involved that it's impossible to predict future events with any consistency. There are two classes of forecasters — those who don’t know, and those who don’t know they don’t know.
- If the market is precarious, you don’t have to know what the catalyst will be. You only have to know that there’s a vulnerability.
- Marks collects examples of “stupid deals” to keep track of the frequency of craziness, greed, and lowering of standards in markets.
- Both in markets and life, the goal isn’t to embrace risk or eschew it, but to bear it intelligently while never forgetting the possibility of an unpleasant outcome.
- If your thinking is heavily colored by wishful thinking, then your probability assignments will be biased toward favorable. If you’re given to fear, then you’ll be biased toward the negative. You have to be aware of that these emotional states color your bias and you have to resist it.
- If you want to add value as an investor, you should avoid the most efficient markets and focus exclusively on less efficient ones.
- The future may be unpredictable, but there is a recurring process of boom and bust which is remarkably predictable. In the investment business, it's very hard to do the right thing, and it's impossible to do the right thing at the right time. Most investors grow complacent when times are good. Marks grows more vigilant, because he realizes the pendulum may be coming to end of its arch.
- View the world as oscillating and cyclical, rather than moving in a straight line. Economies expand and subtract, credit eases and tightens. The cycles will always self-correct, humans always overshoot, so the pendulum always has to swing back eventually.
- Don’t time the market. From 1926 to 1987 the return in stocks was 9.44% pa, but if you had gone to cash and missed the best 50 of those 744 months, you would have returned nothing. Trying to time the market is a source of risk, not protection.
- Avoid future oriented investments. This rules out tech stocks and anything faddish. Nifty Fifty stocks were similar to FANG stocks which crashed heavily in 1974 after soaring valuations. FANG will probably be similar.
- Joel Greenblatt
- Greenblatt started on Wall Street with a summer job at Bear Stearns. He made riskless arbitrage trades via options. Founded Gotham Capital with $7 million in assets. Averaged 50% per year over the first 10 years and averaged 40% annually over the first 20 years. Roughly 80% of the fund was in 6 to 8 positions. Many were spinoffs, restructures, companies emerging from bankruptcy, illiquid small caps. He purposely kept the fund small. All investor money was returned after 10 years. He looked for hidden value that nobody wanted.
- Investing has a complexity problem. It avoids simplicity.
- Complexity can be a seductive trap for clever people. They were rewarded at school for solving complex problems, so it's no surprise if they are drawn to complicated solutions when confronted by the puzzle of investing. But in financial markets, as in martial arts, victory doesn't depend on dazzling displays of esoteric techniques. It depends on a firm grasp of the principles of the game and a deep mastery of basic skills.
- People are crazy and emotional. They buy and sell things in an emotional way, not in a logical way, and that’s the only reason why we have any opportunity.
- Why is it so valuable to reduce investing to a few core principles? For a start, it forces us to think through what we truly believe. I have a simple way of looking at things that makes sense to me and that I’m going to stick with through thick and thin. That’s it.
- Don't buy more of companies that you can make most money on. Buy more of companies that you can't lose money on.
- Buy good businesses at bargain prices.
- Investing (and life) should be a process of subtraction and simplification. Removing what’s unimportant and unnecessary to focus on the key principles.
- I like calculating the odds. Consciously or unconsciously, I’m calculating the odds on every investment. What’s the upside? What’s the downside? I don’t think you can be a good investor without thinking in that way.
- It’s easier to find bargains off the beaten path or in extraordinary situations that other people aren’t looking at.
- You size your positions based on how much risk you’re taking. I don’t buy more of the ones I can make the most money on. I buy more of the ones that I can’t lose money on.
- Pretty much everything we ever owned, we sold way too early. If you’re very cheap in buying, it’s hard to be as comfortable when something has doubled or tripled, even if it’s still good.
- One of the beauties of the pain that people have to take in underperformance is that, if it did not exist, everyone would do what we do.
- The best strategy is the one you can stick to in good and bad times.
- 4 valuation techniques:
- Discounted Cash Flow: take the present value of estimated future earnings and compare to the company’s market cap.
- Relative Value: compare a company’s valuation to similar businesses.
- Acquisition Value: an estimate of what another company might pay for it.
- Liquidation Value: estimated worth if company is closed, assets are sold, debts are paid, and what’s left is distributed to shareholders.
- Bill Miller
- The world changes. This is the biggest problem in markets.
