In this interview on The Knowledge Project Podcast, Chamath Palihapitiya discussed creating behavioral rules to protect you from yourself in investing. Here’s an excerpt from the interview:
I think that when push comes to shove what you’re always going to be fighting is yourself.
Panicking, overreacting, underreacting, refusing to observe the present, living too much in the past, wanting too much to believe in the future, so it’s all psychological traps.
Because the data is there if you want to observe and then just clinically re-underwriting how it sits as part of your risk equation. Which bucket does it sit in? How big is that little bet inside the bucket?
So I’ve tried to really understand how to create an edge and I don’t think an edge comes from attending conferences or writing some crazy algorithmic software.
Maybe a few people can do those things and find an edge but what is a more kind of like mainstream accessible idea, and I think it is that if you define certain behavioral principles that protect you from the worst parts of your own psychology that’s a winning strategy.
I have like a handful of these rules that I try to live by and they… these behavioral rules around trying to think about things like buying companies versus buying stocks, trying to think about the quality of the CEO, the quality of the business. Trying to think in long duration, not looking at the stock price every day, reading annual reports, avoiding quarterly reports.
All these things that try for me to solve for my blind spots, and that’s allowed me to take bigger and bigger swings because I feel like I’m practicing the things that will protect me from myself.
You can watch the entire interview here:
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