Making money in markets requires having a point of view that is different than what the current pricesuggests. Michael Steinhardt called this a “variant perception.”13 Most investors fail to distinguish betweenfundamentals and expectations. When fundamentals are good they want to buy and when they are poorthey want to sell. But great investors... See more

9. Position sizing (maximizing the payoff from edge).

Intro highlights:I believe my lack of business education was an asset because it encouraged me to ask a lot of questions and  to think from first principles.

2. Understand value (the present value of free cash flow).

Great fundamental investors focus on understanding the magnitude and sustainability of free cash flow.  Factors that an investor must consider include where the industry is in its life cycle, a company’s  competitive position within its industry, barriers to entry, the economics of the business, and  management’s skill at allocating capital.  As Al... See more

Proper portfolio construction requires specifying a goal (maximize sum for one period or parlayed bets),identifying an opportunity set (lots of small edge or lumpy but large edge), and considering constraints(liquidity, drawdowns, leverage).

7. Beware of behavioral biases (minimizing constraints to good thinking).

The Santa Fe Institute (SFI) was founded in 1984 by a handful of eminent scientists, including a number of  winners of the Nobel Prize, who believed that many of the most vexing problems in the world lie at the  intersection of disciplines.

6. Update your views effectively (beliefs are hypotheses to be tested, not treasures to beprotected).20 Most people prefer to maintain consistent beliefs over time, even when the facts reveal theirbeliefs to be wrong.  But great investors do two things that most of us do not. They seek information or views that are different than their own and they... See more