Volatility does not measure risk.
Beta is a measure of volatility, it is wrong as a measure of risk.
Past volatility does not determine the risk of investing.
He gives the example of a farm that was welling for $2000 an acre. A few years later due to various economic factors the price dropped to $600 an acre. According to Beta a purchase of the property at $600 is riskier than buying that same property years earlier at $2000.
Buffett state that risk comes from the types of business you’re in, some businesses are riskier than others. Me: The price the market values a business has no bearing on the riskiness of the business itself, only the share price.
Risk comes from not understanding the business you’re buying into, not knowing what you’re doing.
Charlie Munger states that 50% of the stuff tought in finance schools is twaddle.
You’re not right because 1000 people agree with you, or disagree with you. You are right because your facts are right.
Charlie Munger inverts. When Munger was a weather forcaster during the war, he would forcast weather for pilots. He inverted the question, he asked ‘how can I kill these pilots?’ He thought it through that way so he could avoid it. The answer was ‘I’ll get him flying into ice, or I’ll get him to run out of fuel’.