Richer, Wiser, Happier by William Green

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William Green draws from the greatest investors to teach not only the lessons of their investment success but how those lessons crossover into how we make decisions in other areas of our lives.

The Notes

• “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.”
• Bill Ruane
  • “Do not borrow money to buy stocks.” — Ruane
  • “You don’t act rationally when you’re investing borrowed money.” — Ruane
  • “I firmly believe that nobody knows what the market will do… The important thing is to find an attractive idea and invest in a company that’s cheap.” — Ruane
  • “I try to learn as much as I can about seven or eight good ideas. If you really find something very cheap, why not put fifteen percent of your money in it?” — Ruane
  • “I don’t know anybody who can really do a good job investing in a lot of stocks except Peter Lynch.” — Ruane
  • “Most people would be much better off with an index fund.” — Ruane
• Mohnish Pabrai
  • Biggest lesson from his parents: not seeing them get rattled after losing money multiple times. His father was an optimist, always founding new businesses that eventually went bankrupt. Losing didn’t distract his father from trying again.
  • Cloning: 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.
  • “I’m a shameless copycat… Everything in my life is cloned… I have no original ideas.” — Pabrai
  • 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.
  • 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 (Graham’s voting vs. weighing machine). 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.
  • “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.”
  • “The number one skill in investing is patience — extreme patience.” — Pabrai
  • Pabrai theorizes that Buffett’s online bridge playing acts as a positive mental distraction that keeps him from trading Berkshire’s portfolio. We all have a bias towards action that can use distracting.
  • On Buffett’s stock analysis: “What he’s looking for is a reason to say no, and as soon as he finds that, he’s done.” — Pabrai
  • Pabrai’s Stock Filters (cloned from Buffett):
    • Circle of Competence: Only invest in companies you truly understand.
    • Margin of Safety: Only invest in companies trading at a deep — “no brainer” — discount from its true value. “I have very simple criteria: 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.” — Pabrai
    • Competitive Advantage: Look for better businesses rather than just cheap businesses.
    • Too Hard: Avoid companies with financial statements that are difficult to understand. It should be easy to figure out how the business makes money.
  • He avoids companies based in countries with questionable shareholder rights.
  • He avoids startups and IPOs. The added hype makes it less likely to find bargains.
  • 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.
  • Inner Scorecard: live by the standards you set for yourself and stop worrying about what others might think of you.
  • The key isn’t to get rich, it’s financial independence — to do what you want to do without money constraints.
• John Templeton
  • Templeton recognized early that a home country bias (investing only in the U.S.) was too limiting. He invested everywhere.
  • “If a person were going to own stocks and bonds, it would be much wiser to search everywhere, rather than limiting themselves to one nation.” — Templeton
  • “You have to buy at a time when other people are desperately trying to sell.” — 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’s Principles:
    • Beware 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.” — Templeton
      • Exploit the Irrationality in Markets: “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.” — Templeton
    • Beware Ignorance: Buy what you understand and never stop learning.
    • Diversify Broadly: “Don’t put all your money with any one expert. Don’t put all your money in any one industry or any one nation. Nobody is that smart. So the wise thing is to diversify.” — Templeton
    • Be Patient: The edge is in waiting. Too many investors are too impatient to wait for opportunities and too impatient to wait for results to play out.
    • Find Bargains: “…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.”
    • Avoid Fads: “The best way for an investor to avoid popular delusions is to focus not on outlook but on value.” — Templeton
  • “It’s a human failing to even put your mind on a question of which stock market is going to go up or down. There’s never been anybody who knew that.” — Templeton
  • 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).
• Howard Marks
  • “Change is inevitable. The only constant is impermanence. We have to accommodate to the fact that the environment changes… We cannot expect to control our environment.” — Marks
  • Stay Humble: 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.
  • Find Inefficiencies: “The more a market is studied and followed and embraced and popularized, the less there should be bargains around for the asking.” — Marks
  • Buy Cheap: “the essential question to ask about any potential investment should be ‘Is it cheap?'”
  • 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.
