Investment sayings - XI

About simplicity

"We have a passion for keeping things simple." -Charles Munger

"The art of being wise is the art of knowing what to overlook." -William James

"Part of that [having uncommon sense], I think, is being able to tune out folly, as distinguished from recognizing wisdom. You've got whole categories of things you just bat away so your brain isn't cluttered with them. That way, you're better able to pick up a few sensible things to do." -Charles Munger

"Yeah, we don't consider many stupid things. I mean, we get rid of 'em fast...Just getting rid of the nonsense -- just figuring out that if people call you and say, 'I've got this great, wonderful idea', you don't spend 10 minutes once you know in the first sentence that it isn't a great, wonderful idea...Don't be polite and go through the whole process." -Warren Buffett

"The harder you work, the more confidence you get. But you may be working hard on something that is false." -Charles Munger

“Simplicity means the achievement of maximum effect with minimum means.” -Koichi Kawana

“Order and simplification are the first steps toward the mastery of a subject.” -Thomas Mann

“A theory is the more impressive the greater the simplicity of its premises, the more different kinds of things it relates, and the more extended its area of applicability.” -Albert Einstein

“To avoid the various foolish opinions to which mankind are prone, no superhuman genius is required. A few simple rules will keep you, not from all error, but from silly error.” -Bertrand Russell

“There is a master key to success with which no man can fail. Its name is simplicity. Simplicity, I mean, in the sense of reducing to the simplest possible terms every problem that besets us. Whenever I have met a business proposition which, after taking thought, I could not reduce to simplicity, I have left it alone.” -Henri Deterding

“The ability to simplify means to eliminate the unnecessary so that the necessary may speak.” -Hans Hofmann

“There never was a sounder logical maxim of scientific procedure than Ockham’s razor: Entia non sunt multiplicanda praeter necessitatem. That is to say; before you try a complicated hypothesis, you should make quite sure that no simplification of it will explain the facts equally well.” -Charles Sanders Peirce

Charles Sanders Peirce (September 10, 1839 – April 19, 1914) was an American philosopher, logician, mathematician, and scientist, sometimes known as "the father of pragmatism". He was educated as a chemist and employed as a scientist for 30 years. Today he is appreciated largely for his contributions to logic, mathematics, philosophy, scientific methodology, and semiotics, and for his founding of pragmatism.

Koichi Kawana ( born March 16, 1930 in Hokkaido – 1990) native garden designer, college professor, and architect. He has designed gardens in San Diego, Los Angeles, Denver, Colorado, Chicago, Illinois, Memphis, Tennessee, and St. Louis, Missouri. Some of his major works include the Seiwa-en Japanese Garden in the Missouri Botanical Garden and the Japanese Friendship Garden in San Diego's Balboa Park.

Paul Thomas Mann (6 June 1875 – 12 August 1955) was a German novelist, short story writer, social critic, philanthropist, essayist, and the 1929 Nobel Prize in Literature laureate. His highly symbolic and ironic epic novels and novellas are noted for their insight into the psychology of the artist and the intellectual. His analysis and critique of the European and German soul used modernized German and Biblical stories, as well as the ideas of Goethe, Nietzsche and Schopenhauer. Mann was a member of the Hanseatic Mann family and portrayed his family and class in the novel Buddenbrooks.

Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor and philanthropist. He was the most successful investor of the 20th century. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway, and consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and as the third wealthiest in 2011. In 2012 Time named Buffett one of the world's most influential people.

Charles Thomas Munger (born January 1, 1924) is an American business magnate, lawyer, investor, and philanthropist. He is Vice-Chairman of Berkshire Hathaway Corporation, the diversified investment corporation chaired by Warren Buffett; in this capacity, Buffett describes Munger as "my partner." Munger served as chairman of Wesco Financial Corporation from 1984 through 2011 (Wesco was approximately 80%-owned by Berkshire-Hathaway during that time). He is also the chairman of the Daily Journal Corporation, based in Los Angeles, California, US, and a director of Costco Wholesale Corporation.

