Richer, Wiser, Happier: How the World's Greatest Investors Win in Markets and Life Quotes
Quotes from "Richer, Wiser, Happier: How the World's Greatest Investors Win in Markets and Life"
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“What I learned a long time back is, keep observing the world inside and outside your industry, and when you see someone doing something smart, force yourself to adopt it”
“There are no prizes for frenetic activity. Rather, investing is mostly a matter of waiting for these rare moments when the odds of making money vastly outweigh the odds of losing it”
“if something is not going to be an obvious double in a short period of time—you know, two or three years—I have no interest.”
“Be patient and selective, saying no to almost everything. Exploit the market’s bipolar mood swings. Buy stocks at a big discount to their underlying value. Stay within your circle of competence. Avoid anything too hard. Make a small number of mispriced bets with minimal downside and significant upside.”
“Rule 1: Clone like crazy.
Rule 2: Hang out with people who are better than you.
Rule 3: Treat life as a game, not as a survival contest or a battle to the death.
Rule 4: Be in alignment with who you are; don’t do what you don’t want to do or what’s not right for you.
Rule 5: Live by an inner scorecard; don’t worry about what others think of you; don’t be defined by external validation.”
“Too often, we encounter a powerful principle or habit and we contemplate it, take it for a quick spin, and then forget about it. Pabrai becomes consumed by it. He lives by it. That’s a habit I have to clone.
But the goal here isn’t to become a slavish follower of someone else’s ideas. It’s often smarter to take the spirit of a principle and adapt it to suit our own priorities.”
“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.”
“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.” It follows, says Davis, that “a prevalent characteristic in great investors would be low emotional intelligence.” He observes that many of the best investors struggle when it comes to “bonding with others” and nurturing “warm attachments in their family life.”
“ you tend to encounter an entirely different psychological profile among CEOs. They require the emotional intelligence to empathize with others, understand their thoughts, and influence them. But for a contrarian investor, it would be “catastrophic if you were constantly burdened by an awareness of what everybody else was thinking about your decision.”
“First of all, said Templeton, beware of emotion: “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.” One of the primary services he provided as a money manager was to help his clients “get away from that emotionalism. It was a major element in my success.”
“Second, said Templeton, beware of your own ignorance, which is “probably an even bigger problem than emotion.… So many people buy something with the tiniest amount of information. They don’t really understand what it is that they’re buying.” It pays to remember the simple fact that there are two sides in every investment transaction: “The one with the greatest information is likely to come out ahead. It takes a huge amount of work and study and investigation.”
“Fifth, said Templeton, 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 and popular with the herd, whether it’s a high-flying stock or fund or a rapidly growing country. But if a sunny future is already reflected in the price of the asset, then it’s probably a bet for suckers.”
“As an investor, that meant focusing with remorseless discipline on valuations, on gathering better information than his rivals possessed, on making fearlessly independent judgments with no concern for the tastes of the tribe. It also meant doing everything in his power to maintain his mental and emotional equilibrium. He couldn’t control the outcome, but he could control himself. ”
“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. ”
“Marks drew a simple but life-changing lesson from these academic debates: if he wanted to add value as an investor, he should avoid the most efficient markets and focus exclusively on less efficient ones. “The more a market is studied and followed and embraced and popularized, the less there should be bargains around for the asking”
“Any asset, however ugly, can be worth buying if the price is low enough. Indeed, Marks believes that “buying cheap” is the single most reliable route to investment riches—and that overpaying is the greatest risk. Thus, the essential question to ask about any potential investment should be “Is it cheap?”
“As he sees it, 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. Recognizing that we can’t forecast the future might sound like a disheartening admission of weakness. In reality, it’s a tremendous advantage to acknowledge our limitations and operate within the boundaries of what’s possible. Out of weakness comes strength.”
“As Marks often says, “The environment is what it is.” We can’t demand a more favorable set of market conditions. But we can control our response, turning more defensive or aggressive depending on the climate.”
“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.”
“Not trying to maximize is an important component in preparing for what life may throw at you, and that’s true in investing and living. So the question is, do you push the limits?”
“Following Buffett’s lead, we should always keep enough cash in reserve so we’ll never be forced to sell stocks (or any other beleaguered asset) in a downturn. We should never borrow to excess because, as Eveillard warns, debt erodes our “staying power.” Like him, we should avoid the temptation to speculate on hot stocks with supposedly glorious growth prospects but no margin of safety. And we should bypass businesses with weak balance sheets or a looming need for external funding, which is liable to disappear in times of distress.”
“As Kahn put it, the secret of investing could be expressed in one word: “safety.” And the key to making intelligent investment decisions was always to begin by asking, “How much can I lose?” He explained, “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. The problem is that people nowadays think they’re pretty smart because they can do something quite rapidly.”
“The future is so “intrinsically uncertain” that investors should focus heavily on avoiding permanent losses and building “a portfolio that can endure various states of the world.”