  • “I’m convinced that everything that’s important in investing is counterintuitive, and everything that’s obvious is wrong.” — Marks
  • He avoids forecasters (they can’t predict the future), market timing, and fads (rarely cheap).
  • Always ask: How much optimism is priced in?
  • “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
  • Marks collects examples of “stupid deals” to keep track of the frequency of craziness, greed, lowering of standards, etc. in markets.
  • “He asks himself questions such as 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?”
  • “I always look at things in terms of ‘Where’s the mistake? Is the mistake in buying or not buying?’ ” — Marks
  • “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.”
  • “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. I’ve always wondered if it wouldn’t enhance an organization to say, ‘We only trade on Thursdays.’ And the other four days of the week, all you can do is sit and think.” — Marks
  • “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… No one is going to say, ‘This is my prediction and it’s probably wrong.’ But you must say, ‘This is my expectation and I have to be aware of the likelihood that it’s colored by my emotional bias.’ And you have to resist it. For me, that means not to chicken out when the going gets tough.” — Marks
• Jean-Marie Eveillard
  • Eveillard followed Ben Graham’s philosophy: minimize risk because the future is unpredictable.
  • He took over the SoGen International mutual fund in 1979 (part of Société Générale). It had $15 million in assets. It was renamed the First Eagle Global Fund.
  • He looked for a margin of safety of 30% to 40% and held over 100 stocks.
  • On why he was diversified: “I’m too skeptical about my own skills and too worried that it could just blow up.” — Eveillard
  • The fund’s returns were great until the Dot-com bubble. The fund underperformed from 1997 to 1999 and 70% of its shareholders left. Evelliard stuck to his strategy despite the pressure from shareholders, bosses, and career risk. Société Générale sold the fund in Oct. 1999. Evelliard crushed it from 2000 to 2002.
  • “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?” — Eveillard
  • “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.” — Eveillard
• Matthew McLennan
  • Eveillard retired in 2008 and passed control of the First Eagle Global Fund to Matthew McLennan.
  • McLennan follows a similar 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.” — McLennan
  • 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.” — McLennan
  • “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.” — McLennan
  • “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.” — McLennan
  • Markets are biological. Businesses are born, evolve, and die. Investors should evolve (their thinking and strategies) along with it.
  • McLennan builds his portfolio by eliminating anything that leads to mistakes — fads, countries with unstable political systems or a history of seizing corporate property, businesses with a high risk of tech disruption, excess leverage, complex financial statements, and questionable/adventurous management (he says no a lot). What’s left are businesses that tend to persist (and are generally boring) and avoid innovative disruptions.
  • “What I observe in the world is that, if you can accept that stuff exogenous to you is in a state of flux, you can focus on your own endogenous equanimity. And what I see out there is most people doing the opposite. They’re trying to control that exogenous flux. They’re trying to predict. They’re trying to be positioned for it. And that causes a state of inner turmoil. So I think part of it is almost a very simple behavioral switch. It’s saying, am I philosophically willing to accept flux, complexity, and uncertainty, or not? And if you say, yes, I am, then I think it’s extremely freeing in terms of your ability to focus on your own equanimity.” — McLennan
• Irving Kahn
  • “Investing is about preserving more than anything. That must be your first thought, not looking for large 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.” — Kahn
    “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.” — Kahn
• 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. Be it in the number of investment options to choose from, the strategies available, MPT’s formulas and ratios, or behavior, people gravitate toward the complex over the simple.
  • “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.” — Greenblatt
  • Investing (and life) should be a process of subtraction and simplification. Removing what’s unimportant and unnecessary to focus on the key principles.
  • On Noise: “The way I look at it is, if I own a chain store in the Midwest, am I all of a sudden going to sell it for half of what it’s worth because something bad happened in Greece? I don’t think so! But that’s what you read in the newspaper, and that’s what everyone is looking at. If you have a context to say, ‘Well, does it matter or doesn’t it matter?’—it’s just very helpful.” — Greenblatt
  • “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.… So if you have a way to value businesses that’s disciplined and makes sense, you should be able to take advantage of other people’s emotions.” — Greenblatt
  • 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.