Investment sayings - X

About risk

“The risk of an investment is described by both the probability and the potential amount of loss. The risk of an investment—the probability of an adverse outcome—is partly inherent in its very nature. A dollar spent on biotechnology research is a riskier investment than a dollar used to purchase utility equipment. The former has both a greater probability of loss and a greater percentage of the investment at stake.

In the financial markets, however, the connection between a marketable security and the underlying business is not as clear-cut. For investors in a marketable security the gain or loss associated with the various outcomes is not totally inherent in the underlying business; it also depends on the price paid, which is established by the marketplace. The view that risk is dependent on both the nature of investments and on their market price is very different from that described by beta.

While security analysts attempt to determine with precision the risk and return of investments, events alone accomplish that. For most investments the amount of profit earned can be known only after maturity or sale. Only for the safest of investments is return knowable at the time of purchase: a one-year 6 percent T-bill returns 6 percent at the end of one year. For riskier investments the outcome must be known before the return can be calculated. If you buy one hundred shares of Chrysler Corporation, for example, your return depends almost entirely on the price at which it is trading when you sell. Only then can the return be calculated.

Unlike return, however, risk is no more quantifiable at the end of an investment that it was at its beginning. Risk simply cannot be described by a single number. Intuitively we understand that risk varies from investment to investment: a government bond is not as risky as the stock of a high-technology company. But investments do not provide information about their risks the way food packages provide nutritional data.

Rather, risk is a perception in each investor’s mind that results from analysis of the probability and amount of potential loss from an investment. If an exploratory oil well proves to be a dry hole, it is called risky. If a bond defaults or a stock plunges in price, they are called risky. But if the well is a gusher, the bond matures on schedule, and the stock rallies strongly, can we say they weren’t risky when the investment after it is concluded than was known when it was made.

There are only a few things investors can do to counteract risk: diversify adequately, hedge when appropriate, and invest with a margin of safety. It is a precisely because we do not and cannot know all the risks of an investment that we strive to invest at a discount. The bargain element helps to provide a cushion for when things go wrong.”  -Seth Klarman

“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” -Seth Klarman

“Risk means more things can happen than will happen.” -Elroy Dimson

"We have two kinds of forecasters, those who don't know and those who don't know they don't know." -John Kenneth Galbraith

"It is frightening to think that you might not know something, but more frightening to think that by and large the world is run by people who have faith that they know exactly what is going on." -Amos Tversky

"It ain't what you don't know that gets you into trouble. It what you know for certain that just ain't true." -Mark Twain

“There is a great difference between knowing and understanding: you can know a lot about something and not really understand it.” –Charles F. Kettering

"I have no use whatsoever for projections or forecasts. They create an illusion of apparent precision. The more meticulous they are, the more concerned you should be. We never look at projections, but we care very much about, and look very deeply at, track records. If a company has a lousy track record, but a very bright future, we will miss the opportunity..." -Warren Buffett

"[Projections] are put together by people who have an interest in a particular outcome, have a subconscious bias, and its apparent precision makes it fallacious. They remind me of Mark Twain's saying, 'A mine is a hole in the ground owned by a liar.' Projections in America are often a lie, although not an intentional one, but the worst kind because the forecaster often believes them himself." -Charlie Munger

Seth Klarman (born 1957) is an American billionaire who founded the Baupost Group, a Boston-based private investment partnership, and the author of a book on value investing titled Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.

Amos Nathan Tversky (Hebrew, March 16, 1937 – June 2, 1996) was a cognitive and mathematical psychologist, a student of cognitive science, a collaborator of Daniel Kahneman, and a figure in the discovery of systematic human cognitive bias and handling of risk. Much of his early work concerned the foundations of measurement. He was co-author of a three-volume treatise, Foundations of Measurement (recently reprinted). His early work with Kahneman focused on the psychology of prediction and probability judgment. Amos Tversky and Daniel Kahneman worked together to develop prospect theory, which aims to explain irrational human economic choices and is considered one of the seminal works of behavioral economics. Six years after Tversky's death, Kahneman received the 2002 Nobel Prize in Economics for the work he did in collaboration with Amos Tversky. (The prize is not awarded posthumously.) Kahneman told The New York Times in an interview soon after receiving the honor: "I feel it is a joint prize. We were twinned for more than a decade."

