Bruce Lee’s philosophy to be “formless, shapeless, like water” is a powerful model for investors. It warns against rigid adherence to a single dogma, like old-school value investing, and instead encourages adapting one's strategy to fit the unique conditions of the current market environment.
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The key to emulating professional investors isn't copying their trades but understanding their underlying strategies. Ackman uses concentration, Buffett waits for fear-driven discounts, and Wood bets on long-term innovation. Individual investors should focus on developing their own repeatable framework rather than simply following the moves of others.
This "via negativa" approach, inspired by Sun Tzu and Charlie Munger, posits that the easiest way to improve returns is by systematically avoiding common mistakes. Instead of trying to be brilliant, investors should focus on not doing "dumb stuff," as it's easier to identify what leads to failure than what guarantees success.
In an era of accelerating change, a manager's role is to be like a willow tree. They must provide a sturdy, stable vision for the team while remaining highly flexible in how they adapt to storms and changing conditions. This combination builds team resilience.
While long-term focus is a virtue, investment managers at WCM warn it can become an excuse for inaction. During periods of significant market change, blindly "sticking to your knitting" is a liability. Recognizing when to sensibly adapt versus when to stay the course is a critical and nuanced skill.
Howard Marks offers a crucial corollary to Einstein's famous quote. For investors, the real insanity is failing to recognize a paradigm shift. Applying strategies that worked during 40 years of falling interest rates to the current, different environment is a recipe for failure. The context determines the outcome.
Moving from science to investing requires a critical mindset shift. Science seeks objective, repeatable truths, while investing involves making judgments about an unknowable future. Successful investors must use quantitative models as guides for judgment, not as sources of definitive answers.
According to Ken Griffin, legendary investors aren't just right more often. Their key trait is having deep clarity on their specific competitive advantage and the conviction to bet heavily on it. Equally important is the discipline to unemotionally cut losses when wrong and simply move on.
In a rapidly evolving market, the speed at which you can discard outdated strategies and adopt new ones is more critical than simply accumulating new knowledge. Professionals who can let go of 'what has always worked' will adapt and win faster than those who cling to legacy methods.
The era of constant central bank intervention has rendered traditional value investing irrelevant. Market movements are now dictated by liquidity and stimulus flows, not by fundamental analysis of a company's intrinsic value. Investors must now track the 'liquidity impulse' to succeed.
McCullough advocates for a "promiscuous" investment strategy, quickly moving capital to where signals are strongest. He argues that emotional attachment to winning positions, or "bag holding," is the primary way investors lose ground. The goal is to compound returns by avoiding drawdowns, not by marrying a single investment thesis.
