STREET DOGS: 13 JANUARY 2021 – Business Day – MICHEL PIREU
Ironing your shirts then putting them in the washing machine produces a different outcome from washing your shirts first, then ironing them. The reader can either trust me on this or try the experiment with both sequences on the next Sunday afternoon.
Now, assume that your capital is around $1m and you are involved in speculation. Apply path dependence to the reasoning. Making a million dollars first, then losing it, is markedly different from losing a million dollars first then making it. The first path (make-lose) leaves you intact; the second (lose) makes you bankrupt, insolvent, maimed, traumatised and more generally unable to stay in the game, thus unable to benefit from the second part of the sequence. There is no make after the lose. — Nassim Taleb
The trick is not to be the hottest stock picker, the winningest forecaster, or the developer of the neatest model; such victories are transient. The trick is to survive! — Peter Bernstein
We put avoiding losses ahead of the pursuit of profits. — Howard Marks
This does not mean that investors should never incur the risk of any loss at all. Rather that a portfolio should not be exposed to excessive loss. While no-one wishes to incur losses, the speculative urge that lies within most of us is strong; the prospect of free lunch can be compelling, especially when others have already seemingly partaken. It can be hard to concentrate on losses when others are greedily reaching for gains. — Seth Klarman
People start being interested in something because it’s going up, not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren’t. And their spouse is saying can’t you figure it out, too? It is so contagious. So that’s a permanent part of the system. — Warren Buffett.