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June 20 - June 28, 2025
Don’t try to be smarter than everyone else, just be less stupid.
This truth is counterintuitive: Avoiding errors is more important than scoring wins.
Charlie Munger phrased it this way: “It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
The bigger issue is not the bad advice, but rather, the outsourcing of your thinking to a third party.
Blame the halo effect: The tendency to see a person’s success or positive traits in one field spill over into unrelated areas.
We too easily mistake randomness for skill. We imagine we see the future when we hardly understand today. We readily convince ourselves we are in control of our own destinies, when nothing could be further from the truth. Recognizing your own ignorance is an advantage. Most of Wall Street hates this fact.
Mauboussin writes that as a field becomes more crowded with talented, skillful players, the role of luck becomes ever more important. When everyone is competing at the highest level, personal qualities like skill, hard work, and intelligence cancel each other out. Outcomes are determined by the combination of skill plus luck.
The Boston Globe: “Don’t let the Beatles bother you. If you don’t think about them they will go away and in a few more years they will probably be bald.”
Loewy “believed that consumers are torn between two opposing forces: neophilia, a curiosity about new things; and neophobia, a fear of anything too new. As a result, they gravitate to products that are bold, but instantly comprehensible.” Any innovation too far ahead of the curve gets rejected by much of the public.
Paul Graham’s insight is telling: “When experts are wrong, it’s often because they’re experts on an earlier version of the world.”40
The takeaway for investors is the same: If you are going to put capital at risk, make sure you know why. Understand what you want to get out of markets. And always, think for yourself.
William Bernstein astutely observed, “The reason that ‘guru’ is such a popular word is because ‘charlatan’ is so hard to spell.”
As happens so often with accomplished people, they sometimes believe their achievements in one field carries over to another (and the Halo Effect leads us to follow them).
As John Kenneth Galbraith famously observed, “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”
We have clearly seen that nobody knows anything and forecasts about the future, in finance and every other field, are fraught with difficulty and prone to error.
John Maynard Keynes observed, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
The experts are no better than the public at large.
A well-thought-out financial plan that is not dependent upon correctly guessing what will happen in the future. A broad asset allocation model that is Core & Satellite: Mostly passive indexes, plus whatever ornaments you might want on the tree. Rebalance every few years. Repeat forever. Cut the useless, distracting noise in your media diet.
Never forget this simple truism: All forecasting is marketing, plain and simple.
Richard Feynman once stated, “Imagine how much harder physics would be if electrons had feelings.”
The simple fact is the majority of what the media churns out is irrelevant to your portfolio. Data points are occasionally important, but most of the time, much less so than many believe.
“The future is inherently unknown and unknowable.”
Never assume a source is right or wrong without knowing its track record.
three rules for the classic cover indicator: It must be a mainstream publication, not a business/financial periodical; It should be on a popular investing fad; A significant run-up in asset price must have led up to the cover.
Partisanship and content balkanization means Americans no longer live in one nation—we live in millions of self-created bias bubbles.
Investing is the art of using imperfect information to make probabilistic assessments about an inherently unknowable future.
The more you contemplate it, the more you realize investing is a massive problem-solving exercise. The best at it are intellectually flexible; they approach their craft as a discipline, and focus on process.
Morgan Housel corrects this error: “Earnings did not miss estimates, estimates missed earnings.”
6. “The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts.”—Bertrand Russell
Charles Darwin wrote, “Ignorance more frequently begets confidence than does knowledge.”
We spend too much time worrying about big, rare events, while ignoring the mundane everyday factors that are far more dangerous.
This tendency to give too much weight to the survivors while excluding the deceased has a long and storied history in the mutual fund industry.
Let’s begin with the biggest issue: The US dollar (USD) is not a long-term Store of Value. That was never its intended purpose. Rather, the USD is a Medium of Exchange.
“The bigger the top, the harder the drop.”
“If you want to be there for the good times, you must also suffer through the bad times.”
The longer buy-and-hold investors retained their equities, the greater the outperformance relative to Treasury bills.
One revelation might be that active managers should consider focusing less on being stock pickers, and more on being “stock-unpickers”—in other words, avoiding the dogs.
Mike Tyson: “Everyone has a plan till they get punched in the mouth.”
Money is made slowly and lost quickly”—doesn’t truly do the trade much justice.
“Investing is a problem that has been solved.” The problem of human behavior is what remains unsolved.
This is the cognitive error of evaluating decisions based solely on their outcomes, rather than on the quality of the decision-making process behind them.
A strong process is a guarantee—not of outcome or results, but of a higher probability of obtaining your desired results.
Start thinking in terms of decades, not months or minutes.
A good definition of risk is the probability of not getting your expected returns.
Well, I have some bad news: Your politics are killing you in the markets.
To the neuro-physiologists who research cognitive functions, when people are emotionally driven they appear to suffer from cognitive deficits that mimic certain types of brain injuries.315 Not just partisan political junkies, but ardent sports fans, the devout, even hobbyists.
People active in party politics—donors, organizers, true believers, and activists—shouldn’t be allowed anywhere near your investment portfolio or your psyche.
Risk, he observes, occurs when we don’t know what is going to happen next, but we do know what the distribution set looks like. Uncertainty, on the other hand, occurs when we have no idea what is going to happen next and we do not know what the possible distribution looks like.
In The Intelligent Investor,376 Benjamin Graham wrote, “investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
Even when we are shown to be wrong, we defend our costly constructed ideologies. We rationalize, lest all that time and effort be for naught.
