Don’t feel compelled to pursue every opportunity; instead, wait for the easy, simple pitches that are within your ‘sweet spot’ to ensure you do a good job with them. This selective approach allows you to achieve success even if you miss many other opportunities.
To be successful, develop the ability to boil complex ideas down to a few simple, attractive concepts. Combine this simplicity of thought with genuine passion for solving problems and figuring things out, as this combination tends to lead to long-term success.
Aim to find opportunities that are so simple and obvious that their value is clear without extensive, complex analysis. If an idea requires 40 pages of spreadsheets to understand, it’s likely not the kind of clear-cut opportunity that leads to the best results.
When sizing positions, focus on how much you can lose rather than how much you might gain; take larger positions in investments where you believe the downside risk is minimal. Seek asymmetric returns where the potential upside significantly outweighs the limited downside.
Prioritize capital preservation, as avoiding significant losses makes most other investment outcomes favorable. If you don’t lose money, most of the other alternatives are good.
Assess your true risk in an investment by considering the worst-case scenario if you can patiently choose your selling point over a few years, rather than short-term volatility. This allows for a more realistic evaluation of potential loss versus reward.
Develop the patience to wait for clear ‘aha’ moments where an opportunity becomes simple and obvious to you. Only act or ‘pull the trigger’ when you have this strong conviction and a better way of looking at the situation.
Identify and understand your personal strengths, and then focus your efforts on opportunities that align with those strengths. If you are good at simple things, stick to those ideas that make total sense to you.
Maintain a mindset of continuous learning, acknowledging that you will always make mistakes and never ‘have it all figured out.’ The goal is not perfection, but to be right more often than you are wrong.
Actively seek to learn from the mistakes and experiences of other people and from the past. Reading how smart people think is helpful, as it allows you to avoid making those same mistakes yourself and instead make different ones.
Approach stock investing by valuing each stock as an ownership share of an entire business, similar to a private equity firm. Determine what the whole company is worth and what you are paying for that ownership, rather than just focusing on short-term price movements or fancy ratios.
Assess a management team’s competence primarily by their historical track record of capital allocation, rather than their current stories or perceived intelligence. A consistent past performance in capital allocation is the best indicator of future behavior.
When evaluating management teams, remain cold, calculating, and unemotional, focusing on quantitative data of past capital allocation rather than their persuasive stories or apparent intelligence. This objective approach helps avoid being swayed by charisma and leads to better assessments.
To find great opportunities, try to view problems or situations from a ‘40,000 feet’ perspective or a different angle than others. Success often comes from recognizing when the common perspective is incorrect and finding a better way to understand it.
Seek out opportunities in places that are ‘off the beaten path’ or not being scrutinized by everyone else. This approach can provide an advantage by allowing you to find value before it becomes widely recognized.
To perceive a ‘better version of reality’ and see things differently than others, focus on keeping your thinking simple. The best ideas are often simple, and this approach helps you cut through complexity to find clarity.
When teaching, writing, or after an action, reflect to understand ‘what was I really thinking’ and ‘what was the simple thought I had in my mind.’ This process helps to boil down experiences to their elemental truths, whether they resulted in success or failure.
Engage in writing as a method to learn and clarify your understanding of complex topics or your own thought processes. Writing helps you discover what you truly think and understand, often revealing gaps in your knowledge.
When faced with complex situations where competition is fierce, technology is changing, or future earnings are hard to predict, choose to skip those opportunities. Instead, focus on finding situations you can clearly understand and evaluate.
When evaluating opportunities, especially complex ones like new companies with uncertain futures, be willing to put most of them in the ’too hard’ pile. Focus only on the few you can genuinely figure out based on your expertise and vision.
Be quick to pass on opportunities that don’t immediately make sense or look promising, even if it means missing some. Concentrating your efforts on the few things that do make sense is more valuable than spending excessive time on many unpromising leads.
Cultivate a habit of continuously reading and learning about developments in the world that genuinely interest you. This ongoing process of understanding can occasionally spark valuable insights and ideas.
Accumulate experience in your field to develop the ability to contextualize new opportunities against past observations. This helps you recognize truly exceptional opportunities (e.g., top 10-20% of what you’ve seen) and act on them with greater confidence.
Position sizing is crucial; avoid being too timid with your best ideas, as this can be a major mistake. Taking large positions requires a willingness to accept potential big losses and the patience to wait for truly compelling opportunities.
When making large purchases or investments, contextualize the risk by focusing on the realistic potential loss rather than the total scary price. Understanding your true downside (e.g., 10-20% of the value) can make the decision more ‘sleepable’ and manageable.
Understand your own strengths and areas of expertise, and make bets or decisions only where you have a particular vision or something seems simple to you. This self-awareness allows for more confident and potentially successful choices.
Focus on creating long-term value by treating employees, customers, and the environment well, as this is the only sustainable path to true success. Avoid short-term wins that compromise these relationships, as they only create the appearance of value and lead to problems.
For management, prioritize doing the right thing for the long term and building sustainable value, trusting that the market will eventually recognize it. Avoid making decisions solely to please short-term analysts or meet quarterly targets, as this can detract from true long-term growth.
When reviewing financial information, focus on understanding the economic reality of the business by homogenizing different accounting standards or disclosures into a format that makes sense to you. Prioritize transparency and management’s explanation of their thinking over strict adherence to specific accounting rules.
If, after spending significant time, you cannot figure out complex or opaque financial statements or business structures, assume it’s intentional and move on to other opportunities. Lack of clarity is generally not a good sign.
Continuously learn and improve by observing and studying how the most successful practitioners in your field operate and make decisions. This can provide valuable models and insights for your own approach.
Strive to be gracious and generous with your time and wisdom, even with those who may not offer immediate reciprocal benefits. This act of sharing can be deeply meaningful and provide its own form of ‘payback’.
When assessing individuals (e.g., for hiring or partnership), prioritize speaking with people they have worked with in the past. This provides a more accurate indicator of their performance than their interview answers or your own assessment during an interview.
When building a successful model, focus on creating replicable systems that provide necessary support and training to enable average performers to become great. This ensures scalability and consistent high standards across multiple instances.
Establish systems that facilitate the sharing of what’s working and what’s not across different units or teams. Foster a collaborative environment where the focus is on collective improvement and learning outcomes, rather than internal competition.
Demonstrate the validity and effectiveness of a concept or model through repeated, consistent success over many iterations. The cumulative evidence of repeated positive outcomes will speak for itself.
Believe that with the appropriate and targeted supports, almost everyone, regardless of background, can achieve at a high level. Focus on identifying and providing these necessary supports to unlock potential.
For companies, set clear standards for tests, courses, or certificates that can serve as alternative credentials in lieu of a traditional college degree for high-paying jobs. This creates a demand that can foster an ecosystem of supportive services, providing new pathways for diverse talent.
Recognize that a diverse workforce is not just socially beneficial but also profitable. Actively seek out and develop talent from underrepresented groups, as a significant pool of potential is currently being wasted due to traditional credentialing barriers.
If you have the opportunity to borrow money at very low or ‘free’ interest rates, extend the maturities of your debt as long as possible. This locks in favorable terms for a longer duration.