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Performance Must Be Weighed Against Risk

Superior investment performance is not our primary goal. But superior performance with less-than commensurate risk above average gains in good times are not proof of a manager’s skill. It takes superior performance in bad times to prove that those good-time gains were earned through skill, not simply the acceptance of above average risk.

– Howard Marks

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Working On Non-Zero Sum Projects

If what you’re working on/funding would’ve gotten made/funded easily without you, what you’re doing is more zero-sum — you’re just trying to get in for the ride. If the thing wouldn’t exist without your support and you’re providing capital where it is scarce, that feels a lot more productive.


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The Expectations Investing Process

There are three steps to the Expectations Investing process, which are very logical… number one is understand price implied expectations. What we’re doing is using a sound cash flow model, so we’re mimicking first principles. But in this case, we’re not forecasting what we believe. We’re essentially asking, “what is priced into today’s stock?” Now we can be guided by things like consensus forecast, there’s certainly a component of art in this. But you’re basically saying, “what do I need to believe to justify today’s stock price?” By the way, this is best done with you being agnostic…the second step is identifying expectations opportunities and that’s going to have a couple components. The first is understanding historical results, then you’re going to do your strategy analysis and… figure out which trigger matters the most… and then the final step is just make buy and sell decisions. If you’re doing that last step properly, you’re going to have these outcomes and probabilities associated with them that allows us to estimate expected value and that allows us then to buy at a discount to that which is where we get margin of safety.

– Michael Mauboussin

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Hearing Subtle Things

If you just sit and observe, you will see how restless your mind is. If you try to calm it, it only makes it worse, but over time it does calm, and when it does, there’s room to hear more subtle things – that’s when your intuition starts to blossom and you start to see things more clearly and be in the present more. Your mind just slows down, and you see a tremendous expanse in the moment. You see so much more than you could see before. It’s a discipline; you have to practice it.

– Steve Jobs

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Give Weight To Things That Have Survived

To understand the future, you do not need technoautistic jargon, obsession with “killer apps,” these sort of things. You just need the following: some respect for the past, some curiosity about the historical record, a hunger for the wisdom of the elders, and a grasp of the notion of “heuristics,” these often unwritten rules of thumb that are so determining of survival. In other words, you will be forced to give weight to things that have been around, things that have survived.

– Nassim Taleb

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Thinking Is Not As Logical As We Think

No individual, deterministic machine, however universal this class of machines is proving to be, will ever think in the sense that we think. Intelligence may be ever-increasing among such
machines, but genuinely creative intuitive thinking requires nondeterministic machines that can make mistakes, abandon logic from one moment to the next, and learn. Thinking is not as logical as we think.

– George Dyson