Philosophy

It is a complete waste of time to try to outperform the market. In the years when you are figuring out whether you are the next Warren Buffett, you will almost certainly pay more in fees and commissions than those investors who own straightforward index funds, and in performance terms, you will start behind by at least that amount.

A number of adjustments that are subtly or perhaps not-so-subtly adjusting how we should be thinking about investments.

Repetitive patterns can build nice neat statistical formulas that give us a good chance to be correct most of the time. The problem with that belief is the recognition that we won’t be right all of the time and some of the time, when we are wrong, the results are costly.

Do you notice that almost all discussions of supposedly long-term investors are focused on the present or the very immediate future?

Nobel prize winners in Economic Sciences were trying to find a systematic way to invest profitably. The problem is, when looking intensely at present conditions, something that appears to portend broader changes may not be very important in the future, and other incidental observations could be the harbinger of bigger things to come.

How are you looking at the investment world now?

The Enron collapse now seems like a distant memory, and its scale is so tiny compared to the 2008–09 financial crisis that it almost feels like it wasn't really that bad. But it was.

I cannot predict the future, but falling back to my experience handicapping races I can identify both probabilities and possibilities.

Tom Brakke, CFA, states that good research, good due diligence in general, means looking for differential information and approaching the problem in different ways.

If the film industry has anything to teach finance professionals, it's this: The financial services industry, particularly Wall Street, had a serious public relations problem long before the financial crisis of 2008.