Seeking Wisdom by Peter Bevelin
A man who has committed a mistake and doesn’t correct it, is committing another mistake. — Confucius
“All I want to know is where I’m going to die so I’ll never go there.”
If we understand what influencers us, we might avoid certain traps and understand why others act like they do. And if we learn and understand what works and doesn’t work and find some framework for reasoning, we will make better judgements. We can’t eliminate mistakes, but we can prevent those that can really hurt us.
The best way to learn what, how and why things work is to learn from others. Charles Munger says, “I believe in the discipline of mastering the best that other people have ver figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.”
As the Roman poet Publius Terentius (c.190-159 BC) wrote: “Nothing has yet been said that’s not been said before.”
Albert Einstein once said that there are only a few enlightened people with a lucid mind and good taste within a century.
And men should know that from nothing else but from the brain come joys, laughter and jest, and sorrows, griefs, despondency and lamentation. And by this… we acquire wisdom and knowledge, and we see and hear and know what are foul and what are fair, what sweet and what unsavory… and by the same organ we became mad and delirious and fears and terrors assail us. — Hippocrates (Greek physician 460-377 BC)
Our anatomy, physiology and biochemistry are the fundamental bases for our behavior.
If we change anatomy, we change behavior.
It is our brain, its anatomy, physiology and biochemistry and how these parts function that set the limits for how we think. But since our brain’s parts also interact with our body’s anatomy, physiology and biochemistry, we must see brain and body together. They are part of the same system—us.
Weighing only three pounds, the brain is composed of at least 100 billion nerve cells or neurons. It also contains tens of billions other cells called glial cells supporting neurons. Neurons are connected to other neurons and interact. Each neuron has a cell body with tiny branches called dendrites that receive information from other neurons. Extending from the cell body is long fibers called axons that send information to other neurons. Since it is the connection between neurons that cause our mental capacities, it is not the number of cells that is important but the number of potential connections between them.
Every neuron can connect with other neurons at contact points, the space between one neuron and another, call synapses. When a neuron fires an electrical impulse down the axon, the impulses is released as a chemical substance called a neurotransmitter. When this chemical reaches the dendrite of another neuron it triggers an electrical impulse. Thereafter a series of chemical reactions begins. Some stimulations must happen for the neuron to fire. The strength of this firing and what kind of neurotransmitter is released depends on the incoming stimuli.
How does the neurotransmitter cause the electrical impulse? On the surface of the receiving neuron are proteins called receptors and every receptor is tailor-made for a specific chemical. The chemical acts as a key, and the receptor, or the lock, only “lets in” the right chemical.
It is the neurotransmitters dopamine that is being release. Dopamine is involved in the brain’s reward and motivation system, and in adduction.
Another neurotransmitter is serotonin. Serotonin is linked with mood and emotion.
So far we know that the brain is a chemical system, and that neurons communicate with each other through the release of neurotransmitters (chemicals that carry messages between neurons). What we think and feel depends on chemical reactions. And these chemical reactions are a function of how our neurons connect. What determines how these neurons connect and their patterns? Our genes and life experiences, situational or environmental conditions, and a degree of randomness.
Each cell has 46 chromosomes or a chain of genes. 23 chromosomes come from each parent. A gene consists of four chemical molecules: adenine, cytosine, guanine, thymine or A, C, G and T joined together in a chain.
The job of genes is to make protein—the building blocks of life. Proteins are molecules that carry out most of our biological functions and are made up of amino acids. There are twenty kinds of amino acids that can be used to make our skin, hair, muscles, etc. Some proteins called enzymes cause certain, chemical reactions. One example is neurotransmitters. Protein are also hormones that act as messengers between our cells.
Every living thing uses the same genetic code—from cats to humans. This means we can transfer a single human gene into a cat and the cat “can read it” and follow its instructions. But no individual has the same DNA or the same versions of genes (except for identical twins).
Everything that ever happens in your brain is happening as a unification of many, many, many areas at once.
