Thursday, January 11, 2018

Quotes of 2017

Here's a collection of quotes said or written at some point during 2017.

Innovators, Imitators, & the Swarming Incompetents
"...the great majority of [investment] managers who attempt to over-perform will fail. The probability is also very high that the person soliciting your funds will not be the exception who does well. Bill Ruane...said it well: 'In investment management, the progression is from the innovators to the imitators to the swarming incompetents.'

Further complicating the search for the rare high-fee manager who is worth his or her pay is the fact that some investment professionals, just as some amateurs, will be lucky over short periods. If 1,000 managers make a market prediction at the beginning of a year, it's very likely that the calls of at least one will be correct for nine consecutive years. Of course, 1,000 monkeys would be just as likely to produce a seemingly all-wise prophet. But there would remain a difference: The lucky monkey would not find people standing in line to invest with him." - Warren Buffett

Buffett on Bogle
"If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle. For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value.

In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me." - Warren Buffett

Buffett on American Business
"American business – and consequently a basket of stocks – is virtually certain to be worth far more in the years ahead. Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that. Ever-present naysayers may prosper by marketing their gloomy forecasts. But heaven help them if they act on the nonsense they peddle.

Many companies, of course, will fall behind, and some will fail. Winnowing of that sort is a product of market dynamism. Moreover, the years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks. No one can tell you when these traumas will occur – not me, not Charlie, not economists, not the media. Meg McConnell of the New York Fed aptly described the reality of panics: 'We spend a lot of time looking for systemic risk; in truth, however, it tends to find us.'

During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well." - Warren Buffett

Destroying Bad Ideas - Part II

"...I've done so many dumb things that I'm very busy destroying bad ideas because I keep having them. So it's hard for me to just single out one from such a multitude. But I actually like it when I destroy a bad idea because...I think it's my duty to destroy old ideas. I know so many people whose main problem of life, is that the old ideas displace the entry of new ideas that are better. That is the absolute standard outcome in life. There's an old German folk saying...'We're too soon old and we're too late smart.' That's everybody's problem. And the reason we're too late smart is that the stupid ideas we...already have, we can't get rid of! most fields you want to get rid of your old ideas. And it's a good habit, and it gives you a big advantage in the competitive game of life since other people are so very bad at it. What happens is, as you spout ideas out, what you're doing is you're pounding them in. And so you get these ideas and then you start agitating and saying them and so forth. And of course, the person you're really convincing is you who already had the ideas. You're just pounding them in harder and harder. One of the reasons I don't spend much time telling the world what I think about how the federal reserve system should behave and so forth is I know that I'm just pounding the ideas into my own head when I think I'm telling the other people how to run things. So I think you have to have mental habits that -- I don't like it when young people get violently convinced on every damn cause or something. They think they know everything. Some 17 year old who wants to tell the whole world what should be done about abortion or foreign policy...or something. All he's doing when he or she spouts about what he deeply believes is pounding the ideas he already has in, which is a very dumb idea when you're just starting and have a lot to learn.

So it's very important that habit of getting rid of the dumb ideas. One of things I do is pat myself on the back every time I get rid of a dumb idea. You could say, 'could you really reinforce your own good behavior?' Yeah, you can. When other people won't praise you, you can praise yourself. I have a big system of patting myself on the back. Every time I get rid of a much beloved idea I pat myself on the back. Sometime several times. And I recommend the same mental habit to all of you. The price we pay for [not] being able to accept a new idea is just awesomely large." - Charlie Munger

Happy New Year,


Quotes of 2016 
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