Do Your Own Research

It's essential to do your own research whenever possible. As an investor, I recommend reading annual reports directly rather than relying solely on analysts' interpretations.

For instance, I read that Laxman Narasimhan, the current CEO of Starbucks, worked as a barista to grasp the fundamental issues within the company. Similarly, Uber CEO Dara Khosrowshahi drove for Uber to understand the underlying challenges of the business. These examples are striking, given that CEOs are typically very busy. Their willingness to take on minimum wage jobs shows a commitment to understanding their businesses firsthand, rather than filtering information through multiple layers of management.

I personally delve into many annual reports, examining footnotes and striving to comprehend the complexities, even if I often find them perplexing. To deepen my understanding of potential investments, I often try the company's products or simulate its services. For example, I became interested in a metal detection company, so I purchased a metal detector to learn how it operates. When challenges arose, I consulted blogs and manuals, and I discovered the excitement of treasure hunting, which has a vibrant subculture.

While this approach is time-consuming, I believe that if you're investing a significant amount of your capital, you should feel at least 80% confident that you're making a sound choice.

Keep Decision-Making Simple and Probabilistic

During my time as an analyst, I often found it frustrating to provide recommendations that managers disregarded. It seemed that many had already formed their opinions, leaving me to merely validate their beliefs. When I presented contradictory data, I was often blamed for the oversight.

Life often operates on simple probabilities. For example, when tasked with finding customer turnover statistics, I discovered it was challenging to provide a precise number due to varying policies across customer segments. Ultimately, I managed to produce some figures, but I had to emphasize that the effort was unnecessary, as the client's turnover aligned with the national average.

I advise against relying on complicated decision-making models like game theory or intricate modeling techniques for precise predictions, as these can lead to overconfidence. Instead, utilize probabilistic mental models such as Bayesian Inference, Fermi Thinking, and The Law of Large Numbers to inform your decisions. While these may not yield exact outcomes, they help avoid the pitfalls of overconfidence.

Life's a Marathon, but Be Ready to Sprint

Both Warren Buffett and Jeff Bezos are known for making a handful of decisions each year. I understand the rationale: decision fatigue can lead to poorer choices as the number of decisions increases.

I've adopted a straightforward lifestyle: I stay consistent by frequently reading annual reports and continuously learning, but I also know when to act decisively. When a genuine opportunity arises, I invest heavily. The challenge lies in recognizing when a deal is truly valuable—this is the marathon aspect of decision-making.

Accumulating knowledge takes time, and intuition for decision-making develops gradually. Buffett noted in his latest annual letter that significant ideas may only emerge every five years, underscoring the need for patience in knowledge acquisition.

My advice is to start your learning journey early. While youth isn't a prerequisite, beginning your education early is crucial. The learning curve resembles a sigmoid curve: it starts slowly but accelerates once you gain insight.

Conclusions

In summary, I advocate for doing as much as you can independently. While this approach requires time and the patience to resist the fear of missing out, I am confident that cultivating habits of personal analysis and decision-making will lead to success. Just look at Warren Buffett for inspiration.

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