Drawing from Sun Tzu and Charlie Munger, the key to long-term investment success is not brilliance in stock picking, but systematically avoiding common causes of failure. By identifying and steering clear of ruinous risks like excessive debt, leverage, and options, an investor is already in a superior position.

Conventional definitions of risk, like volatility, are flawed. True risk is an event you did not anticipate that forces you to abandon your strategy at a bad time. Foreseeable events, like a 50% market crash, are not risks but rather expected parts of the market cycle that a robust strategy should be built to withstand.

During profound economic instability, the winning strategy isn't chasing the highest returns, but rather avoiding catastrophic loss. The greatest risks are not missed upside, but holding only cash as inflation erodes its value or relying solely on a paycheck.

The smooth exponential curve of compounding is a myth. In reality, it occurs in a world of shocks and uncertainty. True long-term compounding isn't just about picking winners; it's the result of having a robust process that allows you to survive the inevitable randomness and volatility along the way.

Bridgewater's Co-CIO argues the winning formula of the last 15 years—concentrating capital in US equities and illiquid assets—is now a dangerous trap. He believes most investors have abandoned diversification because it hasn't worked recently, creating a risky setup that calls for a globally diversified portfolio.

Warren Buffett's early partner, Rick Gurren, was as skilled as Buffett and Munger but wanted to get rich faster. He used leverage, got wiped out in a market downturn, and missed decades of compounding. This illustrates that patience and temperament are more critical components of long-term success than raw investing intellect.

The dot-com bubble didn't create wealth in 1999; it destroyed it. Generational wealth came from buying and holding survivors like Amazon *after* its stock had fallen 95%. The winning strategy isn't timing the crash, but surviving it and holding quality assets through the long recovery.

Contrary to the retail investor's focus on high-yield funds, the 'smart money' first ensures the safety of their capital. They allocate the majority of their portfolio (50-70%) to secure assets, protecting their core fortune before taking calculated risks with the remainder.

A 50% portfolio loss requires a 100% gain just to break even. The wealthy use low-volatility strategies to protect against massive downturns. By experiencing smaller losses (e.g., -10% vs. -40%), their portfolios recover faster and compound more effectively over the long term.