From The Manual of Ideas on April 21, 2010:
About his investors:
His investors act and think like owners rather than traders. This will allow him to focus on long term. Such an investor base really adds value when you go through periods of distress and under-performance; precisely the time when you need confidence and stability is apt to be the time when investors are rushing for the exits and questioning the approach.
About good business
- understand biz like an owner
- biz should have staying power
- I have to be confident about the general nature of the biz and industry landscape on a long term basis
- I'm big on track record. Stay away from unproven companies with short operating histories.
- I believe a heavy dose of humility and intellectual honesty. Don't fool yourself, and remember you are the easiest person to fool. from Richard Feynman
- think barriers to entry, competitive landscape/threats, the ongoing capital needs, overall economics, durability of biz
- Stress test: what happens under 7-10% unemployment ( if it is 4-5% now) and 6-8% interest rate? Is the biz overly reliant on loose credit extension and frivolous spending?
- I've built up a base of companies that I understand well and would like to own at the right price.
( This is the beauty of the public markets: if you can be patient, there is a good chance the volatility of the marketplace will give you the chance to own companies on your watch list. )
- Think downside before think upside.
Books to read:
- enjoy all the behavior psychology stuffs.
- recommend, predictably irrational - Ariely, nudge - Thaler, how we decide - Lehrer, think twice - Mauboussin
- also The Big Short, The end of the wall street, The relentless Revolution -Appleby
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