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Hey cobbers. CbK #27 coming in hot like a sunrise. Sharing what I’ve been reading, learning, and compressing this week. A quote from my hero Russell Coight to start:
There’s an old saying that outback survival is about seeing problems and dealing with them before they have a chance of becoming problems that need to be dealt with.
Here’s the format of today’s email:
Part 1: Attributes of Great Investors
Part 2: Bonus Quirky Content - Something to Read, Watch, and Listen
Attributes of Great Investors
My little stepbrother has started getting into investing, which got me thinking, what skills/traits/attributes should he be emulating to achieve investing success? This tweet from Josh Wolfe was timely, what do the best investors share? If you were to list what qualities make investors great, what would they be? Not everyone can be Shaquille O’Neal, but can anyone be Buffett?


Ten Attributes of Great Investors by Michael Mauboussin [Link]
Be numerate (and understand accounting). To be a successful investor, you have to be comfortable with numbers.
Understand value (the present value of free cash flow).
Properly assess strategy (or how a business makes money).
Compare effectively (expectations versus fundamentals).
Think probabilistically (there are few sure things).
Update your views effectively (beliefs are hypotheses to be tested, not treasures to be protected).
Beware of behavioural biases (minimizing constraints to good thinking).
Know the difference between information and influence.
Position sizing (maximizing the payoff from the edge).
Read (and keep an open mind).
and to invert this, what a bad investor might look like:
Be innumerate (ignore accounting)
Ignore value
Disregard strategy (Focus on share price not the underlying business).
Don’t compare (expectations vs. fundamentals)
Don’t think probabilistically, will it happen or won’t it? (there are sure things).
Don’t ever update your views
Lean into your behavioural biases
Influence = information (otherwise why would they have influence?)
Size positions haphazardly
Don’t read (and don’t keep an open mind, trust yourself at all times)
Li Lu
I believe there are four basic competencies a good investor must constantly improve. They are:
1) The ability to understand competitive dynamics far into the future for particular businesses and industries because nothing impacts outcomes more than competition.
2) The ability to read through accounting reports and footnotes to develop an educated sense of the company, it’s culture and businesses.
3) Understanding the people who run the company.
4) A habit of constant learning in the hope of occasionally finding some insights and skills to make one more trusted and admired by interesting people who can provide opportunities.
So You Want To Be The Next Warren Buffett? How’s Your Writing? [Link]
Mark Sellers with a great dose of reality. Seller argues that there at least seven traits great investors share that are true sources of advantage because they can’t be learned once a person reaches adulthood. In fact, some of them can’t be learned at all; you’re either born with them or you aren’t.
The ability to buy stocks while others are panicking and sell stocks while others are euphoric. Everyone thinks they can do this, but then when October 19, 1987, comes around and the market is crashing all around you, almost no one has the stomach to buy. And then when the market is roaring, the vast majority of the people who manage money can’t bring themselves to take money off the table and risk falling behind their peers.
Obsessive about playing the game and wanting to win. These people don't just enjoy investing; they live it. They wake up in the morning and the first thing they think about, while they’re still half asleep, is a stock they have been researching, or one of the stocks they are thinking about selling, or what the greatest risk to their portfolio is and how they’re going to neutralize that risk. Unfortunately, you can’t learn to be obsessive about something. You either are, or you aren’t. And if you aren’t, you can’t be the next Bruce Berkowitz.
Willingness to learn from past mistakes. Most people would much rather just move on and ignore the dumb things they’ve done in the past. If you ignore mistakes without fully analyzing them, you will undoubtedly make a similar mistake later in your career.
An inherent sense of risk based on common sense. I believe the greatest risk control is common sense, but people fall into the habit of sleeping well at night because the computer says they should.
Confidence in their own convictions and stick with them, even when facing criticism.
Have both sides of your brain working, not just the left side (the side that’s good at math and organization.) As an investor, you need to perform calculations and have a logical investment thesis. This is your left brain working. But you also need to be able to do things such as judging a management team from subtle cues they give off. You need to be able to step back and take a big picture view of certain situations rather than analyzing them to death. You need to have a sense of humor and humility and common sense. And most important, I believe you need to be a good writer. If you can’t write clearly, it is my opinion that you don’t think very clearly. And if you don’t think clearly, you’re in trouble.
The most important, and rarest, trait of all: The ability to live through volatility without changing your investment thought process. Very few investors can handle the volatility required for high portfolio returns. They equate short-term volatility with risk. This is irrational; risk means that if you are wrong about a bet you make, you lose money. A swing up or down over a relatively short time period is not a loss and therefore not risk unless you are prone to panicking at the bottom and locking in the loss. But most people just can’t see it that way; their brains won’t let them. Their panic instinct steps in and shuts down the normal brain function.
I would argue that none of these traits can be learned once a person reaches adulthood. By that time, your potential to be an outstanding investor later in life has already been determined. It can be honed, but not developed from scratch because it mostly has to do with the way your brain is wired and experiences you have as a child. That doesn't mean financial education and reading and investing experience aren't important. Those are critical just to get into the game and keep playing. But those things can be copied by anyone. The seven traits above can't be.
Winning Habits from The Art of Execution by Lee Freeman-Shor [Link]
1. Best ideas only: Having one or two big winners is essential for success – the 80/20 rule (the Pareto principle) is true. However, avoid investing in just one great idea because shit happens.
2. Position size matters: Invest a large amount of money in each idea, but not so much that one decision determines your fate. However, do not invest in too many ideas and over-diversify. Rather, be prepared to invest big – just don’t go all-in on day one.
We size things based on how much we think we can make versus how much we think we can lose. We’ll probably be willing to lose 5-6% of our capital in any one investment.
- Bill Ackman
3. Be greedy when winning: Run your winners. You need to embrace the possibility of winning big. Embrace the right tail, the statistical long shots, of the distribution curve. Stop trying to make a quick 10%. Give your investments the possibility of growing into ‘ten baggers’.
4. Materially adapt when you are losing: Either add meaningfully to an existing investment or sell out. Both give you the possibility of changing the ultimate outcome. You can turn a loser into a winner. Expect to find yourself in a losing situation, have a plan to materially adapt, and stick to it.
5. Only invest in liquid stocks: Make sure any publicly listed investment is liquid enough to enable you to execute your idea. There is nothing worse than knowing what to do, wanting to do it, but being unable to do it.
Just want to present a counter-point to #5


