Be less unlucky since you cannot make yourself luckier

By | CYH

It started with a conversation with Khin Wai.

Referring to a set of metrics to analyse SaaS and Fintech companies, he said “even with all these it is also a shot in the dark.”

I went on to ask how much of investing is luck. He said more than 50%.

While I don’t know the exact number, I agree luck definitely plays a big part in investment and as in life in general.

We might be tempted to ask how we can be more lucky in investing. But we actually cannot do it because luck is out of our control.

But we can invert the thinking. We can be less unlucky, deliberately.

Charlie Munger has repeated this message in various forms,

It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.

People would often find it frustrating to talk to me about investments because I would often say that I won’t buy because they don’t pass my criteria. Sometimes I am right but sometimes I missed out on winners.

I follow my investment criteria because I believe it allows me to avoid stupid mistakes, rather than to help me pounce on the next big thing.

It might be helpful to look for disconfirming evidence (reasons why you should not buy a stock), rather than trying to find reasons why you should buy a stock. This way you will tend to be less stupid and less unlucky.

Here’s another Munger quote,

All I want to know is where I’m going to die, so I’ll never go there.

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