- It’s all probabilities. There is no certainty.
- I’m trying to get rid of the unnecessary parts of what I used to do. I don’t build models anymore. It’s just stupid. It doesn’t make any sense. For every company, there are a few key investment variables and the rest of the stuff is noise.
- Mohnish Pabrai
- Pabrai studied the best investors, figured out why they were successful then cloned (copied) their approach (studying is a huge part to make sure he clones the right things). He did for more than just investing strategies. He gets investment ideas by searching through 13F’s of the top investors, looks at the top holdings, studies the stocks, and tries to figure out why it’s a top holding.
- I’m a shameless copycat. Everything in my life is cloned. I have no original ideas.
- Never use leverage. The case of Rick Guerlin—he tried to get rich faster than necessary. He was leveraged going into the 1973-74 crash, hit by margin calls, and forced to sell his shares in Berkshire Hathaway for less than they were worth (Buffett bought them).
- He avoids short selling because the upside is only 100% but the downside is unlimited.
- He ignores macroeconomics. It’s too complex.
- He avoids meeting the management of companies he owns. Avoids being biased by sales speak and unreliable information.
- The key isn’t to get rich, it’s financial independence—to do what you want to do without money constraints.
- Pabrai cloned Buffett’s 3 core concepts:
- Buying a stock means buying a piece of a business with a value, not a piece of paper.
- That value of the businesses is not always reflected in stock prices. The key is to stay disconnected from the market’s craziness and patiently wait for mispriced opportunities.
- Buy stocks only when it’s selling at a discount to that value.
- Tom Gayner
- Gayner manages Markel’s investment portfolio since 1990. His portfolio is over 100 stocks with 66% in the top 20 positions.
- Make your mistakes nonfatal. It's so fundamental to longevity. And ultimately, that's what success is in this business: longevity.
- Resounding victories tend to be the result of small, incremental advances and improvements sustained over long stretches of time. His goal is to find tiny habits repeated daily that lead to long-term success. Just making progress over and over again is the critical part.
- You cannot control the outcome. You can only control the effort and the dedication and the giving of one hundred percent of yourself to the task at hand.
- It’s been my experience that the richest people were those who found something good and held on to it. The people who seemed the least happy and the most frenzied and the least successful are those that are always chasing the next hot thing.
- 4 guiding principles:
- He looks for profitable companies with good ROC and little leverage.
- Quality management with integrity.
- The company can reinvest profits at a good rate of return.
- Can be bought at reasonable price.
- Guy Spier
- Fred Martin
- Ken Shubin Stein
- Matthew McClennan
- Eveillard retired in 2008 and passed control of the First Eagle Global Fund to Matthew McLennan. McLennan follows a strategy—looks for at least a 30% margin of safety and owns over 100 stocks in the funds.
- Our goal is not to try to become rich quickly. It’s resilient wealth creation.
- The goal directs every investment decision.
- On risk: just because something has never happened, doesn’t mean it can’t happen. We must be prepared for the possibility.
- We just want to acknowledge that there are things that may not play out so well in the future. You want to be structured to participate in the march of mankind, but to survive the dips along the way.
- I happen to believe that everything is on a path to fade. If you think of evolution, ninety-nine percent of species that have ever existed are extinct. And businesses are no exception.
- Businesses that were robust today won’t be robust in the future. Uncertainty is intrinsic to the system. It’s entropy—the second law of thermodynamics. Basically, things tend toward disorder over time, and it takes a lot of energy to keep structure and quality in place. So, philosophically, we have great respect for the fact that things are not structurally permanent in nature, that things fade.
- Markets are biological. Businesses are born, evolve, and die. Investors should evolve (their thinking and strategies) along with it.
- Jeffrey Gundlach
- Francis Chou
- Thyra Zerhusen
- Thomas Russo
- I call myself a farmer. Wall Street is flooded with hunters—people who try to go out and find the big game. They fell it and bring it back, and there’s a huge feast and everything is fabulous, and then they look for the next big game. I plant seeds and then I spend all of my time cultivating them.
- e looks for companies with the “capacity to suffer.” They are built to survive tough times and outlast the competition.
- Less jam today for more jam tomorrow, the three little piggies, etc, are childhood tales that inculcate thoughtful people with the message of deferred gratification. Society has, however, created endless reasons why decision makers mistakenly prefer more jam today even at the expense of jam tomorrow. Much investment opportunity arises from being able to take the other side of the short-termism bet. I have been blessed with investors who permit me to take the longer view.
- Chuck Akre
- Li Lu
- Peter Lynch
- You get a lot of A’s and B’s in school. In the stock market, you get a lot of F’s. And if you’re right six or seven times out of ten, you’re very good.
- Learning to play poker or learning to play bridge, anything that teaches you to play the probabilities…would be better than all the books on the stock market.
- Pat Dorsey
- Michael Price
- Mason Hawkins
- Bill Ackman
- Jeff Vinik
- The best fund manager of his generation at Fidelity. He was so successful because he used the same consistent approach to investing throughout his career—individual companies with good earnings outlooks at reasonable valuations.
- The more companies you can analyse, the more cashflow statements you can go through, the more good ideas you're going to find and the better the performance is going to be. There's no substitute for hard work.
- Work hard—harder than everyone—read more cashflow statements, more annual reports—knowledge compounds over time.
- Mario Gabelli
- Laura Geritz
- You don’t need to be watching the news to find out what’s changing in the world every ten minutes. It is more valuable to travel, read, think deeply about what the world will be like in 10 years. This gives you a huge edge over investors just watching markets go up and down.
- Brian McMahon
- Henry Ellenbogen
- Donald Yacktman
- Bill Nygren
- Paul Lountzis
- Lountzis strategy is a portfolio of fifteen intensely researched stocks. Focus on businesses with leaders who are creative, adaptable, visionary and have “enormous courage”.
- You need a maniacal focus to really be great at anything. Anyone who tells you that you can have everything all at once, you can’t. I mean, you don’t become Roger Federer by not playing tennis. It has to be consuming.
- All great investors, CEOs, athletes, etc. are practically fanatical about it (at the expense of other areas of their life). Fanaticism won’t guarantee success but being fanatical makes it easier to compete in a world of fanatics. You can’t mimic them because you’re not them. Learn it and adapt it and modify it into your own process.
- He hoards information on the best in the business and investing world to read and reread. The repetition makes the lessons unforgettable.
- Read the same books over and over. Etch the principles into your brain. Constantly be reading and learning.
- ualitative factors are not present in financial statements. You need to determine adaptability, courage. This means you need to operate more like an investigative reporter than an accountant. Businesses change rapidly and become obsolete. You need to be able to see around corners and get insight beyond numbers.
- Jason Karp
- Will Danoff
- Managed Fidelity Contrafund since 1990. His investment philosophy–stocks follow earnings.
- He looks for companies that can grow earnings at a high rate over 5 years because stock price will follow it.
- Do you want to win the game for shareholders and own great companies? Sometimes, to own a great company, you’ve got to pay a fair price.
- Look, I’m not that smart and there’s a lot of information out there. So when I look at a company, I just ask myself: ‘Are things getting better or are they getting worse?’ If they’re getting better, then I want to understand what’s going on.’
- François Rochon
- John Spears
- Joel Tillinghast
- Manages Fidelity’s Low-Priced Stock Fund since 1989, outperforming by roughly 4% per year.
- He creates lists of things to avoid, “defensive principles and practices” that keep him focused and help outperformance.
- Don’t pay too much. Don’t go for businesses that are prone to obsolescence and destruction. Don’t invest with crooks and idiots. Don’t invest in things you don’t understand.
- He also avoids cyclicals, fads, heavy leverage, sales-y management, questionable accounting.
- He won’t talk publicly about his positions (makes it harder to change his mind).
- If you want to be superior, that’s difficult. But what you won’t do is easier to control and more attainable....I’m not going to lose fifteen pounds. But saying no to doughnuts, that’s easy for me.
- Nick Sleep & Qais Zakaria
- Both worked at Marathon Asset Management prior to starting the firm. They started in “cigar butts” but quickly graduated to a concentrated portfolio of high-quality companies held for years (average holding period was about 7 years). A story about Nomad Partnership—a fund run by Nick Sleep and Qais Zakaria. Until recently, I have never heard about these successful investors. I was also intrigued to learn that when they closed their fund in early 2014 and advised their investors to just keep holding 3 stocks in their portfolios: Amazon, Costco and Berkshire Hathaway. Since early 2000, their fund returned over 20% of annualised returns which was 3x higher, compared to returns of MSCI World index.
- Quality in everything (life, stock selection, investment management business).
- The idea of focusing on whatever has the longest shelf life, while always downplaying the ephemeral.