Investment sayings - IX

Warren Buffett :

"We rarely use much debt and, when we do, we attempt to structure it on a long-term fixed rate basis. We will reject interesting opportunities rather than over-leverage our balance sheet. This conservatism has penalized our results but it is the only behavior that leaves us comfortable, considering our fiduciary obligations to policyholders, depositors, lenders and the many equity holders who have committed unusually large portions of their net worth to our care."

"In the end, alchemy, whether it is metallurgical or financial, fails. A base business can not be transformed into a golden business by tricks of accounting or capital structure. The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.”

"You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing. I’ve never borrowed a significant amount of money in my life. Never. Never will. I’ve got no interest in it. The other reason is I never thought I would be way happier when I had 2X instead of X. You ought to have a good time all the time as you go along.”

And:

"The financial calculus that Charlie and I employ would never permit our trading a good night's sleep for a shot at a few extra percentage points of return. I've never believed in risking what my friends and family have and need in order to pursue what they don't have and don't need."

Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor and philanthropist. He was the most successful investor of the 20th century. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway, and consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and as the third wealthiest in 2011. In 2012 Time named Buffett one of the world's most influential people.

Investment sayings - VIII

"When I was 17 I read a quote that went something like "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself, "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "no" for too many days in a row, I know I need to change something. Remembering that I'll be dead soon is the most important thing I've ever encountered to help me make the big choices in life, because almost everything--all external expectations, all pride, all fear of embarrassment or failure--these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart." -Steve Jobs

"Whenever you do any one thing intensely over a period of time you have to give up other lives you could be living. You have to have a real single-minded kind of tunnel vision if you want to get anything significant accomplished. Especially if the desire is not to be a businessman, but to be a creative person." -Steve Jobs

"Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things. And the reason they were able to do that was that they’ve had more experiences or they have thought more about their experiences than other people. Unfortunately, that’s too rare a commodity. A lot of people in our industry haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have." -Steve Jobs

"What difference does it make how much there is laid away in a man's safe or in his barns, how many head of stock he grazes or how much capital he puts out at interest, if he is always after what is another's and only counts what he has yet to get, never what he has already. You ask what is the proper limit to a person's wealth? First, having what is essential, and second, having what is enough." -Seneca


“Complex systems don't have causes. There are just patterns and at any point one's state of health can move randomly onto a new path. It is not the particular path that one should think about. You move over an ensemble of possible paths, conditional on how you live and the choices you make. All you can do is to try to influence the distribution of possibilities. You can never set the particular path or outcome that will be yours from this time forward. If you think you can look back and see some cause of events, you are probably suffering hindsight bias or what I call complexity blindness.

Steven Paul "Steve" Jobs (February 24, 1955 – October 5, 2011) was an American entrepreneur, marketer, and inventor, who was the co-founder, chairman, and CEO of Apple Inc. Through Apple, he is widely recognized as a charismatic and design-driven pioneer of the personal computer revolution and for his influential career in the computer and consumer electronics fields, transforming "one industry after another, from computers and smartphones to music and movies." Jobs also co-founded and served as chief executive of Pixar Animation Studios; he became a member of the board of directors of The Walt Disney Company in 2006, when Disney acquired Pixar. Jobs was among the first to see the commercial potential of Xerox PARC's mouse-driven graphical user interface, which led to the creation of the Apple Lisa and, a year later, the Macintosh. He also played a role in introducing the LaserWriter, one of the first widely available laser printers, to the market. Jobs received a number of honors and public recognition for his influence in the technology and music industries. He has been referred to as "legendary", a "futurist" and a "visionary", and has been described as the "Father of the Digital Revolution," a "master of innovation," "the master evangelist of the digital age" and a "design perfectionist."

