Quotes by Michael Mauboussin - Page 1

The plural on anecdote is not evidence
Michael Mauboussin /
Anecdotes
Evidence
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Humans have a strong desire to be part of a group. That desire makes us susceptible to fads, fashions, and idea contagions.
Michael Mauboussin /
Fashion
Ideas
Strong
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We have no control over outcomes, but we can control the process. Of course, outcomes matter, but by focusing our attention on process, we maximize our chances of good outcomes.
Michael Mauboussin /
Attention
Matter
Outcomes
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Emphasising what's in your control allows you to adopt an attitude of equanimity toward luck. You've done what you can, and from there you have to live with the results - good or bad
Michael Mauboussin /
Attitude
Done
Luck
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Onlookers frequently confuse edge with style...Edge means generating excess returns because of mispricing. Style suggests being in the right place at the right time. Sometimes edge and style overlap, sometimes they don't.
Michael Mauboussin /
Excess
Mean
Style
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People are, by and large, quite poor at judging correct absolute values but are astute about determining relative values. Psychologists call this coherent arbitrariness, which suggests that individuals are coherent when they compare prices on a relative basis but arbitrary when those prices are considered versus fundamental value.
Michael Mauboussin /
Judging
People
Relative Value
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A thoughtful investment process contemplates both probability and payoffs and carefully considers where the consensus - as revealed by a price - may be wrong. Even though there are also some important features that make investing different than, say, a casino or the track, the basic idea is the same: you want the positive expected value on your side
Michael Mauboussin /
Ideas
Thoughtful
Your Side
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Edge also implies what Ben Graham....called a margin of safety. You have a margin of safety when you buy an asset at a price that is substantially less than its value. As Graham noted, the margin of safety 'is available for absorbing the effect of miscalculations or worse than average luck.' ...Graham expands, "The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price."
Michael Mauboussin /
Average
Luck
Safety
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At the core of an analytical edge is an ability to systematically distinguish between fundamentals and expectations. Fundamentals are a well thought out distribution of outcomes, and expectations are what's priced into an asset. A power metaphor is the [pari-mutuel] racetrack. The fundamentals are how fast a given horse will run and the expectations are the odds on the tote board. As any serious handicapper knows, you make money only by finding a mispricing between the performance of the horse and the odds. There are no 'good' or 'bad' horses, just correctly or incorrectly priced ones.
Michael Mauboussin /
Running
Horse
Odds
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Michael Mauboussin Quotes - Page 1

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