I tried so hard to learn the lessons of 1998 in particular, which were: Don’t be unprepared for something out of the blue that’s really bad.

To some extent, we were prepared this time. However, you can never be prepared enough. We had a lot of macro protection in terms of credit default protection on bonds where we were just betting that credit spreads would widen. That’s been incredibly helpful. But we’ve gotten really tired of buying market puts, or anything like that, because they inevitably are expensive and expire worthless.

So as an investor, you have terrible trade-offs. Do you overpay for insurance — or do you go uninsured? That’s just one of those dilemmas for which there are really no perfect answers.

– Seth Klarman

In scientific work, those who refuse to go beyond fact rarely get as far as fact.

– Thomas Huxley

Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do. It’s imperfect, but that’s what it’s all about.

– Warren Buffett

You never have perfect information. So you work, work and work. Sometimes we thumb through ValueLine. How you fill your inbox is very important.

– Seth Klarman

Four essential mechanisms, or “pillars,” massively modulate our ability to learn. The first is attention: a set of neural circuits that select, amplify, and propagate the signals we view as relevant–multiplying their impact a hundred fold. My second pillar is active engagement…learning requires active generation of hypotheses, with motivation and curiosity. The third pillar, the flip side to active engagement, is error feedback…eliminate inappropriate hypotheses, and stabilize the most accurate ones. Finally, the fourth pillar is consolidation: over time, our brain compiles what it has acquired and transfers it into long-term memory…Repetition plays an essential role in this consolidation process.

– Stanislas Dehaene

Capital markets are the best prediction market in the world, because they combine three important questions: are you right, are you right about how wrong everyone else is, and are you right about something that matters?

– Byrne Hobart

Everyone’s forecasts are, on average, consensus forecasts. If your prediction is consensus too, it won’t produce above-average performance even if it’s right. Superior performance comes from accurate non-consensus forecasts. But because most forecasters aren’t terrible, the actual results fall near the consensus most of the time – non-consensus forecasts are usually wrong…The problem is that extraordinary performance comes only from correct non-consensus forecasts, but non-consensus forecasts are hard to make, hard to make correctly and hard to act on.

– Howard Marks

The ability to face constructively the tension of opposing ideas and, instead of choosing one at the expense of the other, generate a creative resolution of the tension in the form of a new idea that contains elements of the opposing ideas but is superior to each…Integrative thinkers don’t break a problem into independent pieces and work on each piece separately. They keep the entire problem firmly in mind while working on its individual parts.

– Roger Martin, The Opposable Mind

There are not more than five musical notes, yet the combinations of these five give rise to more melodies than can ever be heard. There are not more than five primary colors (blue, yellow, red, white, and black), yet in combination they produce more hues than can ever been seen.

– Sun Tzu