Quote:
Originally Posted by Gunnski
I'll do my MOS by hand. Thanks.....
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Indeed.
Any tool will give you a good starting point but only take an investor up to a certain point where he still needs to outweigh and analyse the probabilites of his bet succeeding.
That's right. I said it. It's a BET. Acknowledging this is a very powerful insight. I am pretty sure that WB would agree with this. Effectively, we are dealing with Bayesian logic here. Getting the philosophy right on how to define the goal poasts for this bet is what matters.
The calculations outlined in Phil's book ---as well as the 3 tools give you--- is a shift in the probabilites of an event occurring. However, assuming this as a 'fait accompli' will only lead to disapointments and frustrations.
Taking a few steps aside on what is going on in market theory, one could conclude that this is a battle of philosophies and viewpoints, and so far Buffy and Mungy (soz lads), are leading the pack and beat the casino.
And here is the shocking news. Yes, investing is a BET. But that doesn't mean you have to behave like a muppet. Also, since it is a bet an appreciation of basic statistics and probability theory will undoubtedly benefit the intelligent investor as demonstrated by Munger and Buffet.
To be fair, people give far too much credit but Buffet and overlook Munger. Charlies insights into how mindscapes and perception work is undeniably one of the most important catalysts in Berkshire's success (and generally a very intersting insight into all aspects of life). Asumming this to be the most likely case, it's a dreadful situation for Berk to plan ahead for the future. Not only does Berk has to look for a replacement for Buffet, but also for Munger. And now (Bayesian style), to complicate the matter even further, Berk would have to either find an individual able to replace the pair of them, or two (or more) individuals able to achieve such a fruitful partnership florishing at heights at least equal to the present yardstick to keep it's current status quo intact.
Interesting odds ;)
If you would be a prospective investor in Berk this is one of the lines of reasoning that you might most probably have to face if you want to take the long term view. How you evaluate any of the variables in this equation depends on your judgement, understanding and insight.
What I urge you to think about is to process the information Phil has given you in a similar manner. They are starting points which help you to work out the odds of an outcome. The most important factor however, is your judgement and insight.
No spreadsheet and graph can do this work with a reliably satisfactory and reproductible outcome to date.
Forget the formulas. Think about the business and the people involved!!!!!