What mindware would you need to activate System 2 thinking? At a minimum, you would read a company’s annual report and the annual reports of competitors. If it appears the company has a strong competitive position with a favorable long-term outlook, you would next run several dividend discount models that include different growth rates of the company’s owner earnings over different time periods to get a sense of approximate valuation. Then you would study and understand management’s long-term capital allocation strategy. Last, you might call a few friends, colleagues, or financial advisers to
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Process