Investment sayings - VII

“The content of your character is your choice. Day by day, what you choose, what you think, and what you do is who you become. Your integrity is your destiny…it is the light that guides your way.” -Heraclitus

"Plans are only good intentions unless they immediately degenerate into hard work." -Peter Drucker

"Determine never to be idle. No person will have occasion to complain of the want of time who never loses any. It is wonderful how much may be done if we are always doing." -Thomas Jefferson

"I have been speculating...what makes a man a discoverer of undiscovered things, and a most perplexing problem it is. Many men who are very clever, -- much cleverer than the discoverers -- never originate anything. As far as I can conjecture, the art consists in habitually searching for the causes and meaning of everything which occurs. This implies sharp observation and requires as much knowledge as possible of the subject investigated." -Charles Darwin

"The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him." –Lev Tolstoy

“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” -Eric Hoffer

"I have always thought that one man of tolerable abilities may work great changes, and accomplish great affairs among mankind if he first forms a good plan and, cutting off all amusements or other employments that would divert his attention, makes the execution of that same plan his sole study and business." -Ben Franklin

“At Baupost, we constantly ask: 'What should we work on today?' We keep calling and talking. We keep gathering information. You never have perfect information. So you work, work and work. Sometimes we thumb through ValuLine. How you fill your inbox is very important.” -Seth Klarman

"You can become, to an enormous degree, the person you want to be." -Warren Buffett

“I have a motto: it’s never too late to give up. It’s never too late to give up what you are doing, and start doing what you realise you love.” –Hans Rosling

Lev Nikolayevich Tolstoy ( 9 September 1828 – 20 November 1910), also known as Leo Tolstoy, was a Russian writer, philosopher and political thinker who primarily wrote novels and short stories. Tolstoy was a master of realistic fiction and is widely considered one of the greatest novelists of all time. He is best known for two long novels, War and Peace (1869) and Anna Karenina (1877). Tolstoy first achieved literary acclaim in his 20s with his semi-autobiographical trilogy of novels, Childhood, Boyhood, and Youth (1852–1856) and Sevastopol Sketches (1855), based on his experiences in the Crimean War. His fiction output also includes two additional novels, dozens of short stories, and several famous novellas, including The Death of Ivan Ilyich, Family Happiness, and Hadji Murad. Later in life, he also wrote plays and essays.
Tolstoy is equally known for his complicated and paradoxical persona and for his extreme moralistic and ascetic views, which he adopted after a moral crisis and spiritual awakening in the 1870s, after which he also became noted as a moral thinker, social reformer, and Georgist. His literal interpretation of the ethical teachings of Jesus, centering on the Sermon on the Mount, caused him in later life to become a fervent Christian anarchist and anarcho-pacifist. His ideas on nonviolent resistance, expressed in such works as The Kingdom of God Is Within You, were to have a profound impact on such pivotal twentieth-century figures as Mohandas Gandhi, Martin Luther King, Jr.,and James Bevel.

Heraclitus of Ephesus (c. 535 – c. 475 BCE) was a pre-Socratic Greek philosopher, a native of the Greek city Ephesus, Ionia, on the coast of Asia Minor. He was of distinguished parentage. Little is known about his early life and education, but he regarded himself as self-taught and a pioneer of wisdom. From the lonely life he led, and still more from the riddling and paradoxical nature of his philosophy and his stress upon the needless unconsciousness of humankind, he was called "The Obscure" and the "Weeping Philosopher".
Heraclitus is famous for his insistence on ever-present change in the universe, as stated in the famous saying, "No man ever steps in the same river twice". He believed in the unity of opposites, stating that "the path up and down are one and the same", all existing entities being characterized by pairs of contrary properties. His cryptic utterance that "all entities come to be in accordance with this Logos" (literally, "word", "reason", or "account") has been the subject of numerous interpretations.

