Commonplace Book

1. In the short term, the market functions as a voting machine, but in the long term, it operates as a weighing machine.

2. Even if one’s information is complete and accurate, it can still be misleading investmentwise if it is late. A lemon that has been flattened by a steam roller has more juice in it than a piece of information the stock market has already discounted.

3. Everything should be made as simple as possible, but not simpler.

4. Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

5. It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.

6. Watch your thoughts; they become words. Watch your words; they become actions. Watch your actions; they become habits. Watch your habits; they become character. Watch your character; it becomes your destiny.

7. While there are terrific moats around our individual business units, the barrier to starting a “conglomerate of vertical market software businesses” is pretty much a cheque book and a telephone.

8. Most companies pursue scale efficiencies, but few share them. It’s the sharing that makes the model so powerful. But in the center of the model is a paradox: the company grows through giving more back. We often ask companies what they would do with windfall profits, and most spend it on something or other, or return the cash to shareholders. Almost no one replies give it back to customers – how would that go down with Wall Street? That is why competing with Costco is so hard to do. The firm is not interested in today’s static assessment of performance. It is managing the business as if to raise the probability of long-term success.

9. The simple deep reality for many of our firms is the virtuous spiral established when companies keep costs down, margins low and in doing so share their growing scale with their customers. In the long run this will be more important in determining the destination for our firms than the distractions of the day.

10. History doesn’t repeat itself, but it often rhymes.

11. TerraVest Industries is a publicly traded company that owns a number of metal manufacturing businesses, including propane equipment such as large bulk storage, transport trailers, bobtails, crane service trucks, and more. TerraVest Industries is the parent company of TerraVest Tanks, Mississippi Tank Company, Signature Truck Systems, Pro-Par, Inc. and Maxfield – all long-term and stable companies with a reputation within the industry for producing high-quality units and having excellent customer service.

12. To make money in stocks you must have ‘the vision to see them, the courage to buy them and the patience to hold them.’ Patience is the rarest of the three.

13. You can’t take the same actions as everyone else and expect to outperform.

14. The stock market is a device for transferring money from the impatient to the patient.

15. All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.

16. The four most dangerous words in investing are: ‘This time it’s different.’

17. I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.

18. Good investing is a minority sport, which means that in order to earn returns better than everyone else we need to be doing things different to the crowd. And one of the things the crowd is not, is patient.

19. In the short run, the market is a voting machine but in the long run, it is a weighing machine.

20. You should remember that good ideas are rare - when the odds are greatly in your favor, bet heavily.

21. The strategy of putting all your eggs in one basket and watching that basket is less risky than you might think.

22. The stock market is filled with individuals who know the price of everything, but the value of nothing.

23. In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.

24. Investing is about predicting the future, and the future is inherently unpredictable. Therefore, the only way you can do better is to assess all the facts and truly know what you know and know what you don’t know. That’s your probability edge.

25. Knowing what you don’t know is more useful than being brilliant.

26. My view is that an investor is better off knowing a lot about a few investments than knowing only a little about each of a great many holdings. One’s very best ideas are likely to generate higher returns for a given level of risk than one’s hundredth or thousandth best idea.

27. So one way to create an attractive risk/reward situation is to limit downside risk severely by investing in situations that have a large margin of safety. The upside, while still difficult to quantify, will usually take care of itself. In other words, look down, not up, when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones.

28. The biggest hurdle to making 100 times your money in a stock may be the ability to stomach the ups and downs and hold on.

29. Take your losses quickly and your profits slowly because your objective is not just to be right but to make big money when you are right.

30. You just can’t copy other people’s insights. Sooner or later, the position turns against you. If you don’t have any insights into the business, when it goes from $100 to $50 you aren’t going to know if it will go back to $100 or $200.

31. During a lifetime, you will likely own 10-20 big winners and hundreds of failed impostors. Time and interest are the primary components of the power of compounding. The hard part is we don’t know how much time we have. Identifying the losers in your portfolio is as important as holding winners because losers dilute your returns. Losers are a waste of your time.

32. When any rule or formula becomes a substitute for thought rather than an aid to thinking, it is dangerous and should be discarded.

33. Life is never made unbearable by circumstances, but only by lack of meaning and purpose.

34. Live as if you were living a second time, and as though you had acted wrongly the first time.

35. Religion is regarded by the common people as true, by the wise as false, and by rulers as useful.

36. You have power over your mind - not outside events. Realize this, and you will find strength.

37. It is impossible for a man to learn what he thinks he already knows.

38. We suffer more often in imagination than in reality.

39. The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”

40. He who has a Why to live can bear almost any How.

41. Ultimately, man should not ask what the meaning of his life is, but rather he must recognize that it is he who is asked.

42. You are what your deepest desire is. As is your desire, so is your intention. As is your intention, so is your will. As is your will, so is your deed. As is your deed, so is your destiny.

43. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.

44. Show me the incentive and I’ll show you the outcome.

45. I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge. I’d rather be roughly right than precisely wrong.

46. In a weird way, everybody is rooting for you. When you go to a job interview, the interviewer wants you to be amazing so they don’t have to look anymore. When you go on a date, the person wants to have an amazing date with you. If you make a piece of content, people want to see amazing pieces of content and they have no problem if it’s yours.

    The instant you get into the mindset that people want you to do well, your entire world gets better. And you’ll be shocked to know this pattern keeps repeating in different areas of life.

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