Investing — Art Or Science?

amit rana
3 min readMay 18, 2021

“Investing is more art than science.” Howard Marks

Investing is not a natural science but rather a social science. So, it’s never purely empirical; what you are trying to do is everything you possibly can to enhance your probabilities of being right more often than being wrong.

Investing is a social science it’s not an empirical process it’s not a natural science there’s no newton’s apple in this business it’s all about aligning as many probabilities as you can on your side having if you will a number of bets on things that you think you’re reasonable chance of understanding that you believe are sustainable kinds of businesses and then your outcomes will on average be favorable so it’s important to have a focus and have an objective anchor we sort pf describe it as be in the business of trying to know something that’s reasonably knowable.

“Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ. ” Warren Buffett

It ought to be universal meaning you can apply it across markets and in fact if it’s good it can be applied across markets because ultimately at the end of the day the forces that drive markets are very much the same, they’re not terribly different from market to market as you go around the world. We sometimes use the phrase that ought to be reflective rather than reflexive and if it’s reflective what it’s going to do is going to extend your time horizon and the longer you can extend your time horizon the less competitive the game becomes because most of the world is engaged over a very short time horizon lots of competition, lots of hollering, lots of deciding what they’re going to do about a security now what the outlook is for six months.

“Things like Gaussian curves and Value at Risk (VAR) were some of the dumbest ideas ever put forward.” Charlie Munger

“The elegance of the efficient market theory is at odds with the reality of how the financial markets operate.” Seth Klarman

You have to look at the business and try and get a sense that you reasonably understand it is it a appear to be a sustainable business over time.

It’s likely to be a somewhat bigger and more profitable business than it’s today so you look at what are the characteristics of it you want to own a business that you know many of them it’s quite there’s no genius to knowing what represents a good business you much prefer a business that sells 100 products in 150 countries around the world that in ideally it could be something that has a consumer attraction to it or if it’s an industrial business someone once described it what you want to own is the company that makes the valve that goes into the hundred, thousand rupee pump which goes into the billion rupee refinery well they’re not going to scrimp on the valve they want the very best valve they can get and if you’re the valve supplier you’ve got a good business because they’re going to buy your product and you’re actually going to be able to price your product aggressively because it’s a very low cost component to the end product and so you look for these businesses.

“We put great emphasis on a consistent investment process that demands enormous creativity, energetic sourcing, outside-the-box thinking, intellectual honesty, and vibrant debate.” Seth Klarman

PASCAL once said that most of man’s misery comes from his inability to sit still.

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amit rana

8 billion people + 1 planet = ? From Bits to Atoms: Robots, Space & Biology