Losing Habits from The Art of Execution
Like any good idea, invert, always invert! So here are the habits of losing money managers:
1. Invest in lots of ideas: Many professional fund managers invest in low-conviction, low-expected return ideas when they seek diversification in their portfolios to reduce risk.
“As a result of over diversification their returns get watered down. Diversification covers up ignorance. Active managers have not done enough research into any of their companies. If managers have 200 positions, do you think they know what is going on at any one of these companies at this moment?
- Bill Ackman
2. Invest a small amount in each idea: If you are wrong most of the time, then you not only need your winners to win big, but you also need to have enough capital invested in those ideas to ensure they have a material impact on your overall outcome.
3. Take small profits: Many small profits are the ultimate sign of a losing investment strategy because you are effectively picking up pennies in front of an oncoming train.
4. Stay in an investment idea and refuse to adapt when losing
5. Do not consider liquidity
Crowd-Sourced Answers:

This one from From Growth To Value (@FromValue) is good:
1. Long-term view Keep your eyes on the horizon and hold for years or decades.
2. Seeing through the clouds There is so much noise to ignore
3. Doubt before you buy, not after. Do your due diligence very well, so you can trust your judgment.
I like this one most from Harry Stebbings:
The best investors have 2 attributes:
1.) They are phenomenally patient.
2.) They know when the right time is for patience to subside and be aggressive in their pursuit.
Question: What attributes or traits do you think are most important?
Curated by Kalani Discord Server [Link]
Was planning on doing an Under the Spotlight feature on Discord, but it wasn’t up to my standard so will be scheduled for another week. However, I’ve set up a server on Discord for this newsletter [Join using this link].
Aiming to share interesting resources, connect CbK readers, and be better than yesterday. I won’t be sharing this link outside this newsletter and will be closing it after 30 people sign up for the time being. Hoping to keep it small and tightknit!
Bonus Quirky Content
Something to read: The Tyranny of Relentless Positivity [Link]
I’ve had an extremely cushy and lucky life. But I still enjoyed and took away a tonne from this article. I seriously don’t think I’m prepared for some of life’s turbulence.
Tough emotions are part of our contract with life. You don’t get to have a meaningful career or raise a family or leave the world a better place without stress and discomfort. Discomfort is the price of admission to a meaningful life.
and,
when I looked at what helps people to bring the best of themselves to work, I found a powerful key contributor: individualized consideration. When people are allowed to feel their emotional truth, engagement, creativity, and innovation flourish in the organization. Diversity isn’t just people, it’s also what’s inside people, including diversity of emotion. The most agile, resilient individuals, teams, organizations, families, communities are built on an openness to the normal human emotions.
Something to watch: What's the Meaning of Life? | Joe Rogan and Naval Ravikant [5 mins]
I’m way outta my depth on this topic. So it’s cool to think about it every once in a while. But I’ve always liked the belief that life has no meaning until you give it. If the meaning of life is to become the best god damn potato farmer ever, power to you! What’s my meaning? Fucked if I know. But I like the idea of learn, build, share, repeat.
The beauty, if there was a single answer, we would not be free. We would be trapped, because then we would all have to live to that answer, then we'd be bored like robots each one competing with each other to fulfill that single meaning more than the others.
and
So the answer to that question of "Do I matter?" is "I am nothing" and "I am everything". And you'll find this with all the great questions. The answers are all paradoxes. Which is why it's some level it's sort of pointless to pursue them, to find a trite answer like I'm giving. But the act of pursuing them is actually really useful because then it gives you certain intrinsic understanding in your life that brings a level of peace.
Something to listen to: Jack Weatherford Genghis Khan & The Making Of The Modern World [Link] [Apple Link]
This is a looooong episode. Which was great for me when spending so damn long driving. No specific quotes as it’s hard (and foolish) to note them when driving. But particularly enjoyed from about 90 mins in when Weatherford goes deep on Gengis Khan and his leadership.
Rabbit hole/resource to dive into: Teddy Okuyama’s Compilation of Links [Link]
“English Fintwit meets Japanese Equities” Which basically sums it up. For investors who only know English but have an interest in Japanese equities, this is for you. A great compilation of links for researching Japanese stocks.
Final thought for the week:
Until next week, have a good one!
- Big Aussie Battler Boi
You can find previous issues of Curated by Kalani here. I’m on the web at kscarrott.com and on Twitter @scarrottkalani.
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Attributes of Great Investors
“Truth doesn’t care about your ego” 👌🏼