Dear Everybody,

Jim O’Shaughnessy is Founder, Chairman, and Co-Chief Investment Officer of O’Shaughnessy Asset Management. He’s the host of Infinite Loops, a podcast with Jamie Catherwood, and he’s the author of four books on investing, including Invest Like the Best, What Works on Wall Street, How to Retire Rich, and, Predicting the Markets of Tomorrow.

I organized and distilled his last 3,000 tweets into a summary of his big ideas, in two parts: 

1. Successful Investing - Philosophy & Process

2. Quotes on Investing Mindset and The Search for Truth

PART ONE: SUCCESSFUL INVESTING - PHILOSOPHY & PROCESS

Successful investing is simple, but it’s not easy…

• There’s no sure thing, and there’s no secret to success

• 🚨 And there’s a lot we know that just ain’t so 🚨

Humans are designed to be bad investors…

• We’re crushed by uncertainty

• We’re not disciplined when things are bad

• And we’re emotional when our money’s at stake

Worse yet, we remember things that didn’t happen…

• We see things that aren’t so, and forecast things we don’t know

• We panic, chase phantoms, and get caught up in greed

Successful investing defies human nature…

• It combats quirks of the mind 

• It adopts external fail-safe measures

• And it sticks to a plan 

• (The last sustainable advantage is to arbitrage our nature)

Check your ego and search for the truth…

• (Truth doesn’t abide a big ego)

• Have a beginner’s mind and keep it wide open

• Happily accept most of your beliefs are wrong

• Recognize how little you actually know and admit it

• The smartest of the smart are often the least arrogant

Be brutally honest with yourself…

• Know who you are 

• See yourself clearly

Actively develop a strong mental attitude…

• Don’t concern yourself with what others are saying or doing

• Don’t attach self-worth to things people aspire to

• Allow yourself to be self-reliant and free of illusions

• Have agency and control your own fate

• Above all, believe you can do it

Think long-term…

• Take the long view on returns 

• Do not overweight short-term events

• Do not succumb to short-term volatility 

• Pay attention to what might happen in ten or twenty years

Unglue yourself from the present…

• The future flows from the past, and cycles repeat, with variations

• Read original books, journals, news articles, and diaries from other eras

• Focus on the ones that ring true 

• Study how markets have behaved and what moved people to act, believe, and behave the way they did

Learn, learn, and learn some more…

• Read broadly outside of finance

• Read more than almost everyone else

• Study as much as you can about investing

• Seek to understand those you might have an aversion to

Build on what you learn…

• Sort out gems of knowledge 

• Separate wheat from the chaff

• Make a never-ending commitment to gain knowledge

• Read, synthesize, abandon ideas that aren't working, try new ones, read some more

Challenge your own beliefs…

• Don’t wed yourself to an idea or cling to a treasured belief 

• Constantly and ruthlessly challenge each belief, no matter how basic

• Guard your brain from noxious ideas living there rent-free

• The more certain you sound, the less certain you should be

Discard beliefs that are no longer useful…

• Ruthlessly remove bad ideas and advice

• Improve your mental maps by deleting misperceptions

• Throw away poor filters and replace them with better ones

Ask why a lot (then keep asking why)…

• Doing so uncovers a lot of bad beliefs

• Continually ask "Why do I believe this?"

• Continually ask, “Am I seeing things correctly?" 

• People who don’t ask questions don’t get answers

Challenge conventional thought…

• Most historical beliefs and commonly accepted “truths” have been wrong

• Many of a today’s cherished beliefs are castles built on sand

• Don’t accept these default settings

• Remove yourself from the dominant thinking of our era 

In other words, don’t follow the crowd…

• Be willing to hold uncomfortable opinions

• Make your investment portfolio very different than the market 

• (Just know this will create far higher career risk that the alternative)

Document your thoughts…

• Keep a handwritten journal 

• Consistently record decisions and beliefs over time

• Write about every worry, frustration, and uncertainty you’re experiencing

• Date it, put it away, and review your written observations later

• You’ll be surprised how you think after the pressure and emotion have dissipated

• And seeing things in your own handwriting makes it difficult to fool yourself

Be dispassionate in your judgment…

• Maintain a “we’ll see” disposition 

• Never let emotions dictate decisions

• You can negate your entire track record by just once emotionally overriding your investment model

• Real discipline kicks in when things are going against you, sometimes significantly

Search instead for a methodology that’s…

• Simple

• Passive

• Concrete

• Cohesive

• Consistent

• Systematic

• Explainable

• Rules-based

• To the point

• Time-tested

• And quantitative

• (Don't believe willpower will allow you to overcome your fears and emotions)

