Every business you own is subject to change—rapid or gradual—and you need management teams thinking ahead about how their models must adapt.
Slow (“invisible”) change can be even more dangerous than rapid change because it lulls you into complacency.
Stay Within Your Circle of Competence
Be brutally honest about what you understand deeply versus what you don’t—and resist the urge to stray into areas where your knowledge is weak.
Leverage outside perspectives (trusted friends, partners) to help you identify blind spots in your own expertise.
Intrinsic Value Trumps Market Price
Focus on the present value of all future cash flows (i.e. private‐business value), not short-term earnings or “comps” to indexes.
Qualitative factors (brand strength, management quality) matter as much as quantitative inputs in estimating value.
Don’t Fear Concentration (If You’re Right)
A small number of big positions in your highest‐conviction ideas can outperform a broad, unfocused portfolio—provided the price is attractive.
That said, size constraints inevitably push you toward larger businesses over time; adapt your approach as your capital base grows.
Mistakes Are Your Greatest Teachers
You will make significant errors; what counts is how quickly and effectively you “scramble out” of them and redeploy capital.
Avoid “bet‐the‐company” gambles; mistakes should be manageable, so you can learn without risking the whole enterprise.
Buy Durable Moats, But Price Matters
Owning businesses with strong competitive advantages (brands, network effects, scale) is powerful—just insist on paying a rational price.
Even “moaty” businesses (e.g. Coke, AmEx) face disruption; always ask what could undermine their franchise and build that into your valuation.
Cash-Light, Asset-Light Businesses Thrive in Inflation
If you can buy once (brand, royalty stream, real estate bought long ago) and not keep plowing in more capital, you benefit from inflation.
Capital-intensive businesses (utilities, railroads) constantly need more reinvestment and can see their “real” returns eroded by rising replacement costs.
Patience Beats Aggression
When deploying big sums, you can wait months or years for the right deal—don’t let “analyst impatience” drive you into overpriced opportunities.
If cash piles up, consider share repurchases only when stock is clearly undervalued; otherwise, better to bankroll new acquisitions at fair prices.
Management Quality Is Paramount
You want operators who treat “their” business as if they’ll own it forever, obsess over costs and customers, and honestly confront risks.
A culture of integrity and long-term thinking at the top cascades through the entire organization, minimizing the chance of catastrophes.
Stay Rational—It’s a Moral Imperative
Continually strip away avoidable ignorance; it’s not just smart, it’s honorable to update your beliefs in light of new facts.
Emotional equanimity—never getting too exuberant in booms or too despondent in busts—is your greatest competitive advantage in markets driven by fear and greed.
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