- Information has a “shelf life.” Most of it expires in a few days, weeks, or months. They looked for information with a long shelf life.
- It is not necessary to behave unethically or unscrupulously to achieve spectacular success, even in a vicariously capitalist business where self-serving behaviour is the norm.
- In a world that's increasingly geared toward short-termism and instant gratification, a tremendous advantage can be gained. It’s all about deferred gratification. When you look at all the mistakes you make in life, private and professional, it’s almost always because you reached for some short-term fix or some short-term high. And that’s the overwhelming habit of people in the stock market.
- They purposely detached themselves from day-to-day market action. Even placed their Bloomberg terminal in the most uncomfortable location, a short corner table without a chair, to limit its use.
- We just read annual reports until we were blue in the face and visited every company possible until we were sick of it.
- Questions:
- Where will the company be in 10 or 20 years?
- What’s management doing today to make that more likely to happen?
- What might stop that from happening?
- Is the company improving customer relations with “superior products, low prices, and efficient service?”
- Does management make sound capital allocation decisions to improve shareholder value?
- Does the company mistreat employees, suppliers, customers?
- Does the company do anything that could hurt its reputation?
- Scale Economies Shared Model:
- Companies that take advantage of economies of scale to grow revenue while lowering the cost of business only to share those cost savings with customers to further entrench their advantage over competitors.
- Increased revenues begets scale savings begets lower costs begets lower prices begets increased revenues.
- Costco is an example. It deferred profits for customer satisfaction/retention and long-term growth.
- Amazon is another example. According to Bezos in 2005 Shareholder Letter—Relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com.
- Tend to be founder-led companies where the founder is obsessive about small details.
- Tend to prioritize the customer experience.
- Tend to be serial cost-cutters.
- Tend to be very long-term focused.
- Paul Isaac
- Mike Zapata
- Paul Yablon
- Whitney Tilson
- Francois-Marie Wojcik
- Sarah Ketterer
- Christopher Davis
- Raamdeo Agrawal
- Arnold Van Den Berg
- Being rich consists of money, happiness, and peace of mind. Use your wealth to help and serve others.
- Mariko Gordon
- Jean-Marie Eveillard
- He took over the SoGen International mutual fund in 1979 (part of Societe Generale). It had $15 million in assets. It was renamed the First Eagle Global Fund. Eveillard followed Ben Graham’s philosophy: minimize risk because the future is unpredictable.
- On why he was diversified: I’m too skeptical about my own skills and too worried that it could just blow up.
- To lag is to suffer. It becomes psychologically painful, but also financially painful....After one year, your shareholders are upset. After two years, they’re furious. After three years, they’re gone. and It had gone on for so long that there were days when I thought I was an idiot. You do, in truth, start doubting yourself....Everybody seems to see the light. How come I don’t see it?
- To the extent that we’ve been successful over the decades, it’s due mostly to what we did not own. We owned no Japanese stocks in the late eighties. We owned no tech in the late nineties. And we didn’t own any financial stocks to speak of between 2000 and 2008.
- Guy Spier
- Sir John Templeton
III. Quotes
- Everything is on a path to fade. — Matthew McLennan
- Most people make the mistake of adding too much complexity to their lives. They skim the surface, preoccupying themselves with the superficial and the extraneous. As the best investors show, sustained excellence requires us to subtract and go deep.
- If you’re going to be in this game for the long pull, which is the way to do it, you better be able to handle a fifty percent decline without fussing too much about it. And so my lesson to all of you is, conduct your life so that you can handle the fifty percent decline with aplomb and grace. Don’t try to avoid it. It will come. In fact, I would say if it doesn’t come, you’re not being aggressive enough.
- Munger has also learned to control certain toxic emotions that would corrode his enjoyment of life. “Crazy anger. Crazy resentment. Avoid all that stuff,” he tells me. “I don’t let it run. I don’t let it start.” The same goes for envy, which he considers the dumbest of the seven deadly sins because it’s not even fun. He also disdains the tendency to view oneself as a victim, and he has no patience for whining. When I ask if he has a mental process that helps him to defuse self-defeating emotions, he replies, “I know that anger is stupid. I know that resentment is stupid. I know self-pity is stupid. So I don’t do them....I’m trying not to be stupid every day, all day.
- You get a lot of A’s and B’s in school. In the stock market, you get a lot of F’s. And if you’re right six or seven times out of ten, you’re very good.
