Value Investing

25 Pages of the Best Value Investing Quotes (PAGE WILL LOAD SLOWLY)

  1. response removes thinking and debating instincts;
  2. Inconsistency-avoidance tendency: man tends to avoid all forms of change; leads to habits, both good and bad; avoiding bad habits – an ounce of prevention is worth a pound of cure; saving face; ground breaking discoveries made by the new generation;
  3. Curiosity tendency:
  4. Kantian Fairness tendency: golden rule — follow behaviors that, if followed by all others, would make the surrounding human system work best for everybody
  5. Envy/jealousy tendency: “It is not greed that drives the world, but envy.” – Buffett; Munger argues that the origins of envy are the result of a desire for man to acquire scarce resources, and then the feelings of conflict associated with seeing those resources in the hands of others. Munger also notes that jealousy is fiercest among siblings, particularly at younger ages
  6. Reciprocation tendency: humans tend to reciprocate both favors and disfavors; leads to both positive and negative feedback loops; humans seems ill programmed to turn the other cheek; most likely to occur when spending other people’s money (e.g., favors from vendors/salesmen)
  7. Influence-from-mere-association tendency: premium branding/advertising; misweighting of past successes/failures;
  8. Simple, pain-avoiding psychological denial: “It is not necessary to hope in order to persevere.”
  9. Excessive self-regard tendency: narcissism; thinking too highly of one’s own children; endowment effect; prefer people like oneself; self-picked lottery numbers are more popular than random ones
  10. Overoptimism tendency: “What a man wishes, that also will he believe.” — Demosthenes; use trained, habitual practice of simple probability math of Fermat and Pascal to overcome
  11. Deprival-superreaction tendency: pain of loss > pleasure of gain; leads to misprioritization of problems/issues; wage dispute à strike à company goes out of business; leads gamblers to ruin as they seek to recover losses; don’t throw good money after bad
  12. Social-proof tendency: man often does what he observes to be thought and done by those around him; often results in a feedback loop, either positive or negative; teenagers’ friends are more important than their parents’ urgings; “Learn how to ignore the examples from others when they are wrong, because few skills are more worth having.”
  13. Contrast-misreaction tendency: appearances often seem relatively in/significant or positive/negative when compared to other actions, when in reality that is not the case; e.g., buying a wildly overpriced $1000 dashboard because it’s attached to a $50,000 car; “a small leak will sink a great ship.”
  14. Stress-influence tendency: makes Social Proof tendency even stronger; light stress can be good, heavy stress very bad; driving force behind cults and gangs;
  15. Availability-misweighting tendency: recency bias; use checklists to counteract; seek disconfirming evidence; note that this kind of information can certainly be useful – it’s just often misweighted in relative importance
  16. Use-it-or-lose-it tendency:
  17. Drug-misinfluence tendency:
  18. Senescence-misinfluence tendency:
  19. Authority-misinfluence tendency: man mostly follows his leaders, with only a few people doing the leading; leads to dominance heirarchies; but man thus suffers greatly when the leaders are poor or the leader’s ideas are misunderstood;
  20. Twaddle tendency: to talk in a trivial, feeble, silly, or tedious manner; prate; As a social animal, however, man is prone to twaddle even when serious work is being attempted. But some humans are more prone than others to twaddle, and those are the ones Munger believes should be kept far away.
  21. Reason-respecting tendency: man likes to solve puzzles and have order and reason; also, any reason often accepted as valid – be skeptical;
  22. Lollapalooza Tendency: The tendency to get extreme consequences from confluences of psychological tendencies acting in favor of a particular outcome

 

 

 

Quotations- Charlie Munger

“Charlie Munger is truly the broadest thinker I have ever encountered,”  Bill Gates http://www.poorcharliesalmanack.com/recommendations.html

 

 

More people would benefit from Charlie if his thoughts were more accessible and if he was as prolific a writer as he is a reader.  The best way by far to know Charlie is to read:  http://www.poorcharliesalmanack.com/index.html.

 

 

Academia:

 

“Warrenonce said to me, “I’m probably misjudging academia generally [in thinking so poorly of it] because the people that interact with me have bonkers theories.” …  We’re trying to buy businesses with sustainable competitive advantages at a low – or even a fair price.  [The reason the professors teach such nonsense is that if they didn’t], what would they teach the rest of the semester?  [Laughter]  Teaching people formulas that don’t really work in real life is a disaster for the world.” http://www.tilsonfunds.com/wscmtg04notes.doc

 

“There’s a lot wrong [with American universities]. I’d remove 3/4 of the faculty — everything but the hard sciences. But nobody’s going to do that, so we’ll have to live with the defects. It’s amazing how wrongheaded [the teaching is]. There is fatal disconnectedness. You have these squirrelly people in each department who don’t see the big picture.”  http://www.fool.com/news/foth/2002/foth020515.htm

“a different set of incentives from rising in an economic establishment where the rewards system, again, the reinforcement, comes from being a truffle hound. That’s what Jacob Viner, the great economist called it: the truffle hound — an animal so bred and trained for one narrow purpose that he wasn’t much good at anything else, and that is the reward system in a lot of academic departments.” http://www.loschmanagement.com/Berkshire%20Hathaway/Charlie%20munger/The%20Psychology%20of%20Human%20Misjudgement.htm

“I think liberal art faculties at major universities have views that are not very sound, at least on public policy issues — they may know a lot of French [however].” http://www.amazon.com/gp/product/1578643031/104-7644521-2497538?v=glance&n=283155

Accounting

 

“Proper accounting is like engineering. You need a margin of safety. Thank God we don’t design bridges and  airplanes the way we do accounting.”  http://www.law.stanford.edu/publications/stanford_lawyer/issues/64/sl64.pdf

 

“’F.A.S.B’” … ‘Financial Accounts Still Bogus’”. http://www.bluechipinvestorfund.com/munger.html

 

“I talked to one accountant, a very nice fellow who I would have been glad to have his family marry into mine.  He said, “What these other accounting firms have done is very unethical.  The [tax avoidance scheme] works best if it’s not found out [by the IRS], so we only give it to our best clients, not the rest, so it’s unlikely to be discovered.  So my firm is better than the others.”  [Laughter]  I’m not kidding.  And he was a perfectly nice man.  People just follow the crowd…Their mind just drifts off in a ghastly way…”  http://www.tilsonfunds.com/wscmtg04notes.doc

 

“…accounting [is] the language of practical business life. It was a very useful thing to deliver to civilization. I’ve heard it came to civilization through Venice which of course was o­nce the great commercial power in the Mediterranean. However, double-entry bookkeeping was a hell of an invention. And it’s not that hard to understand. But you have to know enough about it to understand its limitations ? because although accounting is the starting place, it’s o­nly a crude approximation. And it’s not very hard to understand its limitations. For example, everyone can see that you have to more or less just guess at the useful life of a jet airplane or anything like that. Just because you express the depreciation rate in neat numbers doesn’t make it anything you really know  http://www.thinkfn.com/en/content/view/52/?id=124

 

You’ll better understand the evil when top audit firms started selling fraudulent tax shelters when I tell you that one told me that they’re better [than the others] because they only sold [the schemes] to their top-20 clients, so no-one would notice.