Genes control the chemistry in the brain but need to be activated by the environment. An environmental event must switch them on, or midday their level of activity, before they can start making proteins that influence neural connections. Our genes determine if we inherit a particular characteristic but it is the environment that causes our genes to make proteins that produce certain “response tendencies.” So our behavior emerges from the mutually dependent activity of genetic and environmental factors.
The brain changes continually as a result of our experiences. Experiences produce physical changes in the brain either through new neural connections or through the generation of new neurons. Studies suggest that the brain can change even during the course of a day.
Experiences are the reason that all individuals are unique. People behave differently because differences in their environment cause different life experiences.
Our state of mind is a function of our life experiences and the specific situation.
Negative expectations can influence our bodies and cause symptoms that over time may cause our body harm.
Our genes and life experiences determine how neurons connect thereby influencing and setting the limits for our behavior. ‘
Evolution is change (structural, physiological, behavioral)—which occurs over time through interaction with environment.
Since every living thing uses the same genetic code, it is likely that life descended from a distant common ancestor that had that code.
Darwin called his principles natural selection. Any slight variation in traits that gives an individual an advantage in competing with other individuals of the same or different species or in adapting to changes in their environment increases the chance that the individual will survive, reproduce, and pass along its characteristics to the next generation. Maybe they have greatest resistance to disease, or can run faster, or survive climate changes better.
That we pay more attention to possible losses than gains makes sense.
Connections between neurons determine how we think and behave. Our genes provide us with the framework for neural development and our life experiences and our environment shapes our brain.
Since natural selection is about survival and reproduction, and individuals either survive or die and reproduce or not, it makes sense that individuals are predisposed to act in ways that enhance their own prospects for survival and reproduction.
Altruistic individuals are at a disadvantage. They are always vulnerable to so e mutants that take advantage of them. Altruistic behavior cannot evolve by natural selection since natural selection favors individuals that are best at promoting their own survival and reproductive success. Only behavior that is selfish or for the mutual good is in an individual’s self-interest and therefor favored by natural selection. Some behavior may under certain conditions look like altruism but can often be explained by self-benefit.
Doing what you believe is in your best interest leads to a worse outcome than if you cooperate and deny. But here is the dilemma. You don’t know if you can trust your partner. Cooperation only works if you and your partner can trust each other.
Abraham Lincoln wrote: “If you once forfeit the confidence of your fellow citizens, you can never regain their respect and esteem”
Our fears are always more numerous than our dangers. — Seneca
Failure to detect threats is often more costly than false alarms.
Put more completely, the brain exists to make better decisions about how to enhance reproductive success. Reproduction is the central act in the life of every living thing. Once an individual has survived past the age of reproduction, the individual is evolutionarily useless.
Since natural selection is ultimately about reproduction in a world of limited mates, some individuals were better at getting mates than others. The individuals that had an advantage in attracting prospective mates were “selected.”
The reproductive success of woman doesn’t depend on how many men she has sex with, but on her ability to get access to resources (like food, shelter, and protection) for herself and her children. Women are therefor more discriminating than men. She won’t pick the first guy around. This causes women to compete with each other for access to resources.
Warren Buffett on why even smart people get bad results: “It’s ego. It’s greed. It’s envy. It’s fear. It’s mindless imitation of other people. I mean, there are a variety of factors that cause that horsepower of the mind to get diminished dramatically before the output turns out. And I would say if Charlie and I have any advantage it’s not because we’re rational and we very seldom let extraneous factors interfere with our thoughts. We don’t let other people’s opinion interfere with it … we try to get fearful when others are greedy. We try to get greedy when others are fearful. We try to avoid any kind of imitation of other people’s behavior. And those are the factors that cause smart people to get bad results.
The more emotional, confused, uncertain, insecure, excited, distracted, tired or stressed we are, the easier we make mistakes. Geniuses aren’t excluded.
