I wrote an article at the end of last month about Don Keoughās fantastic book, āTen Commandments for Business Failure.ā As Don notes in the opening, the idea for the book came to him when he was asked to speak about the secret to success, a task he found quite difficult:
āWhen I was asked to talk about how to win, my response was that I couldnāt do that. What I could do, however, was to talk about how to lose and I offered a guarantee that anyone who followed my formula would be a highly successful loser.ā
Charlie Munger likes to quote the German mathematician Carl Jacobi, who said āInvert, always invertā. At a 2008 event sponsored by Coca-Cola (KO) in Atlanta, Warren Buffett talked about this idea:
āYou really want to reverse engineer your life. My partner Charlie Munger (whoās 84 and drinks a lot of Cokeās everyday too) says āall I want to know is where Iām going to die so that Iāll never go thereāā¦ If you engineer out of your life the habits of failureā¦ whatās left is success; itās not very complicated.ā
This applies to what I have been talking about recently, particularly in my article entitled āBuying Stocks on Saleā - most of us arenāt looking to simply maximize our profits (despite what academia might think); in reality, we are looking for a risk-averse way to build our life savings at an attractive rate of return. For the great majority of people, an intelligent investment strategy that focused on buying great companies when they were attractively priced would generate returns that were more than satisfactory.
As such, Iām starting a list of ā10 Commandments for Investment Failureā, which outlines some things individuals should do if they hope to drain their brokerage accounts dry; I hope that others will help me build this list by adding their own two cents in the comment section of this article:
10 Commandments for Investment Failure
1. Buy and sell in and out of stocks; the more frequently, the better.
2. Donāt bother reading annual reports; EPS is all that matters.
3. While youāre at it, donāt read about business or financial history at all; this is the āgreat moderationā, and the booms and busts of yesteryear are a thing of the past.
4. Spend the majority of your āresearchā time (if you feel the need to do research) watching CNBC.
5. Donāt limit yourself to one area of expertise; diversify into commodities trading, currencies trading, etc.
6. Rely on spreadsheets; whatever number the DCF model spits out must be trueā¦
7. Live in a bubble; find what agrees with your thesis and avoid that which doesnāt
8. Look for the next big thing, especially in industries you know nothing about.
9. Avoid the advice of successful investors like Warren Buffett; everybody knows that ābuy and holdā is dead anywaysā¦
10. Use leverage; ā2Xā sounds a whole letter better than little old āXāAlso check out:
āWhen I was asked to talk about how to win, my response was that I couldnāt do that. What I could do, however, was to talk about how to lose and I offered a guarantee that anyone who followed my formula would be a highly successful loser.ā
Charlie Munger likes to quote the German mathematician Carl Jacobi, who said āInvert, always invertā. At a 2008 event sponsored by Coca-Cola (KO) in Atlanta, Warren Buffett talked about this idea:
āYou really want to reverse engineer your life. My partner Charlie Munger (whoās 84 and drinks a lot of Cokeās everyday too) says āall I want to know is where Iām going to die so that Iāll never go thereāā¦ If you engineer out of your life the habits of failureā¦ whatās left is success; itās not very complicated.ā
This applies to what I have been talking about recently, particularly in my article entitled āBuying Stocks on Saleā - most of us arenāt looking to simply maximize our profits (despite what academia might think); in reality, we are looking for a risk-averse way to build our life savings at an attractive rate of return. For the great majority of people, an intelligent investment strategy that focused on buying great companies when they were attractively priced would generate returns that were more than satisfactory.
As such, Iām starting a list of ā10 Commandments for Investment Failureā, which outlines some things individuals should do if they hope to drain their brokerage accounts dry; I hope that others will help me build this list by adding their own two cents in the comment section of this article:
10 Commandments for Investment Failure
1. Buy and sell in and out of stocks; the more frequently, the better.
2. Donāt bother reading annual reports; EPS is all that matters.
3. While youāre at it, donāt read about business or financial history at all; this is the āgreat moderationā, and the booms and busts of yesteryear are a thing of the past.
4. Spend the majority of your āresearchā time (if you feel the need to do research) watching CNBC.
5. Donāt limit yourself to one area of expertise; diversify into commodities trading, currencies trading, etc.
6. Rely on spreadsheets; whatever number the DCF model spits out must be trueā¦
7. Live in a bubble; find what agrees with your thesis and avoid that which doesnāt
8. Look for the next big thing, especially in industries you know nothing about.
9. Avoid the advice of successful investors like Warren Buffett; everybody knows that ābuy and holdā is dead anywaysā¦
10. Use leverage; ā2Xā sounds a whole letter better than little old āXāAlso check out:
