Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing (Columbia Business School Publishing)

For investors, nirvana is a profitable, growing enterprise that is certain to endure. Financial leverage does not destroy companies, but it does create vulnerability. Look for businesses that respect the matching principles: Match borrowings with safe (not risky) assets, and match long-term assets with long-term (not short-term) debt. Businesses th

This book is about succeeding in investing by avoiding mistakes. The organizing framework of this book, in five parts, is that we will reap pleasing investment rewards if we (1) make decisions rationally, (2) invest in what we know, (3) work with honest and trustworthy managers, (4) avoid businesses prone to obsolescence and financial ruin, and (5)

Seek out the refuting evidence or bearish story. Invert. Consider whether the opposite story also makes sense.

We tend to weight information based on its availability (ease of recall), because our System 1 thinks What You See Is All There Is. This WYSIATI means that it’s the recent, dramatic, unexpected, and personally relevant images that jump to mind. What doesn’t come to mind is historical, statistical, theoretical, and average. Even with work, a stock’s

This chapter covers the ways psychological biases misinform our investments, and how the stock market charges us for certain emotions and behaviors and pays us for others.

before it featured the rugged cowboy in its ads, Marlboro had been launched as a ladies’ cigarette that was as “mild as May.” The red filter tip, meant to hide lipstick stains, was later switched to a manly cork brown. Decades after the rebranding, Philip Morris was still reaping the benefits of an iconic package and mascot. Over a quarter of a cen

If you must sell in a hurry, you will receive market price, not value. However, the central idea of value investing—of which I am an advocate—is that price and value are not always equal, yet should be at some date in the future. Because the date is unknown, patience is mandatory.

Some telltale signs of gambling include betting on discrete events, near-instantaneous timelines, use of leverage, overcommitment to one story, and no way to gauge whether the odds are in your favor.

Successful people simplify their lives by focusing on the facts and actions that matter most. If you don’t, you will find yourself either on a hamster wheel or bogged down in trivia. The trickiest part is staying open to new and contradictory information that affects your goals, while cutting out the clutter. One test for noise is to ask whether a