Believe is a list of 28 reasons for misjudgments and mistakes. It can be used as a checklist to explain or predict behavior or as a pilot’s checklist to avoid fooling ourselves.
- Bias from mere association—automatically connecting a stimulus with pain or pleasure; including liking or disliking something associated with something bad or good. Includes seeing situations as identical because they seem similar. Also bias from Persian Messenger Syndrome—not wanting to be the carrier of bad news.
- Underestimating the power of rewards and punishment—people repeat actions that result in rewards and avoid actions that they are punished for.
- Underestimating bias from own self-interest and incentives.
- Self-serving bias—overly positive view of our abilities and future. Includes over-optimism.
- Self-deception and denial—distortion of reality to reduce pain or increase pleasure. Includes wishful thinking.
- Bias from consistency tendency—being consistent with our prior commitments and ideas even when acting against our best interest or in the face of disconfirming evidence. Includes confirmation bias—looking for evidence that confirms our actions and beliefs and ignoring or distorting disconfirming evidence.
- Bias from deprival syndrome—strongly reacting (including desiring and valuing more) when something we like and have (or almost have) is (or threatens to be) taken away or “lost.” Includes desiring and valuing more what we can’t have or what is (or threatens to be) less available.
- Status quo bias and do-nothing syndrome—keeping things the way they are. Includes minimizing effort and a preference for default options.
- Impatience—valuing the present more highly than the future.
- Bias from envy and jealously.
- Distortion by contract comparison—judging and perceiving the absolute magnitude of something not by itself but based only on its difference to something else presented closely in time or space or to some easier adaptation level. Also underestimating the consequences over time of gradual changes.
- Bias from anchoring—over-weighing certain initial information as a reference point for future decisions.
- Over-influence by vivid or the most recent information.
- Omission and abstract blindness—only seeing stimuli we encounter or that grabs our attention, and neglecting important missing information or the abstract. Includes inattention blindness.
- Bias from reciprocation tendency—repaying in kind what others have done for or to us like favors, concessions, information and attitudes.
- Bias from over-influence by liking tendency—believing, trusting and agreeing with people we know and like. Includes bias from over-desire for liking and social acceptance and for avoiding social disapproval. Also bias from disliking—our tendency to avoid and disagree with people we don’t like.
- Bias from over-influence by social proof—imitating the behavior of many others or similar others. includes crowd folly.
- Bias from over-influence by authority—trusting and obeying a perceived authority or expert.
- Sense-making—Constructing explanation that fit an outcome. Includes being too quick in drawing conclusions. Also thinking events that have happened were more predictable than they were.
- Reason-respecting—complying with requests merely because we’ve been given a reason. Includes underestimating the power in giving people reasons.
- Believing first and doubting later—believing what is not true, especially when distracted.
- Memory limitations—remembering selectively and wrong. Includes influence by suggestions.
- Do-something syndrome—acting without a sensible reason.
- Mental confusion from say-something syndrome—feeling a need to say something when we have something to say.
- Emotional arousal—making hasty judgements under the influence of intense emotions. Includes exaggerating the emotional impact of future events.
- Mental confusion from stress.
- Mental confusion from physical or psychological pain, the influence of chemicals or disease.
- Bias from over-influence by the combined effect of many psychological tendencies operating together.
There is always some background within which behavior makes sense. Behavior can’t be seen as rational or irrational independent of context. If we change context or environment, we change behavior.
The ancient Greek philosopher Aristotle said: “That which is common to the greatest number gets the least amount of care. Men pay most attention to what is their own; they care less for what is common.”
In Charles Munger’s words: “The worst abuses come where people have the greatest temptations.” If we make it easy for people to steal, they steal (and bad behavior will spread).
Mark Twain understood the dangers of blindly trusting past experience for dealing with the future. “We should be careful to get out of an experience only the wisdom in it, and stop there, lest we be like the cat that sits down on a hot stove-lid. She will not sit down on a hit stove-lid again—but also she will never sit down on a cold one anymore.”
