Can we use heuristics to analyze a business?
Adequate, though often imperfect, answers to difficult questions
Part 2: Human Foibles and Investment Decision Making
The inherently short-term nature of the investment management industry
Market conditions are fixed only in part by balance sheets and income statements; much more by the hopes and fears of humanity; by greed, ambition, acts of God, invention, financial stress and strain, weather, discovery, fashion, and numberless other causes impossible to be listed without omission
Quantitative vs intuitive in investing
Human decisions affecting the future, whether personal or political or economic, cannot depend on strict mathematical expectation, since the basis for making such calculations does not exist.
Cut your losses is confused advice
Your baggage is what you already own, and it gets in the way of excellence.
It doesn’t matter what high profile investors are buying or selling
“If you’ve been in the [poker] game 30 minutes and you don’t know who the patsy is, you’re the patsy.”
Most investors suffer from home bias
If you search worldwide, you will find more bargains and better bargains than by studying only one nation. Also, you gain the safety of diversification
Fear and investing
The house of fear has many windows
The secret to keeping things in perspective
Shielding themselves from the pain of losses by Broad Framing
Thinking for ourselves
Heuristic – This alternative to careful reasoning may cause us to answer the question of what is the fair value of a stock by asking the question, what is the ‘market value’?
The danger of specious correlation
It is mathematically inevitable that highly intelligent women will marry husbands who on average will be less intelligent than they are.
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