The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.
People chronically mis-appraise the limits of their own knowledge. That’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant.
A contrarian approach is just as foolish as a follow-the-crowd strategy. What’s required is thinking rather than polling. Unfortunately, Bertrand Russells observation about life in general applies with unusual force in the financial world: Most men would rather die than think. Many do.
– Warren Buffett, 1990 Berkshire Hathaway Annual Letter
The formula for successful entry is the same for all industries: compete asymmetrically. This means introduce products which change the basis of competition and deter competitive responses by making your goals dissimilar from those of the incumbents. This is classic “ju-jitsu” of disruptive competition.
CEOs always act on leading indicators of good news, but only act on lagging indicators of bad news. In order to build anything great, you have to be an optimist, because by definition you are trying to do something that most people would consider impossible. Optimists most certainly do not listen to leading indicators of bad news.
You own the cheap stock, it becomes the target of a deal, you do the arbitrage, they screw up the deal, it becomes a bankruptcy, and you play that. We don’t forget the companies we trade in. We try to watch the companies over all parts of that cycle. We watch the acquisitions, we think about whether they’re sensible, and we don’t lose track.
– Michael Price, The Vulture Investors