Mosaic Chapter 17: Yes, But I Like to Punt!

Mosaic: Perspectives on InvestingThe next chapter to add to Poor Man’s Mosaic is “Chapter 17: Yes, But I Like to Punt!” In this chapter of Mohnish Pabrai’s book, Pabrai provides a cheat sheet of Warren Buffett rules on investing. Here are the key points:

On Punting (taking a high risk, high return bet)

“Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1.”

“We’re perfectly willing to trade a big payoff for a certain payoff.”

On When to Invest

“Be Fearful when the World is Greedy and Be Greedy when the World is Fearful.”

“We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.”

On Sticking to One’s Circle of Competence in Investing

“It’s not important how big one’s circle of competence is; knowing its boundaries, however, is critical.”

“I don’t try to jump over 7-foot hurdles: I look around for 1-foot bars that I can step over.”

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”

On Capital Allocation

“[We] can take our capital and move it into businesses that make sense.”

“I am a better investor because I am a businessman and I am a better businessman because I am an investor.”

On the Importance of Investing in Good Businesses

“When a management team with a reputation for brilliance joins a business with poor fundamental economics, it is the reputation of the business that remains intact.”

On the Efficient Market Theory

“I’d be a bum on the Street with a tin cup if the market were always efficient.”

On Being (In)active in the Management of Acquired Businesses

“If they need my help to manage the enterprise, we’re probably both in trouble.”

On Investment Bankers and other Middle Men

“My idea of a group decision is looking in the mirror.”

“Never ask your barber if you need a haircut.”

These are all nuggets of Mr. Buffett’s wisdom that can help us all become better investors. Thank you Mr. Pabrai for sharing this cheat sheet with us. What else would you add to this list?

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