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Kindle Notes & Highlights
by
Gautam Baid
Read between
December 17 - December 30, 2023
As long as the odds are in our favor and we’re not risking the whole company on one throw of the dice or anything close to it, we don’t mind volatility in results. What we want are the favorable odds. —Charlie Munger
“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that [emphasis added].”
Bias from mere association. This bias automatically connects a stimulus with pain or pleasure.
Underestimating the power of rewards and punishment.
We do not improve the man we hang; we improve others by him.
Underestimating bias from one’s own self-interest and incentives. Persuade others by asking them questions that highlight the consequences of their actions. Appeal to interest, not to reason.
Self-serving bias. This bias encourages an overly positive view of our abilities or being overly optimistic.
Self-deception and denial. When we practice denial, we engage in a distortion of reality to reduce pain.
Bias from consistency and commitment tendency. This bias causes us to remain consistent with prior commitments and ideas, even in the face of disconfirming evidence.
As Buffett has said, “What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.”
As Karl Popper said, “The aim of an argument, or of a discussion, should not be victory, but progress.”
Impatience. When we are impatient, we value the present more highly than the future.
Bias from envy and jealousy. People will do many things to feel loved.
Distortion by contrast comparison. This bias involves judging and perceiving the absolute magnitude of something not by itself but rather based only on its difference from something else when presented closely in time or space or from some earlier adaptation.
Bias from anchoring. When we anchor, we overweigh certain information (often arbitrary and meaningless) as a reference point for future decisions.
Overinfluence from vivid or recent events. Always back up “stories” with facts and numbers.
Omission and abstract blindness. When we experience this bias, we see only stimuli we encounter or that grabs our attention, and we neglect important missing information and the abstract.
Bias from reciprocation tendency. We repay in kind what others have done for or to us.
Bias from overinfluence by liking tendency. We believe, trust, and agree with people we know and like.
Bias from overinfluence by social proof. We imitate the behavior of “similar others.”
Bias from overinfluence by authority. We tend to trust and obey perceived authorities or experts.
Sense making. When we construct explanations that fit an outcome, we may act too quickly to draw sound conclusions, thinking events that have happened were predictable in advance.
Reason respecting. We often comply with requests merely because we have been given a reason.
Believing first and doubting later. It can be easy to believe what is not true when in a distracted state.
Memory limitations. This causes us to remember selectively and wrongly.
Do-something syndrome. We may be prone to take some action just for the sake of being active.
Mental confusion from say-something syndrome.
“Better to remain silent and be thought a fool than to speak an...
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Emotional arousal. It is easy to make hasty judgments under the influenc...
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Munger agrees: “You need a different checklist and different mental models for different companies. I can never make it easy by saying, ‘Here are three things.’ You have to derive it yourself to ingrain it in your head for the rest of your life.”
We must always understand what we’re trying to accomplish [emphasis added].”
It is wisdom to know others. It is enlightenment to know one’s self. —Lao Tzu
If most of us remain ignorant of ourselves, it is because self-knowledge is painful and we prefer the pleasures of illusion. —Aldous Huxley
As Robert Heinlein writes, “man is not a rational animal; he is a rationalizing animal.”
The best investors make a habit of putting procedures in place, in advance [emphasis added], that help inhibit the hot reactions of the emotional brain. —Jason Zweig
In other words, to maximize profits, you have to minimize losses. You must focus on capital preservation above all else.
“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Benjamin Franklin wrote in Poor Richard’s Almanack, “He that builds before he counts the cost, acts foolishly; and he that counts before he builds, finds he did not count wisely.”
Stephen King says, “Writing is magic, as much the water of life as any other creative art. The water is free. So drink.”
Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have—or don’t have—in their portfolio. —Nassim Nicholas Taleb
To know what people really think, pay regard to what they do, rather than what they say. —René Descartes
This is why Munger says, “Perhaps the most important rule in management is to get the incentives right.”
Yogi Berra said, “In theory, there is no difference between practice and theory. In practice, there is.”
Goals should be (1) tailored to the economics of the specific operating business; (2) simple in character so that the degree to which they are being realized can be easily measured; and (3) directly related to the daily activities of plan participants.
“All commissioned salesmen,” said Munger, at the 1988 Wesco Financial annual meeting, “have a tendency to serve the transaction instead of the truth.”
Only free people can be honest. Only honest people can be free.
John Maynard Keynes: “It is better to be roughly right than precisely wrong.”
Not everything that counts can be counted, and not everything that can be counted counts. —Albert Einstein
“We never sit down, run the numbers out and discount them back to net present value…. The decision should be obvious [emphasis added].”
“You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits.”
