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The margins of safety that you should not compromise on are the ones you control: your rationality and your circle of competence. If, like me, you are a bit lax on your circle of competence, lifetime learning is the best defense. While you are still gathering facts, small bets and diversification help. (Yes, you also get these through an index fund.) Before investing, you should locate the weakest link in your margin of safety and consider whether it alone could make or break your results. Whether your path more closely resembles Bogle’s or Buffett’s, you will reduce your regrets by seeking a margin of safety in five steps. (1) Be clear about your motives, and don’t allow emotions to guide your financial decisions. (2) Recognize that some things can’t be understood and that you don’t understand others. Focus on those that you understand best. (3) Invest with people who are honest and trustworthy, and who are doing something unique and valuable. (4) Favor businesses that will not be destroyed by changing times, commoditization, or excessive debt. (5) Above all, always look for investments that are worth a great deal more than you are paying for them.
Big Money Thinks Small
Joel Tillinghast
When the Trump administration came to power, the chairman of the PCAOB, James Doty, was in the middle of trying to negotiate a new arrangement with Beijing. But Doty was removed in 2018 by Securities and Exchange Commission chairman Jay Clayton, who was chosen by Mnuchin. Clayton was also a legal adviser to Alibaba. As he had so many times before, Trump’s pro-business Treasury secretary had effectively short-circuited America’s response to China’s economic aggression. The massive fraud and corruption these practices allowed eventually became well known enough that a cottage industry of short sellers cropped up. By simply performing basic research on these companies, firms like Muddy Waters Research were able to expose fraud after fraud. They were featured in a 2018 documentary called The China Hustle, which chronicled the efforts of Wall Street whistleblowers to call attention to the huge scope and scale of the probtem. But as so often happened, when China’s economic aggression was exposed, it simply changed its tactics.
Chaos Under Heaven
Josh Rogin
Some decisions can be life-altering: Should you retire? Have the surgery? Give up your dream? Some decisions are less challenging. After every game, I used to ask Michael one question: Five, six, or seven? As in, what time are we hitting the gym tomorrow morning? And he’d snap back a time, and that was it. Especially after a loss, when there wasn’t a whole lot else to say. No discussion, no debate, no lame attempt to convince me he needed the morning off. You good? I’m good. See you in the morning. And the next morning at whatever time he’d decided, he’d awaken to find me standing outside his door. No matter what had happened the night before—good game, bad game, soreness, fatigue—he was up working out every morning while most of the other guys slept. Interesting how the guy with the most talent and success spent more time working out than anyone else.
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