We prefer a sequence of experiences that improve over time.
Praise is more effective in changing behavior than punishment. It is better to encourage what is right than to criticize what is wrong.
Don’t over-learn from your own or others bad or good experiences. The same action under other conditions may cause difference consequences.
Tie incentives to performance and to the factors that determine the result you want to achieve. Make people share both the upside and downside. And make them understand the link between their performance, their reward and what you finally want to accomplish.
The key is what a reward implies. A reward for our achievements makes us feel that we are good at something thereby increasing our motivation. But a reward that feels controlling and makes us feel that we are only doing it because we’re paid to do it, decreases the appeal. Blaise Pascal said: “We are generally the better persuaded by the reasons we discover ourselves than by those given to us by others.”
People do what they perceive is in their best interest and are biased by incentives.
Incentives for the decision-maker determine behavior. This means that we have to recognize self-interested behavior in others.
All commissioned salesmen have a tendency to serve the transaction instead of that truth.
We never look at projections, but we care very much about, and look very deeply at, track records.
Since the risk of losing is more motivating than the chance of gaining, we stand a better chance changing people if we appeal to their fear of losing something they value—job, reputation, status, money, control, etc.
The ancient Greek philosopher Plato said: “Do not train boys to learning by force and harshness, but lead them by what amuses them, so that they may better discover the bent of their minds.” Pressuring people or giving them orders often doesn’t work. It is better to convince people by asking questions that illuminate consequences. This causes them to think for themselves and makes it more likely that they discover what’s in their best interest.
The 18th Century English poet Edward Young said: “All men think all men are mortal but themselves.”
There’s integrity, intelligence, experience, and dedication. That’s what human enterprises need to run well.
American physicist Richard Feynman warned against self-deception: “The first principle is that you must not fool yourself—and you are the easiest person to fool.”
Bad news that is true is better than good news that is wrong.
“The task of man is not to see what lies dimly in the distance, but to do what lies clearly at hand.”
This “foot-in-the-door technique” is based on the principle that if people ask us to make a small commitment, we are more likely to agree to a larger request because we want to appear consistent.
When people get us to commit, we become responsible.
How do we get people to take inner responsibility for their actions? Make it voluntary. We take responsibility for our behavior in cases when we are internally motivated by satisfaction or interest, when we feel in control, and when we are free from incentives or outside pressure.
The German philosopher Friedrich Wilhelm Nietzsche wrote: “Convictions are more dangerous enemies of truth than lies.” Intense commitments for political, religious or philosophical ideas create an ideological bias. People with various political, religious, and philosophical interests are motivated to seek the trusts that confirm these interests. Never underestimate the power of ideology. They can act as a device for justifying war and violence. As Blaise Pascal wrote: “Men never do evil so completely and cheerfully as when they do it from religious conviction.”
Lucious Annaeus Seneca said: “There is nothing wrong with changing a plan when the situation has changed.” Irish writer Jonathan Swift said: “A man should never be ashamed to own that he has been in the wrong, which is but saying, in other words, that he is wiser today than he was yesterday.”
Warren Buffett says, “The most important thing to do when you find yourself in a hole is to stop digging.”
“The great man is he who is in the midst of the crowd keeps with perfect sweetness the independence of solitude.”
I have often said that the sole cause of man’s unhappiness is that he does not know how to sit quietly in his room.—Blaise Pascal
Mark Twain wrote: “If you have nothing to say, say nothing.”
You can learn to make fewer mistakes than other people—and how to fix your mistakes faster when you do make them.
One way to reduce unintended consequences is to stop focusing on isolated factors and instead consider how our actions affect the whole system.
How a system behaves is a function of all the factors (human and non-human) that make up and influence the system.
A system is a collection of parts working together as a whole. Take a business as an example. It is a collection of parts but works as a complete system.
Morden History Professor Richard Evans wrote In Defense of History: “Time and again, history has proved a very bad predictor of future events. This is because history never repeats itself; nothing in human society … ever happens twice under exactly the same considerations or in exactly the same way.”
