“Discussing Short-Term Results is Hazardous to Your Financial Health”

“What gets measured, gets managed.” Peter Drucker

Investment managers abound who tout the benefits of long-term investing and being patient.  The most frequent place to find such statements are monthly or quarterly letters detailing a fund’s performance over the past month/quarter. Remember: what gets measured, gets managed.  Cognitive dissonance is at its best if investors believe they can track their everyday, weekly or even quarterly performance without managing to those benchmarks.  Mutual funds are stuck with a lot of regulations regarding such metrics, but private investment partnerships are free to state openly and from the beginning that they will not report results on a quarterly basis.  Annual or biennial seems more appropriate.  The SEC should require a new warning label:

“Discussing Short-Term Results is Hazardous to Your Financial Health”

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Returns for Great vs. Bad Businesses

Munger and The Cattle Rancher

Munger’s ability to find great businesses is directly related to his ability to consistently discard bad businesses. He is excellent at inverting, and discarding the bad businesses as quickly as possible.

The Abominable No-Man and Bad Management

Some investors think a business is good, but know that management is bad.  These investors justify the investment based on the idea that the great price of the business is worth the bad management. This is akin to marrying a supermodel who is going to yell at you all day.  Whatever pleasure your eyes may derive from the marriage, your ears will endure a greater amount of pain in the long run. The pocketbooks of those partnering with bad management are likely to see a similar 50%+ decline in their net worth.


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