If someone took the time to analyze lots of historically important inventors, entrepreneurs, and thinkers, I doubt the important common factor would be that they made fewer mistakes than others.
I think this depends on reference class and what one means by ‘mistakes’. The richest financier is someone whose strategy is explicitly ‘don’t make mistakes.’ (Really, it’s “never lose money” plus the emotional willingness to do the right thing, even if it’s boring instead of clever.)
I think the heart of the disagreement here is the separation between things that are ‘known to someone’ and ‘known to no one’—the strategies one needs to discover what other people have already found are often different from the strategies one needs to discover what no one knows yet, and both of them are paths to success of varying usefulness for various tasks.
I think this depends on reference class and what one means by ‘mistakes’. The richest financier is someone whose strategy is explicitly ‘don’t make mistakes.’ (Really, it’s “never lose money” plus the emotional willingness to do the right thing, even if it’s boring instead of clever.)
Depends on the investment class. Even Charlie Munger (Warren Buffet’s partner) says “If you took our top fifteen decisions out, we’d have a pretty average record.”
I think the heart of the disagreement here is the separation between things that are ‘known to someone’ and ‘known to no one’—the strategies one needs to discover what other people have already found are often different from the strategies one needs to discover what no one knows yet, and both of them are paths to success of varying usefulness for various tasks.
Yes, even if success in the domain is basically about avoiding mistakes, I imagine that if there are huge winners in the domain they got there by finding some new innovative way to get their rate of mistakes down.
The richest financier is someone whose strategy is explicitly ‘don’t make mistakes.’ (Really, it’s “never lose money)
Nope, finance doesn’t work like that. The richest financier is one who (1) has excellent risk management; and (2) got lucky.
Notably, risk management is not about avoiding risks (and so, possible mistakes). It’s about managing risk—acknowledging that mistakes will be made and making sure they won’t kill you.
So, obviously ‘never’ is hyperbole on Buffett’s part.
Nope, finance doesn’t work like that.
I’ll buy that value investing stopped working as well because of increased investor sophistication and a general increase in asset prices. As a somewhat related example, daily S&P 500 momentum investing worked up until 1980, and now you need to track more sophisticated momentum measurements. But to quote Cliff Asness (talking about momentum investing, not value investing):
If everyone did them yesterday, they would go away. They work in my opinion — again using my version of “work” — in kind of a sweet spot. Good enough to be really important if you can follow discipline, not so good enough that the world looks at it and goes, “this is easy.” They’re excruciating at times and I hate those times. I won’t pretend I’m neutral as to those times.
I think this depends on reference class and what one means by ‘mistakes’. The richest financier is someone whose strategy is explicitly ‘don’t make mistakes.’ (Really, it’s “never lose money” plus the emotional willingness to do the right thing, even if it’s boring instead of clever.)
I think the heart of the disagreement here is the separation between things that are ‘known to someone’ and ‘known to no one’—the strategies one needs to discover what other people have already found are often different from the strategies one needs to discover what no one knows yet, and both of them are paths to success of varying usefulness for various tasks.
Depends on the investment class. Even Charlie Munger (Warren Buffet’s partner) says “If you took our top fifteen decisions out, we’d have a pretty average record.”
Yes, even if success in the domain is basically about avoiding mistakes, I imagine that if there are huge winners in the domain they got there by finding some new innovative way to get their rate of mistakes down.
Nope, finance doesn’t work like that. The richest financier is one who (1) has excellent risk management; and (2) got lucky.
Notably, risk management is not about avoiding risks (and so, possible mistakes). It’s about managing risk—acknowledging that mistakes will be made and making sure they won’t kill you.
So, obviously ‘never’ is hyperbole on Buffett’s part.
I’ll buy that value investing stopped working as well because of increased investor sophistication and a general increase in asset prices. As a somewhat related example, daily S&P 500 momentum investing worked up until 1980, and now you need to track more sophisticated momentum measurements. But to quote Cliff Asness (talking about momentum investing, not value investing):