Sometimes we can guess that certain things are bound to happen, but we can’t predict when they will happen.
Warren Buffett says: “It is not necessary to do extraordinary things to get extraordinary results.”
True replication is the cornerstone of science.
Light travels at an average speed of 186,281 miles per second. The star Alpha Centauri is 4.35 light-years away.
There was a sign hangin in the physicist Albert Einstein’s office at Princeton that said: “Not everything that counts can be counted, and not everything that can be counted counts.”
Money has a price and that price is interest.
Richard Feynman said in his Caltech Lectures on Physics: “There are good guesses and there are bad guesses. The theory of probability is a system for making better guesses.”
We can reduce risk by increasing the number of wanted possible outcomes, reducing the number of unwanted possible outcomes, reducing the magnitude of consequences or avoiding certain situations.
The media has na interest in translating the improbable to the believable.
George Bernard Shaw said: “We learn from history that man can never learn anything from history.”
What is true depends on the amount of evidence supporting it, not by the lack of evidence against it.
If the opposite of a given statement is more likely, the statement is probably false.
Statistics are a record of the past, not a production of the future.
We need to consider changes in conditions before using past evidence to predict likely future outcomes.
“We’d rather be roughly right than precisely wrong.”
We can’t treat the average or the median as the most likely outcome for any single individual. Look at the variations between all outcomes. This means that a treatment ought so be determined based on whether an individual is likely to have an outcome better or worse than the median.
Spanish-American philosopher George Santayana once said: “Those who cannot remember the past are condemned to repeat it.” How can we understand what is happening to us without any reference to the past? We conveniently forget to record our mistakes. But they should be highlighted. We should confess our errors and learn from them. We should look into their causes and take steps to prevent them from happening again.
A valuable model produces meaningful explanations and predictions of likely future consequences where the cost of being wrong is high.
If, in some cataclysm, all of scientific knowledge were to be destroyed, and only one sentence passed on to the next generations of creatures, what statement would contain the most information in the fewest words? I believe it is the atomic hypothesis (or the atomic fact, or whatever you wish to call it) that all things are made of atoms—little particle that move around in perpetual motion, attracting each other when they are a little distance apart, but repelling upon being squeezed into one another. In that one sentence, you will see, there is an enormous amount of information about the world, if just a little imagination and thinking are applied.
Newton’s 1st law tells us that an object in motion tends to continue in motion at a steady speed in a straight line, and an object at rest tends to stay at rest, unless the object is acted upon by an outside force.
Newton’s 2nd law tells us that force is the product of mass and acceleration.
Newton’s 3rd law is that force works in pairs. One object exerts a force on a second object, but the second object also exerts a force equal and opposite in direction to he force acting on it—the first object.
Alfred North Whitehead said in The Aims of Educating “Education should be useful, whatever your aim in life.”
Knowledge is only valuable if it’s useful and something is only useful if we understand what it means.
Albert Einstein said: “If you can’t explain it simply, you don’t understand it well enough.”
The larger the difference between an economic asset’s value (e.g. $42) and the price we pay, the higher our yearly return becomes.
Earnings are only a means to an end, and the means should not be mistaken for the end. Therefore we must say that a stock derives its value from its dividends, not its earning. In short, a stock is worth only what you can get out of it.
What you’re trying to do is to look at all the cash a business will produce between now and judgement day and discount it back to the present using an appropriate discount rate and buy a lot cheaper than that.
Warren Buffet says, “Growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years… Growth is simply a component—usually a plus, sometimes a minus—in the value equation.”
Let’s assume based on the store’s history and expecting the same conditions in the future, John estimates that he can take out $300,000 in cash every year. Knowing he can always buy a risk-free government bond, John uses a bond rate of 6% as the discount rate. He also knows he can reinvest whatever cash he can take out from the store at 6%. The value of the store is then $5 million ($300,000/0.06).
