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Charlie Munger and Warren Buffett
CM: "All I want to know is where I'm going to die so I won't go there"
I'll give you a ticket with 20 holes in it, representing all the investments you get to make in a lifetime. And once you've punched through the card, you can't make any more investments at all. Under these rules, you'd think really carefully about what you did, and you'd only load up on what you'd really thought about.
"I'm no genius. I'm smart in spots, and I stay around those spots." (Tom Watson Sr., Founder of IBM)
3 step process
1. Quickly eliminate the big universe of What I Do Not Do.
2. Multi-discipline attack to understand what remains.
3. Act decisively when, and only when, the right circumstances appear.
3 baskets for investing: yes, no, and 'too hard to understand'. The 'yes' candidates have to be easy to understand, and a dominant business franchise that can sustain itself and thrive in all market conditions.
Pharmaceuticals and tech go straight into the 'too hard to understand' basket.
No such thing as riskless investment - only those with fewer risks which are easy to understand.
Look at management - how do they deploy cash? Do they allocate it intelligently on behalf of their owners? Or do they over-compensate themselves, or pursue ego-oriented growth for the sake of the deal?
We like putting out large amounts of money where we won't have to make another decision. If you buy something because it's undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. But if you buy a few great companies, you can sit on your ass. That's a good thing.
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