I have always understood that the world changes a lot. Just because you’re doing well now doesn’t mean you should be set in your ways. It’s my habit that I am very careful with my cash flow. That I means I have the extra capital to get into another industry whenever I want to. Cash flow is the most important thing. I have this principle: in the development phase, don’t forget about stability. When there’s stability, don’t forget about development. Such a balance is very important.
All posts filed under “Notes”
Scientific Understanding
Having a scientific understanding of the world is fundamentally about how you judge which information to trust.
Curiosity
People who are curious are going to be better investors and better stewards of others’ money. If there’s no curiosity, you’re basically doing something that’s already been done by someone else.
Successive Approximations
A scientist has a healthy skepticism, suspended judgement, and disciplined imagination…the scientist explains the world by successive approximations.
Magnitude Beats Frequency
As an investor, success can be defined by how much you make when you are right, less how much you lose when you are wrong. This means how often you are right or wrong does not matter very much in the end. Magnitude beats frequency.
Everything Is Cyclical
I think it’s essential to remember that just about everything is cyclical. There’s little I’m certain of, but these things are true: Cycles always prevail eventually. Nothing goes in one direction forever. Trees don’t grow to the sky. Few things go to zero. And there’s little that’s as dangerous for investor health as insistence on extrapolating today’s events into the future.
Pointless
The more the universe seems comprehensible, the more it also seems pointless.
Being Prepared
Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime. If you took our top 15 decisions out, we’d have a pretty average record.
Diversification
If you can identify six wonderful businesses, that is all the diversification you need. And you will make a lot of money. And I can guarantee that going into the seventh one instead of putting more money into your first one is going to be a terrible mistake. Very few people have gotten rich on their seventh best idea. So I would say for anyone working with normal capital who really knows the businesses they have gone into, six is plenty, and I would probably have half of it in what I like best.