If John’s required rate of return is 10%, the value of the store is $3 million.
How much cash flow the store will generate is mainly determined by three variables: (1) Sales—how many units of ice cream will be sold at what price? (2) Operating costs—how much does it cost to make the ice cream and conduct the business? (3) Invested capital—how much capital is needed to conduct the business?
Be problem-oriented. Not method-oriented. Use whatever works because the result is what matters, not the method we use to arrive at it.
In Arthur Conan Doyle’s The Reigate Puzzle, Sherlock Holmes says: “It is of the highest importance in the art of detection to be able to recognize, out of a number of facts, which are incidental and which vital.”
People calculate too much and think too little.
Focus leads to understanding and efficiency.
Those who attain to any excellence commonly spend life in some single pursuit, for excellence is not often gained upon easier terms.—Samuel Johnson
Publius Syrus said: “To do two things at once is to do neither.”
Always think with a purpose in mind.
There are two questions you ask yourself as you look at the decision you’ll make. A) is it knowable? B) is it important? If it is not knowable, as you know there are all kinds of things that are important but not knowable, we forget about those. And if it’s unimportant, whether it’s knowable or not, it won’t make any difference. We don’t care.
“Buffett’s genius was largely a genius of character—of patience, discipline and rationality…HIs talent sprang from his unrivaled independence of mind and ability to focus on his work and shut out the world.”
If we are in a hurry, it’s easier to make misjudgments.
A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.
Rules are for the obedience of fools and the guidance of wise men.—David Ogilvy
Benjamin Franklin: “To apply myself industriously to whatever business I take at hand, and not divert my mind from my business by any foolish project of growing suddenly rich; for industry and patience are the surest means of plenty.” Other rules could be, “Walk from anything I don’t understand or can’t quantify or doesn’t work. Only deal with people I trust.”
Warren Buffett was asked how he evaluated new business ideas, he said he used 4 criteria as filters:
- Can I understand it? If it passes this filter,
- Does it look like it has some kind of sustainable competitive advantage? If it passes this filter,
- Is the management composed of able and honest people? If it passes this filter,
- Is the price right? If it passes this filter, then we write a check.
What does Warren Buffett mean by “understanding?” Predictability: “Our definition of understanding is thinking that we have a reasonable probability of being able to assess where the business will be in 10 years.”
It’s the predictability of the economics of the situation 10 years out.
“Avoid low quality people.” As a consequence a filter may be: “Good track record and character traits.”
Our plans miscarry because they have no aim. When a man does not know what labor he is heading for, no wind is the right wind. —Lucius Annaeus Seneca
The key thing in economics, whoever someone makes an assertion to you, is to always ask. “And then what?” Actually, it’s not such a bad idea to ask it about everything. But you should always ask. “And then what?”—Warren Buffett
If you’re a caption in the Navy and you’ve been up for 24 hours straight and have to go to sleep and you turn the ship over to a competent first mate in tough conditions and he takes the ship aground—clearly through no fault of yours—they don’t court martial you, but your naval career is over. Napoleon said he liked luckier generals — he wasn’t into supporting losers. Well, the Navy likes luckier captains. You can say, “That’s too tough. That’s not law school. That’s not due process.” Well, the Navy model is better in its context than would be the law school model. The Navy model really forces people to pay attention when conditions are tough—because they know that there’s no excuse. Very simply, if your ships goes aground, your career is over. “It doesn’t matter whether it was your fault or not. Nobody’s interested in your fault. It’s just a rule that we happen to have—for the good of all, all effects considered.” I like some rules like that—I think that the civilization works better with some of these no-fault rules. But that stuff tends to be anathema around law school. “It’s not due process. You’re not really searching for justice.” Well, I am searching for justice when I argue for the Navy rule—for the justice of fewer ships going aground. Considering the net benefit, I don’t care if one captain has some unfairness in his life. After all, it’s not like he’s being court marshaled. He just has to look for a new line of work. And he keeps vested pension rights and so on. So it’s not like it’s the end of the world.