“Once you realize that your entire mission is to value businesses and pay much less for them than they’re worth, it’s incredibly liberating. “If you see it that simply and can keep that simplicity in your mind, it’s very compelling and almost makes a lot of what else you see look silly”
“Depending on the business, Greenblatt uses some combination of four standard valuation techniques. Method 1: he performs a discounted cash flow analysis, calculating the net present value of the company’s estimated future earnings. Method 2: he assesses the company’s relative value, comparing it to the price of similar businesses. Method 3: he estimates the company’s acquisition value, figuring out what an informed buyer might pay for it. Method 4: he calculates the company’s liquidation value, analyzing what it would be worth if it closed and sold its assets.”
“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.”
“It’s not enough to find a smart strategy that stacks the odds in your favor over the long haul. You also need the discipline and tenacity to apply that strategy consistently, especially when it’s most uncomfortable.”
“First, you don’t need the optimal strategy. You need a sensible strategy that’s good enough to achieve your financial goals. As the Prussian military strategist General Carl von Clausewitz said, “The greatest enemy of a good plan is the dream of a perfect plan”
“Second, your strategy should be so simple and logical that you understand it, believe in it to your core, and can stick with it even in the difficult times when it no longer seems to work. The strategy must also suit your tolerance for pain, volatility, and loss. It helps to write down the strategy, the principles upon which it stands, and why you expect it to work over time.”
“Second, there is the idea of focusing on whatever has the longest shelf life, while always downplaying the ephemeral. This principle applied not only to the information they weighed most heavily, but also to the long-lasting companies they favored.”
“Third, there is the realization that one particular business model—scale economies shared—creates a virtuous cycle that can generate sustainable wealth over long periods”
“Fourth, it’s not necessary to behave unethically or unscrupulously to achieve spectacular success, even in a voraciously capitalistic business where self-serving behavior is the norm.”
“Fifth, in a world that’s increasingly geared toward short-termism and instant gratification, a tremendous advantage can be gained by those who move consistently in the opposite direction. This applies not only to business and investing, but to our relationships, health, careers, and everything else that matters.”
“Resounding victories tend to be the result of small, incremental advances and improvements sustained over long stretches of time. “If you want the secret to great success, it’s just to make each day a little bit better than the day before”
“Make your mistakes nonfatal,” Gundlach tells me. “It’s so fundamental to longevity. And ultimately, that’s what success is in this business: longevity.”
“What Gayner’s record shows is that you don’t need to be extreme to achieve exceptional long-term results. On the contrary, he says, “People get themselves into trouble with extremes”
“You cannot control the outcome,” says Gayner. “You can only control the effort and the dedication and the giving of one hundred percent of yourself to the task at hand. And then whatever happens, happens”
“None of these practices is earth-shattering in isolation. But remember: it’s the aggregation of marginal gains that’s so powerful. Moreover, the modest benefits generated by smart habits continue to compound over many years. In the short run, all those tiny, incremental advances seem insignificant”
“What we need is a selection of sensible habits that are directionally correct and sustainable—habits that give us a marginal advantage that will compound over time”
“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.”
“The art of subtraction is incalculably important, particularly in an age of information overload when our minds can so easily become scattered”
“The more distracted others become, the more of an advantage it is to subtract mental clutter, technological intrusions, and overstimulation. But the details differ for each of us.”
“He strives consistently to reduce his capacity for “foolish thinking,” “idiotic behavior,” “unoriginal error,” and “standard stupidities.”
“This, then, is the first mental trick we should learn from Munger as a safeguard against stupidity: imagine a dreadful outcome; work backward by asking yourself what misguided actions might lead you to that sorry fate; and then scrupulously avoid that self-destructive behavior. “Of course,” says Munger, “a lot of people are so interested in reaching for the prize that they don’t even think about the stupidities that might prevent them from getting it.”
“This habit of actively collecting examples of other people’s foolish behavior is an invaluable antidote to idiocy. In fact, it’s the second great anti-stupidity technique we should learn from Munger. ”
“He once told Berkshire’s shareholders, “I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.” Indeed, it’s the third trick we must learn from him in our campaign to constrain our own stupidity.”
“Nothing matters more than averting obvious errors with the potential for catastrophic consequences.”
“His “golden rule for risk management” is simple: “Know what you own.”
“As Martin learned in the navy, “adherence to process” is an indispensable safeguard: “Always honor it because that’s going to keep you out of trouble.”I This idea of adopting a few standard practices and unbendable rules is our fourth technique for reducing stupidity.”
“The reluctance to reexamine our views and change our minds is one of the greatest impediments to rational thinking. Instead of keeping an open mind, we tend consciously and unconsciously to prioritize information that reinforces what we believe.”
“Munger particularly admires their unflinching determination to seek out “disconfirming evidence” that might disprove even their most cherished beliefs. This mental habit, which takes many different forms, is our fifth defense against idiocy.”
“That willingness to welcome the discovery of our own errors is an inestimable advantage. ”
“That means adopting “a mindset of falsification,” always striving to “disprove” your hypothesis, and seeing “if it stands up to the assault.” One of Shubin Stein’s favorite questions is, “Why might I be wrong”