  • “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.” — Greenblatt
  • “It’s easier to find bargains off the beaten path or in extraordinary situations that other people aren’t looking at.” — Greenblatt
  • “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.” — Greenblatt
  • “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.” — Greenblatt
  • “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.” — Greenblatt
  • The best strategy is the one you can stick to in good and bad times.
• Will Danoff
  • Managed Fidelity Contrafund since 1990.
  • His investment philosophy: “Stocks follow earnings.” — Danoff
  • 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.” — Danoff
  • “Will once said to me, falsely, ‘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.’ ” — Bill Miller
• Bill Miller
  • “The world changes. This is the biggest problem in markets.” — Miller
  • “It’s all probabilities. There is no certainty.” — Miller
  • “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.” — Miller
• Nick Sleep & Qais Zakaria
  • Started Nomad Investment Partnership in 2001 and retired in 2014. They charged a tiny flat fee to cover expenses, then 20% of the funds profits over a 6% return hurdle.
  • 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).
  • No shorting, no leverage, no active trading.
  • 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.
  • 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.” — Sleep
  • 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?
  • On Benefits of Quality Management: “If they’re thinking rationally and thinking about the long term, you can subcontract the capital allocation decisions to them. You don’t have to be buying and selling shares.” — Sleep
  • 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.” — Sleep
    • Costco is an example. It deferred profits for customer satisfaction/retention and long-term growth.
    • 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.
    •  “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.” — Jeff Bezos, 2005 Shareholder Letter
  • “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.” — Sleep
• 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.” — Russo
  • He 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.” — Russo
• Jeff Gundlach
  • “If I assume that I’m wrong on this, what’s the consequence going to be?… Make your mistakes nonfatal. It’s so fundamental to longevity. And ultimately, that’s what success is in this business: longevity.” — Gundlach
• Tom Gayner
  • Gayner manages Markel’s investment portfolio since 1990.
  • His goal is to find tiny habits repeated daily that lead to long-term success.
  • “If you want the secret to great success, it’s just to make each day a little bit better than the day before. There are different ways you can go about doing that, but that’s the story… Just making progress over and over again is the critical part.” Gayner
  • “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
  • Returns, training, learning, etc., it all compounds!
  • 4 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.
  • He wants compounding machines to hold “forever.”
  • “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.” — Gayner
  • His portfolio is over 100 stocks with 66% in the top 20 positions.
  • “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. And then whatever happens, happens.” — Gayner
• Paul Lountzis
  • “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.” — Lountzis
  • 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.
  • He hoards information on the best in the business and investing world to read and reread. The repetition makes the lessons unforgettable.
  • “You can’t mimic them because you’re not them. Learn it and adapt it and modify it into your own process.” — Lountzis
• Charlie Munger
  • He constantly tries to avoid stupidity.
  • “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.” — Munger
  • On Attacking Problems via Inversion: “It’s counterintuitive that you go at the problem backward. If you try and be smart, it’s difficult. 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.” — Munger
  • The best way to avoid stupidity is to ask: How bad will this be? Instead of, How great will this be? Or about investing more broadly ask: what are all the stupid ways people lose money? Then don’t do those things.
  • “Finding out what’s wrong and trying to avoid it is different from finding out what’s good and trying to get it. You have to do both, of course, in life. But this inversion of looking for the trouble and trying to avoid it keeps you out of a lot of messes… It’s a precaution. It’s like a checklist before you take off in an airplane.” — 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.” — Munger
  • Munger collects examples of other people’s exceptionally stupid behavior. So can he learn from others’ mistakes.
  • 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.
  • “I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.” — Munger
  • On Incentives: “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.” — Munger
  • On Discovering Your Own Errors: “If Berkshire has made modest progress, a good deal of it is because Warren and I are very good at destroying our own best-loved ideas. Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.” — Munger
  • 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 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
  • “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.” — Munger
• 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.” — Tillinghast
  • 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.” — Tillinghast
• Ed Thorp
  • “As far as gambling is concerned, if I don’t have an edge, I don’t play.” — Thorp
  • 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.”
• 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.” — Lynch
  • “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.” — Lynch
• 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
• Rick Guerin 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).
• “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

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