1/ In the Book, "Benjamin Graham on Value Investing: Lessons from the Dean of Wall Street", Warren Buffett narrates an incident that went down when he was still a student in Benjamin Graham's class at the Columbia Business School in the 1950s. A very short thread.
2/ Mr. Gaham gave out 20 True-or-False questions and revealed beforehand that for half of them, the answer was 'True'. Remember here that many of the students taking this test were the brilliant investment peers of Mr. Buffett and were taught by Mr. Graham himself.
3/ When the test was done and evaluated, many of the students got less than 10 of them right. Do you get why this is bad? If the students had just written 'True' or 'False' for all the answers, they'd have gotten exactly 10 of them right. Getting a 10 was 'easy pickings'.
4/ But of course, maybe the students didn't want 'easy pickings' and tried to be competitive. That's probably why they ended up getting less than 10 right. They put greed over safety. In investment parlance, they put 'Returns' over 'Risk'.
5/ Charlie Munger once said “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” and he couldn't have been more right!
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