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When Charlie Munger Calls, Listen and Learn
Jan. 25, 2019 | WSJ | By Jason Zweig.

Mr. Munger was calling to say that he had read the novel Mr. Taylor was about to self-publish, “The Rebel Allocator.” He was “surprisingly engaged,” recalls Mr. Taylor, 37, who had sent the book to Mr. Munger without much hope the great investor would read it. Mr. Munger proceeded to reel off roughly 20 minutes of unsolicited, detailed advice, mostly about plot and character.

In an interview, Mr. Munger tells me he tends to “skim” or “at least give some cursory attention” to any book that mentions Berkshire Hathaway......“The Rebel Allocator” is the opposite of most business novels. Here, the rich capitalist isn’t an evil genius using genetic engineering to hijack the brains of newborn babies. Instead, he is a hero: an investing mastermind who regards allocating capital as a noble calling that improves other people’s lives.

In the novel, a business student named Nick is on a field trip with his MBA class when he meets a 77-year-old billionaire, Francis Xavier, a restaurant mogul also known as “the Rebel Allocator” and “the Wizard of Wichita.”

Blunt and bristly, with zero tolerance for stupidity, Mr. Xavier spouts proverbs and zingers. A mash-up of Mr. Munger and Mr. Buffett, he often invokes their ideas.

Taking a shine to Nick, Mr. Xavier asks him to write his biography. Like many young people today, Nick wonders if becoming a billionaire is inherently immoral when poverty is still widespread.

Mr. Xavier teaches Nick what separates great businesses from good and bad ones. He uses three drinking straws, labeled “cost,” “price” and “value,” to demonstrate: When a business can charge a higher price than its goods or services cost, the difference is profit. When the value its customers feel they get is greater than price, that difference is brand or pricing power—the ability to raise prices without losing customers.

As Mr. Xavier moves the straws around, Nick learns that investing decisions can make the world a better place: “Good capital allocation means doing more with less to create happier customers,” says Mr. Xavier. “Profit should be celebrated as a signal that an entrepreneur provided value while consuming the least amount of resources to do so.”
asset_management  Berkshire_Hathaway  books  capital_allocation  Charlie_Munger  fiction  intrinsic_value  investing  investors  Jason_Zweig  novels  Warren_Buffett 
january 2019 by jerryking
To Be a Great Investor, Worry More About Being Wrong Than Right - MoneyBeat - WSJ
By JASON ZWEIG
Dec 30, 2016

The stunning surprises of 2016 should have taught all of us that the unexpected will happen. To be a good investor, you have to be right much of the time. To be a great investor, you have to recognize how often you may be wrong. Great investors like Warren Buffett practice trying to disprove their investing assumptions to determine whether they are correct.

Techniques to combat these cognitive biases:

Shun peer pressure from social media or the Internet. If you reveal your opinion to a group that has strong views, the sociologist Robert K. Merton has warned, the ensuing debate becomes more “a battle for status” than “a search for truth.” Instead, get a second opinion from one or two people you know and can trust to tell you if they think you are wrong.

Listen for signals you might be off-base. Use Facebook or Twitter not as an amen corner of people who agree with you, but to find alternative viewpoints that could alert you when your strategies are going astray.

Write down your estimates of where the Dow Jones Industrial Average, oil, gold, inflation, interest rates and other key financial indicators will be at the end of 2017. If you don’t know, admit it. Ask your financial advisers to do the same. Next Dec. 31, none of you will be able to say “I knew that would happen” unless that’s what the record shows.

Book reference: Keith Stanovich, Richard West and Maggie Toplak point out in their new book, “The Rationality Quotient,” rational beliefs “must correspond to the way the world is,” not to the way you think the world ought to be.
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Commenter:

What investors need to do is focus on their own investments, their strategies for each particular holding, long-term, income-oriented, speculative, etc. and stick to their plan without being distracted by peers and press looking for big headlines.
Warren_Buffett  biases  confirmation_bias  investors  books  Pablo_Picasso  personal_finance  investing  Jason_Zweig  pretense_of_knowledge  self-awareness  self-analysis  self-reflective  proclivities  warning_signs  signals  second_opinions  peer_pressure  DJIA  assumptions  mistakes  personal_economy  surprises  worrying 
january 2017 by jerryking
Some of the Wisest Words Ever Spoken About Investing - MoneyBeat - WSJ
By JASON ZWEIG
Nov 25, 2016

Investing is often portrayed as a battle between you and the markets. Instead, Graham wrote, “the investor’s chief problem — and even his worst enemy — is likely to be himself.”

Evaluating yourself honestly is at least as important as evaluating your investments accurately. If you don’t force yourself to learn your limits as an investor, then it doesn’t matter how much you learn about the markets: Your emotions will be your undoing....Nobel Laureate Daniel Kahneman with his book Thinking, Fast and Slow.
I’m especially grateful that he taught me this: “The most important question is, ‘What is the base rate?’”....Michael Mauboussin, a strategist at Credit Suisse, has taken that hint and compiled base rates for all sorts of corporate measures, so investors can readily check a company’s projections against reality.....From the economist and investing writer Peter Bernstein, who died in 2009, I learned about Pascal’s wager: You must weigh not only the alluring probabilities of being right, but the dire consequences of being wrong....Finally, Mr. Bernstein never tired of emphasizing that we can never know the future — least of all at the very moments when it seems most certain....Richard Dawkins pointed out in a lecture in 1996, many of us today know more about the world around us than Aristotle, the greatest mind of his age, did more than 2,300 years ago: “Science is cumulative, and we live later.”