- All of humanity’s problems stem from man’s inability to sit quietly in a room alone.
- I feel wealthier not because I have more money but because I’ve got health, good friendships, I’ve got a great family. Prosperity takes all of these things into consideration: health, wealth, happiness, peace of mind. That’s what a prosperous person is, not just a lot of money. That doesn’t mean anything. – Van Den Berg
- If all you succeed in doing in life is getting rich by buying little pieces of paper, it’s a failed life. Life is more than being shrewd in wealth accumulation. — Charlie Munger
- It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on.
- If you just go around and identify all of the disasters and say, ‘What caused that?’ and try to avoid it, it turns out to be a very simple way to find opportunities and avoid troubles.
- I don’t have any wonderful insights that other people don’t have. I just have slightly more consistently than others avoided idiocy. Other people are trying to be smart. All I’m trying to be is non-idiotic. I find that all you have to do to get ahead in life is to be non-idiotic and live a long time. It’s harder to be non-idiotic than most people think.
- Take up one idea. Make that one idea your life. Think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea and just leave every other idea alone. This is the way to success.
- The Art of Subtraction—If there is one habit that all of the investors in this chapter have in common, it’s this: They focus almost exclusively on what they’re best at and what matters most to them. Their success derives from this fierce insistence on concentrating deeply in a relatively narrow area while disregarding countless distractions that could interfere with their pursuit of excellence. Jason Zweig, an old friend who is a personal finance columnist at the Wall Street Journal and the editor of a revised edition of The Intelligent Investor, once wrote to me, “Think of Munger and Miller and Buffett: guys who just won’t spend a minute of time or an iota of mental energy doing or thinking about anything that doesn’t make them better....Their skill is self-honesty. They don’t lie to themselves about what they are and aren’t good at. Being honest with yourself like that has to be part of the secret. It’s so hard and so painful to do, but so important.
- Once you have a sense that life is meaningless, what should you do? Not fuck up life for other people. Leave the planet a better place than you found it. Do a good job with your kids. The rest of it is a game. It doesn’t matter.
- The difference between successful people and really successful people is that really successful people say no to almost everything.
- How to prepare for the future instead of fooling ourselves into believing we can predict it.
- In a world where nothing is stable or dependable and almost anything can happen, the first rule of the road is to be honest with ourselves about our limitations and vulnerabilities.
- Fragility comes in many forms.
- The ideal amount to give your kids is enough so they can do anything, but not so much that they can do nothing.
- Templeton, Soros, and Buffett share “the willingness to be lonely, the willingness to take a position that others don’t think is too bright. They have an inner conviction that a lot of people do not have.”– Michael Lipper
- A necessary characteristic of great investors is that they can’t be overly influenced by what other people think. The easiest way not to be overly influenced by what other people think is not to be that aware of what they think. If you don’t really notice that and don’t really care about what other people think, that will make it easier to be a great investor. — Chris Davis
- If you’re even a slightly above average investor who spends less than you earn, over a lifetime you cannot help but get very wealthy. — Buffett
- You don’t have to swing at everything—you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’ — Warren Buffett
- We, and our judgment, and all mortal things go on flowing and rolling unceasingly. Thus nothing certain can be established about one thing by another, both the judging and the judged being in continual change. — Michel De Montaigne
- The art of being wise is the art of knowing what to overlook. — William James
- To attain knowledge, add things every day. To attain wisdom, subtract things every day. — Lao-tzu
- Uncertainty compels diversification. Diversification is and always has been the first tenet of the Prudent Man Rule of Investing....In sub-Saharan Africa, for centuries, people believed cattle were the safest repository of wealth. That was until the great drought came along. — Barton Biggs
- The stock market is a sadistic, contrary, changeable beast and nothing is forever. — Barton Biggs
- The crucial question is whether the investor will, in fact, hold on. The problem is not in the market, but in ourselves, our perceptions, and our reactions to our perceptions. This is why it is so important for each client to develop a realistic knowledge of his own and/or his organization’s tolerance for market fluctuations. — Charles Ellis
- The only thing we can really count on in this uncertain world is human unreliability itself. — Garrett Harden
- It struck me that we should think small, not big, and adopt a philosophy of continuous improvement through the aggregation of marginal gains. Forget about perfection; focus on progression, and compound the improvements. — Sir David Brailsford, coach of the British cycling team