Enjoy vivid stories, but ask for proof…

• Invest in dull facts 

• Apply analytical tests 

• Favor reams of statistical data

• Look for evidence that odds are in your favor 

• Prefer impersonal statistics to descriptive data

• Prefer options that have a huge amount of empirical support 

• Prefer experimental evidence over received wisdom that sounds good

Don’t chase sugar highs…

• Ignore predictions

• Don’t watch television news

• Don’t pay attention to financial forecasts

• Distractions sap your mental and even physical energy

• People tend to take recent events and forecast similar returns into the future

Look for rare, favorable, and fortunate circumstances…

• Look for potentially unusual and random circumstances

• Recognize when a situation not of your own making is conducive to a favorable outcome

Take advantage of the spot Karma places you…

• Smart luck involves awareness followed by action

• Jump in, act quickly on knowledge, and try things

• Even if circumstances are ideal, you still need to take advantage of them

• You can be in the right place at the right time and still make the wrong choice

• Favorable conditions are meaningless if you don’t fight hard 

Persevere…

• Remember, this too shall pass

• Persist even after you're knocked down ten times

• Continue on in a rigorous, unemotional, and consistent manner

Enjoy and embrace the music while it lasts…

• Be a pragmatic optimist 

• Even if you're wrong, you'll enjoy life a lot more

• Be open, be kind, treat people well, and Karma will get your back

PART TWO: QUOTES ON INVESTING MINDSET AND THE SEARCH FOR TRUTH

Don’t look for the meaning: Look for the use!

-Wittgenstein

They were muddy like unreflecting water. The mud will settle, but it is hard to wait for it. If you can, then you can act. If you follow the Tao without pretension you will never burn yourself out.

-Lao Tzu, Tao Te Ching, Verse 15 (reflecting “ancient times” and the masters of those days being “minutely subtle, mysteriously comprehending, and too profound to be known.”)

The race may not always be to the swift nor the victory to the strong, but that's the way to bet.

-Damon Runyon

O Fortune, like the moon

You are changeable, ever waxing, ever waning;

Hateful life

First oppresses and then soothes as fact takes it;

Poverty and power

It melts the like ice.

-Carl Orff, Carmina Burana

If you’re going to kick authority in the teeth, you might as well use both feet.

-Keith Richards

In the realm of ideas, everything depends on enthusiasm, in the real world, all rests on perseverance.

-Goethe 

You are the music while the music lasts.

-T.S. Eliot

You just can’t beat the person who never gives up.

-Attributed to Babe Ruth

Discipline is the bridge between goals and accomplishment.

-Jim Rohn

When, in disgrace with fortune and men’s eyes, I all alone beweep my outcast state, and trouble deaf heaven with my bootless cries, and look upon myself and curse my fate…

-Shakespeare, 29th Sonnet

Many people simply weren’t born with the correct wiring to be so unemotional…The ability and willingness to take risk are not always equal for most investors. Charlie Munger is a one-of-kind. It’s good for investors to remind themselves of this when trying to emulate him. Very few can.

-Ben Carlson, discussing Charlie Munger’s ability to withstand drawdowns

Having, and sticking to a true long term perspective is the closest you can come to possessing an investing super power.

-Clifford Asness

Perception doesn't create reality, it is reality.

-Jed McKenna

We find that a long list of investment biases—e.g., the reluctance to realize losses, performance chasing, and the home bias—are human, in the sense that we are born with them. Genetic factors explain up to 45% of these variation in those biases across individuals. We find no evidence that education is a significant moderator of genetic investment behavior.

-Henrik Cronqvist and Stephan Siegel

If you can’t describe what you are doing as a process, you don’t know what you’re doing.

-W. Edwards Deming

Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude.

-Thomas Jefferson

It’s not what happens to you, but how you react that matters.

-Epictetus

The only thing you control is your mind.

-Napoleon Hill

There is nothing either good or bad, but thinking makes it so.

-Shakespeare

To map out a course of action and follow it to the end requires courage.

-Ralph Waldo Emerson

Success is not final, failure is not fatal: it is the courage to continue that counts.

-Winston Churchill

I can calculate the motions of heavenly bodies but not the madness of men.

-Newton

Wait for the wisest of all counselors, time.

-Pericles

I have no use whatsoever for projections or forecasts. They create an illusion of apparent precision. The more meticulous they are, the more concerned you should be.

-Warren Buffett

Because of the rapid change of the world around us since our birth, we humans are living anachronisms. Our world has changed dramatically in the past 150 years. Human physiology, in contrast, took millions of years to create and has not changed much in 150,000 years. Your body—even if it is in mint condition—is designed for success in the past. It is an antique biological machine that evolved in response to a world that no longer exists. Although we live in a world in which computer processing speed doubles roughly every twenty-four months, human information processing has not expanded substantially over the past 150,000 years. Our physiology is clearly behind the times.

