Humility
The Farnam Street blog has a great post today on “great books” – what this used to mean to the author, what it does now, and how to deal with the unread – the things you realize you don’t know yet and probably should. We were immediately reminded of Umberto Eco’s Anti-Library, as described by Nassim Taleb in his book The Black Swan. Finally and while very different from the anti-library concept, we were also reminded of a post we wrote about anti-portfolios a while ago.
In the 1st Buysiders article inspired by a reader’s suggestion, we’d like to propose “anti-portfolios”. It’s a vital lesson in humility: our activity involves a certain degree of failure, of missed or simply wrong ideas. Recognizing that we are going to make mistakes over time is extremely important in order to mitigate risk as we define it (the permanent loss of capital). The objective here is to insist, once again, that price is the ultimate measure. (…) After you’ve done all the homework, you still have to demand a price that implies a large margin of safety – and keep analyzing the position everyday with the same skepticism you had before you bought it.
