Here’s a great conversation with Morgan Housel and Annie Duke at the 73rd CFA Institute Annual Virtual Conference last month in which they discuss a number of topics around managing risk, investing during periods of uncertainty, and the importance of humility in the investment decision making process. During the conversation Duke provides some great insights about investing during periods of uncertainty which may explain why Warren Buffett has been quiet during this latest crisis. Here’s an excerpt from the conversation:
Duke: The people that do well through any financial crisis tend to be the people who don’t do too much. And just kind of say, ok I’m going to cover my bases and I’m not going to try and predict perfectly. That takes a lot of humility and it takes a lot of understanding that you don’t know.
It takes an ability to resist when something has gone well that that doesn’t mean that your model of the world is correct also. I think about that in terms of growth and value investors where even if it’s correct in a particular environment it might not be correct going forward so you have to hold those models very loosely.
It may not even have been the right choice at the time that it was working well because it could be right for not necessarily the right reasons. It could just happen that the right model of the world happened to overlap enough with the model that you had come up with. There’s all sorts of reasons that that could be true which you want to hold loosely.
You can watch the entire conversation here:
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