Most aspects of our life depend on our ability to quantify and understand patterns and relationships, proportions, or magnitudes. What does math do? It helps us develop consequence, and evaluate when things make sense. And math is stable.
“It is better to be roughly right than precisely wrong.” said J.M. Keynes.
We don’t merely observe some behavior; we observe with some purpose in mind or in light of some theory or with some background about what is important to look for. It is the same when we search for information.
Occam’s Razor is a principle attributed to the 14th Century logician William of Occam: “Entities should not be multiplied unnecessarily.” If we face two possible explanations which make the same predictions, the one based on the least number of unproven assumptions is preferable, until more evidence comes along. Occam doesn’t rule out other explanations. To paragraphed Albert Einstein: “Theories should be as simple s possible, but no simpler.”
Study the past if you would divine the future.—Confucius
The mental habit of thinking backward force objectivity—because one of the ways you think a thin through backward is you take your initial assumption and say, “Let’s try and disprove it.” This is not what most people do with their initial assumption. They try and confirm it. It’s an automatic tendency in psychology—often call “first conclusion bias.” But it’s only a tendency. You can train yourself away from the tendency to a substantial degree. You just constantly take your own assumptions and try and disprove them.
A lot of success in life and success in business comes fro knowing what you want to avoid—like early death and a bad marriage.— Charles Munger
Marcus Porcius Cato wrote: “Wise men profit more from fools than fools from wise men; for the wise men shun the mistakes of the fools, but fools do not imitate the successes of the wise.”
Studying errors encourages effortful thinking, and improves our capacity to deal with change and new or unusual situations.
In 1796, British physician Edward Jenner discovered vaccination. He noticed that milkmaids who had contracted a mild and usually non-lethal form of the pox virus—cowpox—seemed to be immune to the lethal form of the virus, smallpox. He then took samples of a milkmaid’s lesions and inoculated a young boy with cowpox. The boy built up antibodies in his immune system that prevented him from getting smallpox and subsequently survived the epidemic.
When we believe we have arrived at the right judgement, we should consider what could cause the opposite of our prediction—what we don’t want to happen. Supposed we make a personality judgement and conclude that the individual is of good character and we want to enter a relationship. Ask: What can ruin this relationship? What causes me to misjudge character? Other uses of backward thinking are: Study evidence that implies the opposite of what is normal and ask “why.” Use “negative” rules—tell people what they can’t do. Practice zero base thinking—start with a clean sheer of paper and ask: If we weren’t already doing what we do, how can we best achieve our goal?
Warren Buffett says that “the best way to minimize risk is to think.”
There is far more to successful long-term investing than brains and performances that has recently been good. Over time, markets will do extraordinary, even bizarre things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risk, including those never before encountered. Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed today by financial institutions. Temperament is also important. Independent thinking, emotional stability, and a keen understanding of both human and intuitional behavior is vital to long-term investment success.
Life, if you know how to use it, is long. The part of life we really live is small. For all the rest of existence is not life, but merely life. Life is too short to waste. Samuel Johnson said: “It matters not how a many dies, but how he lives. The act of dying is not of vimpornae, it last so short a time.”
Confucius said: “To know that we know what we know, and that we do not know, what we do not know, that is true knowledge.”
If we don’t stand for something, we fall for anything.
Honesty is the first chapter of the book of wisdom.—Thomas Jefferson
Every human being is unique so we have the right to be different. Why is intercity the real freedom? Because if we have nothing to hide we have nothing to fear.
Lao Tsu said: “Respond intelligently even to unintelligent treatment.”
Life is too important to be taken seriously.—Oscar Wilde
Blessed is he that expects nothing, for he shall never be disappointed.—Benjamin Franklin
Charles Munger said: If you just take the attitude that however bad it is in any way, it’s always your fault and you just dix it as best you can—the so-called “iron prescription”—I thin that really works.