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Precise Asteroid

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Book Review, An Investment Thinking Toolbox

2023-05-015

I learned about this book from a random tweet that highly recommended it. As suggested on that tweet I DM the author, boughts it directly and even got a personal autographed version of the book.

Main take aways 📓

Chapter 1
  • Only invest in domains you understand and have an advantage over the marginal investor. Otherwise invest in index
    • Marginal Investor: representative of the investor the trade the stock and reflects their belief, hence determine the price ##### Chapter 2
  • Thiking in first principles
    • In investment you want to think differently than the marginal investor and win. Otherwise go with indexes
    • Think about what is a fact and what is a rumor
    • Think about what is improtant
    • Break down the questions to small part that are still meaninful
Chapter 3
  • Second level thinking: not the superficial information everybody knows, but one level deeper. Not it is COVID time so everyone would work from home.
  • Known vs reflected: one needs to ask oneself whether all the information is already reflected in the share price. general, public information is usually already refelected. But are there hidden gems?
  • Act: there is no point in doing second level thinking if you will not act based on its conclusion. Remember that in order to beat the marginal investor, one needs to act unlike the marginal investor, thus operate against the movement of the crowd. That's always hard. one needs to "play the players"
Chapter 4: Unknonw Unknows
  • The unknown unknowns (UU) are the biggest problems and we can't by defintion know the size of that bucket
  • By thinking about the company we could probably bring questions from unknwon unknowns (UU), to unknown knowns (UK) and then even to asnwer them and bring them all the way to known knowns (KK)
  • Eventually we need ask ourselves is my KK and KU bigger than the marginal investor, you could consider investing. Otherwise pass.
Chapter 5: Inverting
  • The liklihood of some X to happen p(x) = 1 - p(not x)
  • When deciding whether to invest or not, one should think of the oppoosite question trying to convince one self. For example instead of asking whether company X will successed, sometimes it is easier to ask why should compnay X fail

Made by Amir 💚