How to Compose a Successful Critical Commentary - Daniel Dennett

Remember that last hot investment case debate you had in your firm? How could you politely address that making it smoother for everybody of the team, which at the end of the day yields a more productive meeting?

1. You should attempt to re-express your target's position so clearly, vividly, and fairly that your target says, "Thanks, I wish I'd thought of putting it that way."
2. You should list any points of agreement (especially if they are not matters of general or widespread agreement).
3. You should mention anything you have learned from your target.
4. Only then are you permitted to say so much as a word of rebuttal or criticism. 

- from Intuition Pumps and Other Tools for Thinking 

The Characteristics of Successful Investment Firms - Dr. Charles D. Ellis, CFA

Great to remember what makes people-based businesses thrive.

The Characteristics of Successful Investment Firms - Dr. Charles D. Ellis, CFA

Quantitative (hard) x Qualitative (fluffy) Sides of Investing

It's been quite a while. Reviewing some of my previous posts, I've realized how 'fluffy' I ended up when contrasting my early days thoughts. As an engineer, I confess I used to focus too much on the quantitative side of investing, leaving much of the qualitative analysis aside.

Today I am working for the third start-up in my career (not a so long one since I'm just 27) and now I've finally learnt that 'fluffiness' matters - actually, it dominates over the quantitative side of a investment case. The numbers we analyze when quarterly results are released are just a lagging indicator of what has been happening inside the company for the last 12 months or so. New executives came onboard, a new area was created, the organogram was changed to better adapt the salesforce and the analytical part of distribution & logistics, and so on.

At the end of the day, we are looking for leading indicators that could change the evolution of the numbers we will see a year onward from now. The quantitative side of the story is a due diligence to make sure you are not being fooled at day 1. What we want after-all is a company that can be worth an ORDER OF MAGNITUDE higher than today's market price. Sometimes even 20x valuation multiples can be worth it for compounders or growing cash machines, for example. What you need is a huge tailwind (most of the time, those are business environment related - and when it's related to people, we are usually too late).

To identify those, the best thing we can do is read, read a lot. Qualify our sources as time gets by. Learn what is indispensable to read. Mold our routine to accommodate the mental models consolidation process. At the same time, get down to what matters instead of being a philosopher (nothing against them!).

What did we learn today? That's a pretty simple exercise that can help us a lot to track our evolution. Keep your notebook open.

The Art of Knowing When to Sell

Remember you buy your portfolio everyday.

The greatest skill at cards is to know when to discard; the smallest of current trumps is worth more than the ace of trumps of the last game. - Baltasar Gracian

Ray Dalio: Company Culture and the Power of Thoughtful Disagreement

This video probably summarizes what I have learned this year not only as an investor, but also as a human being. Do you want your company to make a difference? Create and nurture an outstanding culture. It might sound odd to most people, even from people within, but you have to put your beliefs in practice. That's how others companies also work. As Dalio puts its, the real difference is either on people or culture.

In his company's case, the ruthlessly transparent internal environment (forcefully) creates a trustful atmosphere, in which thoughtful disagreement foments knowledge creation. The possible issue: as people are smart in so many different ways, they must appreciate each other and make a team of them - the possible solution: the culture itself. It takes a genius to make it simple, and Dalio indeed did it by building an environment built on truth and thus, trust.

Culture is self-reinforcing.

 
"My biggest advantage is that I know what I don't know."