Balancing Conviction and Flexibility in Investing
The ability to properly navigate the tension between conviction and flexibility is one of the distinguishing traits of superb investors.
When to stick with one’s conviction in investing
- When you have developed a well thought-out investment philosophy and process over time
- When the original logic that led to your initial conclusion is still valid when taking into account all of the new evidence.
- When there is new evidence that makes your original conclusion more likely.
When to be flexible and consider changing your opinion
- When sufficient counter-thesis evidence presents itself.
- It is important to re-examine your original logic at certain intervals, even in the absence of contrary evidence.
- Don’t anchor on the investment’s prior price
- Assume you have made some mistakes and aggressively search for them
You should stick to your conviction if your analysis is still correct and the facts are still consistent with your conclusion even if others disagree with you. You should also be hesitant to drastically change your overall investment process because of any short-term reason. On the other hand, you need to be flexible enough to look for contrary evidence and update your thesis when such information presents itself.
Arthur Schopenhauer: On Reading and Books
In The Prince, Machiavelli offered the following advice: “A wise man ought always to follow the paths beaten by great men, and to imitate those who have been supreme, so that if his ability does not equal theirs, at least it will savour of it.”
Seneca, writing on the same subject, said, “Men who have made these discoveries before us are not our masters, but our guides.”
When we read, another person thinks for us: we merely repeat his mental process.
In reading, our head is, however, really only the arena of some one else’s thoughts. And so it happens that the person who reads a great deal — that is to say, almost the whole day, and recreates himself by spending the intervals in thoughtless diversion, gradually loses the ability to think for himself;
it is only by reflection that one can assimilate what one has read if one reads straight ahead without pondering over it later, what has been read does not take root, but is for the most part lost.
It's important to take time to think about what we're reading and not merely assume the thoughts of the author. We need to digest, synthesize, and organize the thoughts of others if we are to understand. This is the grunt work of thinking. It's how we acquire wisdom.
Reading consumes time. And if we equate time with money, it should not be wasted on bad books. Knowing what to read is important but so is its inversion— knowing what not to read.
In Norwegian Wood, Haruki Murakami makes the argument that “If you only read the books that everyone else is reading, you can only think what everyone else is thinking.”
To desire that a man should retain everything he has ever read, is the same as wishing him to retain in his stomach all that he has ever eaten.
Every one has aims, but very few have anything approaching a system of thought. This is why such people do not take an objective interest in anything, and why they learn nothing from what they read: they remember nothing about it.
Any kind of important book should immediately be read twice, partly because one grasps the matter in its entirety the second time, and only really understands the beginning when the end is known; and partly because in reading it the second time one’s temper and mood are different, so that one gets another impression; it may be that one sees the matter in another light.
The Shaper Effect: How to Truly Innovate
The Focus on the Details
When you look at the records of some of the most influential and competent leaders in history, much of their success can be traced down to seemingly tiny and unimportant things.
Musk like many others who make big progress can see the second and third order effects of seemingly small things.
The Discipline of a Vision
The secret weapon here is strategic imagination, and it’s the second part of what makes people who really make a dent in the world who they are.
The Power of the Shaper Effect
Ray Dalio found that most of these people can be characterized as shapers, and the identifier of a shaper is that they are both tactically and strategically astute in their decisions. Being a shaper gives you a wider lens through which to see the world.