Investing knowledge is also cumulative, and we all benefit from those who have already learned — and taught — how it works.
investing  investors  gratitude  Peter_Bernstein  wisdom  economists  Jason_Zweig  ETFs  books  Benjamin_Graham  pretense_of_knowledge  base_rates  Michael_Mauboussin  self-awareness  self-analysis  self-reflective  proclivities  probabilities  Pascal’s_wager  Daniel_Kahneman  delusions  self-delusions  emotions  Achilles’_heel  cumulative  Nobel_Prizes 
november 2016 by jerryking
Investing Ideas That Stand Test of Time
April 25, 2000 | WSJ | Jonathan Clements

These days I find I am left with just three core investment ideas:
(1) Financial Success is a Sense of Control
If you ask folks about their financial goals, they will likely offer a laundry list of goods they want to buy or announce they want to accumulate as much money as possible. But in reality,
both goals are a prescription for unhappiness.
Sure it might be nice to purchase everything that catches your fancy. But nobody has unlimited wealth, so a focus on endless consumption inevitably results not in happiness, but in frustration and financial stress. Yeah, it would also be great to have heaps of money. But if all you want is an even bigger pile of cash, you will never be satisfied, because you will never reach your goal. So what should you
shoot for? A far more worthy goal, I believe, is eliminating the anxiety that comes with managing money. You want to reach that sweet spot where you feel your finances are under control, no matter what your standard of living and level of wealth.

(2)Investing is Simple
No doubts about it, there are lots of investments and investment strategies that are mighty complicated. But complexity usually means investors are running the risk of rotten results and Wall Street is getting the chance to charge fat fees. Investing is best when it is simple. In fact, if you want to accumulate a healthy nest egg, there
isn’t much to it. First, you have to save a goodly amount, preferably at least ten percent of your pre-tax annual income. Second, you should consider investing at least half of your portfolio in stocks, even if you are approaching retirement. Third, you should diversify broadly, owning a decent mix of large, small and foreign stocks. Fourth, you should hold down investment costs, including
brokerage commissions, annual fund expenses and taxes. Finally, you should give it time. A little humility also helps. Don’t waste effort — and risk havoc — by trying to pick the next hot stock, identify the next superstar fund manager or guess the market’s next move. Instead, your best bet is to buy and hold a few well-run mutual funds.

(3) We are the enemy
If successful investing is so simple, why do so many people mess up? It isn’t the markets that are the problem, it is the investors.
We make all sorts of mistakes. We fret about the performance of each investment that we own, so we don’t enjoy the benefits of diversification. We are often overly self-confident, which
prompts us to trade too much and bet too heavily on a single stock or market sector. We
extrapolate recent results, leading to excessive exuberance when stocks are rising and unjustified
pessimism when markets decline. We lack self-control, so we don’t save enough.

[All the points made immediately above are analogous to Jason Zweig's article on personal finance & investing. From Benjamin Graham --investing is often portrayed as a battle between you and the markets. Instead, “the investor’s chief problem — and even his worst enemy — is likely to be himself.”

Similarly, Nobel Laureate Daniel Kahneman wrote in his book Thinking, Fast and Slow. [that]evaluating yourself honestly is at least as important as evaluating your investments accurately. If you don’t force yourself to learn your limits as an investor, then it doesn’t matter how much you learn about the markets: Your emotions will be your undoing.... ]

If you are going to truly be a successful and happy investor, it isn’t enough simply to devise
strategies that allow you to meet your investment goals. Your strategies also must give you a
sense of financial control and fit with your risk tolerance, so that you stick with them through the
inevitable market turmoil.
That may mean keeping more of your money in bonds and money-market funds. It could mean
paying for an investment advisor. It might mean scaling back your financial goals and accepting
that the kids won’t be heading to Harvard and that you won’t be able to retire early.
These sorts of choices aren’t foolish. What’s foolish is settling on investment strategies without
considering whether you can see them through.
personal_finance  investing  howto  ideas  goal-setting  Nobel_Prizes  money_management  Jonathan_Clements  financial_literacy  biases  humility  mistakes  self-awareness  self-control  proclivities  overconfidence  financial_planning  delusions  self-delusions  emotions  human_frailties  Jason_Zweig  extrapolations  risk-tolerance  recency  unhappiness  human_errors  bear_markets  sense_of_control  superstars  Daniel_Kahneman 
may 2012 by jerryking
The Intelligent Investor: You Should Be Worried - WSJ.com
* MAY 22, 2010

Legendary Investor Is More Worried Than Ever

*
By JASON ZWEIG
Seth_Klarman  value_investing/investors  Jason_Zweig  worrying 
may 2010 by jerryking

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