The folks at SumZero published a great interview with Micheal Mauboussin this week that is worth reading this weekend.
The interview is not too long, but it focuses on the opportunities for active management going forward. So things like value investing, market inefficiencies, systematic strategies, and more were discussed.
However, the final question reflected on a great piece Mauboussin wrote in 2016 on ten principles that make a great investor. He was asked which of the principles were the most important to his success as an investor.
Here’s what he said:
The first is thinking carefully about market efficiency. If I make a trade who is on the other side? What does he or she know that I don’t? Why do I think I have the best of it?
The second is valuation. My emphasis there has always been on understanding the expectations for long-term cash flows.
Third is a deep appreciation for the competitive position of business. In business school, we teach finance and strategy as different disciplines. But if you are an investor, you have to consider them together. You can’t do a proper valuation without understanding the competitive position of a company within its industry, and the litmus test of a strategy is whether it creats value.
The final area is decision making. We are all subject to using heuristics and the associated baises that come along with them. How can we weave into our process ways to manage or mitigate those biases? As Charlie Munger has said, the goal is less to be brilliant than to not be dumb.
Head over and give it read. A link to his 2016 piece I referred to earlier is also below.
- Strategic Faith – D. Egan
- 50 Things I Learned About Investing Over the Last Year – Hackernoon
- Jim Chanos Interview – Business Insider
- GMO: The Advent of a Cynical Bubble (PDF) – J. Montier
- It’s All Classic: The Main Questions are About Timing and What the Next Downturn Will be Like – R. Dalio
- How Inflation Works (or Why Your Chicken Is Going to Cost More) – NY Times
- Smart Beta Is Making This Strategist Sick – Institutional Investor
- Gates Foundation: 2018 Annual Letter – GatesNotes
- Is Bitcoin a Waste of Resources? – St. Louis Fed
- Blockchain: What It Is, What It Does, and Why You Probably Don’t Need One – St. Louis Fed
- Why Uber and Google Went to War Over Almost Nothing – Slate