-Philip Zimbardo

There’s someone in my head but it’s not me.

-Pink Floyd

If the sage refuses to be proud then people won’t compete for his attention. Not to value treasures that are hard to come by keeps people from wanting to steal them…You see, if there is nothing to fight for then there is nothing that can break the flow.

-Lao Tzu

Listen, give up trying to be so learned and things will go a lot easier…Between yay and nay how much difference is there? Is there really much difference between being angry and pretending not to be? What others fear I must also fear.

-Lao Tzu

Humans are fear-based creatures. We are primarily emotional and our ruling emotion is fear…and [almost] all fear is fear of the unknown.

-Jed McKenna

My mind is that of a fool—how blank! Vulgar people are clear, I alone am drowsy. Vulgar people are alert, I alone am muddled. And the people, the people are so busy! But I have nothing to bother about. The multitude all have a purpose. I alone am foolish and uncouth. Most people seem to be bright and sharp. And how do I feel? Like a blunted sword.

-Lao Tzu 

Human judgment is far more limited than we think. We have a surprisingly restricted capacity to manage or interpret complex information.

David Faust, The Limits of Scientific Reasoning

Fear is the mind-killer. Fear is the little death that brings total obliteration.

Frank Herbert, Dune

The first principle is that you must not fool yourself and you are the easiest person to fool.

-Richard P. Feynman

There is no more miserable human being than one for whom nothing is habitual but indecision.

-William James

Beware of words. The moment you look away, they will take on a life of their own; they will dazzle, mesmerize, terrorize, lead you astray from the reality they represent, lead you to believe they are real.

-Anthony De Mello

Without disasters, the wise could not distinguish themselves.

-Robert Veres

For us, there is only the trying.

-T.S. Eliot

The average man can't prove of most of the things that he chooses to speak of

And still won't research and find out the root of the truth that you seek of

-Nas and Damian Marley, Patience

Everything in the world may be endured except continual prosperity.

-Goethe

The art of being wise is the art of knowing what to overlook.

-William James

Destiny is no matter of chance. It is a matter of choice. It is not a thing to be waited for, it is a thing to be achieved.

-William Jennings Bryan

I know of no more encouraging fact than the unquestionable ability of man to elevate his life by conscious endeavor.

-Henry David Thoreau

Too much of a good thing can be wonderful.

-Mae West

Is the Universe a Computer?... In the study of anything outside human affairs, including the study of complexity, it is only simplicity that can be interesting.

-Steven Weinberg, Nobel Prize–winning physicist

There are old fools.

There are bold fools.

But, there are no old, bold fools.

-Old Wall Street saying

All theory, dear friend, is gray, but the golden tree of life springs ever green.

-Johann Wolfgang von Goethe

All conflict is self-conflict.

-Kapil Gupta

Truth never comes into the world but like a bastard to the ignominy of him that brought its birth.

-Milton         

To understand is to know what to do.

-Wittgenstein

With a game, you shouldn’t do anything as vulgar as play it.

-Simon Norton, British mathematician

Mu means “no thing.” Like “Quality” it points outside the process of dualistic discrimination. Mu simply says, “No class; not one, not zero, not yes, not no.” It states that the context of the question is such that a yes or no answer is in error and should not be given.

-Robert Pirsig

Not only may questions remain unanswered; all the right questions may not even have been asked.

-Seth Klarman

The average expert was roughly as accurate as a dart-throwing chimpanzee.

Philip Tetlock, after an academic career analyzing expert predictions

It's more complicated than you realize. I am here because of you and you are here because of me.

-Nasrudin

Every time change is in the offing, you’re going to run into conflict because people hate change. They don’t want change. They want progress without change.

-Anthony De Mello

Never let the truth get in the way of a good story, unless you can’t think of anything better.

-Mark Twain

When the eye is unobstructed, the result is sight. When the ear is unobstructed, the result is hearing. When the mouth is unobstructed, the result is taste. When the mind is unobstructed, the result is truth.

-Anthony De Mello

The world is full of sorrow. The root of sorrow is attachment. The uprooting of sorrow means the uprooting, the dropping of attachments.

-Anthony De Mello

Buddha formulated it beautifully. He said, “Monks and scholars must accept my words not out of respect, but must analyze them, the way a goldsmith analyzes gold: by cutting, scraping, rubbing, melting.”

-Anthony De Mello

Anytime you find yourself on the side of the majority, it’s time to pause and reflect.

-Attributed to Mark Twain

The map is not the territory.

-Korzybski

A great many people think they are thinking when they are merely rearranging their prejudices.

-William James

Thank you for reading!  

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Sincerely,

Justin