Thomas Jefferson (April 13 1743 – July 4, 1826) was an American Founding Father, the principal author of the Declaration of Independence (1776), and the third President of the United States (1801–1809). He was a spokesman for democracy, and embraced the principles of republicanism and the rights of the individual with worldwide influence. At the beginning of the American Revolution, he served in the Continental Congress, representing Virginia, and then served as a wartime Governor of Virginia (1779–1781). Just after the war ended, from mid-1784 Jefferson served as a diplomat, stationed in Paris. In May 1785, he became the United States Minister to France. Jefferson was the first United States Secretary of State (1790–1793) serving under President George Washington. In opposition to Alexander Hamilton's Federalism, Jefferson and his close friend, James Madison, organized the Democratic-Republican Party, and later resigned from Washington's cabinet. Elected Vice President in 1796, Jefferson opposed Adams, and with Madison secretly wrote the Kentucky and Virginia Resolutions, which attempted to nullify the Alien and Sedition Acts.

Investment sayings - VI

“You’ve got to have models in your head and you’ve got to array you experience – both vicarious and direct – onto this latticework of mental models.” - Charlie Munger

“Your life must focus on the maximization of objectivity." -Charlie Munger

“Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group… then to hell with them.” -Charlie Munger

“If it is wisdom you’re after, you’re going to spend a lot of time on your ass reading.” -Charlie Munger

"In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero... You'd be amazed at how much Warren reads -- at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out." -Charlie Munger

"Warren and I insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think. So Warren and I do more reading and thinking and less doing than most people in business." -Charlie Munger

“The man who doesn’t read good books has no advantage over the man who can’t read them.” -Mark Twain

“Not everything that counts can be counted, and not everything that can be counted counts.” -sign that hung in Albert Einstein’s office at Princeton

"Most of what we say and do is not essential. If you can eliminate it, you'll have more time, and more tranquility. Ask yourself at every moment, 'Is this necessary?" -Marcus Aurelius
"The definition of insanity is doing something over and over again and expecting different results." -Albert Einstein

“If I have seen further [than certain other men] it is by standing upon the shoulders of giants.” -Sir Isaac Newton

“If I am anything, which I highly doubt, I have made myself so by hard work.” -Sir Isaac Newton

“The harder you work the luckier you get.” -Ben Franklin

"More important than the will to win is the will to prepare." -Charlie Munger

“In all things success depends on previous preparation, and without such previous preparation there is sure to be failure” –Confucius

"Hard work, honesty, if you keep at it, will get you almost anything." -Charlie Munger

Marcus Aurelius (Marcus Aurelius Antoninus Augustus;26 April 121 – 17 March 180 AD) was Roman Emperor from 161 to 180. He ruled with Lucius Verus as co-emperor from 161 until Verus' death in 169. He was the last of the Five Good Emperors, and is also considered one of the most important Stoic philosophers. 
Marcus Aurelius' Stoic tome Meditations, written in Greek while on campaign between 170 and 180, is still revered as a literary monument to a philosophy of service and duty, describing how to find and preserve equanimity in the midst of conflict by following nature as a source of guidance and inspiration.

Sir Isaac Newton  (25 December 1642 – 20 March 1726) was an English physicist and mathematician (described in his own day as a "natural philosopher") who is widely recognised as one of the most influential scientists of all time and as a key figure in the scientific revolution. His book Philosophiæ Naturalis Principia Mathematica ("Mathematical Principles of Natural Philosophy"), first published in 1687, laid the foundations for classical mechanics. Newton also made seminal contributions to optics and shares credit with Gottfried Leibniz for the invention of calculus.

Charles Thomas Munger (born January 1, 1924) is an American business magnate, lawyer, investor, and philanthropist. He is Vice-Chairman of Berkshire Hathaway Corporation, the diversified investment corporation chaired by Warren Buffett; in this capacity, Buffett describes Munger as "my partner." Munger served as chairman of Wesco Financial Corporation from 1984 through 2011 (Wesco was approximately 80%-owned by Berkshire-Hathaway during that time). He is also the chairman of the Daily Journal Corporation, based in Los Angeles, California, US, and a director of Costco Wholesale Corporation.