Money and Finance
From Howard Marks in his memo "On the Couch":
The above reminded me of a quote from Charlie Munger:
- Objectivity...
From Poor Charlie's Almanack: The life of Darwin demonstrates how a turtle may outrun a hare, aided by extreme objectivity, which helps the objective person end up like the only player without a blindfold in a game of Pin the Tail on the Donkey. If...
- Howard Marks Quote
From Marks' memo "Liquidity": When you find an investment with the potential to compound over a long period of time, one of the hardest things is to be patient and maintain your position as long as doing so is warranted on the basis of the prospective...
- Confirmation And Disconfirmation
An excerpt from the Boyles Q1 letter to investors... Confirmation and Disconfirmation “The exceptions to any rule are most interesting in themselves, for they show us that the old rule is wrong. And it is most exciting, then, to find out what the...
- Charlie And Checklists
"Checklist routines avoid a lot of errors. You should have all this elementary [worldly] wisdom and then you should go through a mental checklist in order to use it. There is no other procedure in the world that will work as well." -- Charlie Munger -...
- November Dividend
Hello Reader(s), Time to report my November Dividend since everybody else is doing it. DE 10.20T 13.34AAPL 1.41ARCP 12.58KMI 9.24TIS 5.25LTC 3.57CORR 15.21Total:...
Money and Finance
The advantage of objectivity...
From Howard Marks in his memo "On the Couch":
One of the most significant factors keeping investors from reaching appropriate conclusions is their tendency to assess the world with emotionalism rather than objectivity. Their failings take two primary forms: selective perception and skewed interpretation. In other words, sometimes they take note of only positive events and ignore the negative ones, and sometimes the opposite is true. And sometimes they view events in a positive light, and sometimes it’s negative. But rarely are their perceptions and interpretations balanced and neutral.
...investor psychology rarely gives equal weight to both favorable and unfavorable developments. Likewise, investors’ interpretation of events is usually biased by their emotional reaction to whatever is going on at the moment. Most developments have both helpful and harmful aspects. But investors generally obsess about one or the other rather than consider both.
...It all seems so obvious: investors rarely maintain objective, rational, neutral and stable positions. First they exhibit high levels of optimism, greed, risk tolerance and credulousness, and their resulting behavior causes asset prices to rise, potential returns to fall and risk to increase. But then, for some reason – perhaps the arrival of a tipping point – they switch to pessimism, fear, risk aversion and skepticism, and this causes asset prices to fall, prospective returns to rise and risk to decrease. Notably, each group of phenomena tends to happen in unison, and the swing from one to the other often goes far beyond what reason might call for.That’s one of the crazy things: in the real world, things generally fluctuate between “pretty good” and “not so hot.” But in the world of investing, perception often swings from “flawless” to “hopeless.” The pendulum careens from one extreme to the other, spending almost no time at “the happy medium” and rather little in the range of reasonableness. First there’s denial, and then there’s capitulation.
..........
The above reminded me of a quote from Charlie Munger:
“It’s kind of fun to sit there and outthink people who are way smarter than you are because you’ve trained yourself to be more objective and more multidisciplinary. Furthermore, there is a lot of money in it, as I can testify from my own personal experience.”As well as this excerpt from one of his speeches in Poor Charlie's Almanack:
Engaging in routines that allow you to maintain objectivity are, of course, very helpful to cognition. We all remember that Darwin paid special attention to disconfirming evidence, particularly when it disconfirmed something he believed and loved. Routines like that are required if a life is to maximize correct thinking. And one also needs checklist routines. They prevent a lot of errors, and not just for pilots. You should not only possess wide-ranging elementary wisdom but also go through mental checklist routines in using it. There is no other procedure that will work as well.
- Objectivity...
From Poor Charlie's Almanack: The life of Darwin demonstrates how a turtle may outrun a hare, aided by extreme objectivity, which helps the objective person end up like the only player without a blindfold in a game of Pin the Tail on the Donkey. If...
- Howard Marks Quote
From Marks' memo "Liquidity": When you find an investment with the potential to compound over a long period of time, one of the hardest things is to be patient and maintain your position as long as doing so is warranted on the basis of the prospective...
- Confirmation And Disconfirmation
An excerpt from the Boyles Q1 letter to investors... Confirmation and Disconfirmation “The exceptions to any rule are most interesting in themselves, for they show us that the old rule is wrong. And it is most exciting, then, to find out what the...
- Charlie And Checklists
"Checklist routines avoid a lot of errors. You should have all this elementary [worldly] wisdom and then you should go through a mental checklist in order to use it. There is no other procedure in the world that will work as well." -- Charlie Munger -...
- November Dividend
Hello Reader(s), Time to report my November Dividend since everybody else is doing it. DE 10.20T 13.34AAPL 1.41ARCP 12.58KMI 9.24TIS 5.25LTC 3.57CORR 15.21Total:...