Absolutely critical, I like to say I have limited brain energy don’t expend it waste fully. Re companies I would like to identify 2-3 main issues as key drivers and monitor others . You have to get that identification correct, when you do it works very well. Good luck all
Been thinking a lot about this in terms of return on invested time (ROIT). My main conclusions was to make sure priorities are set and time is used in a focused way. Thanks for these insights!
"modelling what matters" is an important point, even better if the metric is not directly disclosed by co, and sometimes, might not be a metric, could be qualitative ones, but having them on file and keeping track of them is an important part of continuous evaluation.
This post resonated with me. I used to go into many rabbit holes when I started researching the Co. I tried to forecast the revenues, margins, etc. It was crazy because I am a value investor who buys stocks when news, business performance, and outlook is very negative and the stock has fallen 50-70%. When I realized that all I needed to know was... will this business survive this downturn? Is this a temporary or structural problem? Is it industry-wide or company-specific? And is the valuation rock bottom?
My focus turned more to the valuation, balance sheet, and cashflows and away from the income statement. Usage for income statement for me is ....till GPM it informs me about the business and beyond GPM it informs me about the management and their decisions/priorities.
For my kind of stocks, they go up when they just stop bleeding. If sales and margins go up then I get multi-bagger in the Indian market. I stopped forecasting. I asked different questions and tracked different metrics. It left me a lot of time for my other interests like motorcycle riding and photography.
I don't agree with the idea that learning new things crowds out what we learned before—in fact, integrating new information makes the whole network stronger, easier to work with, and so on.
But your broader point stands, and I love the ROMC label you came up with, because a lot of what we focus on, or reportedly take in, is a waste of time, of resources, of energy.
One thing I've found lowers my ROMC immensely in addition to what you've said is simply to invest with management teams that I respect because they know what they're doing (and have proven so).
I wish I had all those hours back, mostly spent when I was younger, thinking about what this management team should be doing or should not be doing!
Nice mental model. Worthy of storing in my attic. Can’t help but wonder what Munger’s analogue mental model would be.”Ignore the macro. Focus on the micro.” maybe. I’m also seeing shades of the Pareto principle in focussing on the 2 or 3 factors that matter.
Absolutely critical, I like to say I have limited brain energy don’t expend it waste fully. Re companies I would like to identify 2-3 main issues as key drivers and monitor others . You have to get that identification correct, when you do it works very well. Good luck all
Been thinking a lot about this in terms of return on invested time (ROIT). My main conclusions was to make sure priorities are set and time is used in a focused way. Thanks for these insights!
"modelling what matters" is an important point, even better if the metric is not directly disclosed by co, and sometimes, might not be a metric, could be qualitative ones, but having them on file and keeping track of them is an important part of continuous evaluation.
excellent writeup.
This post resonated with me. I used to go into many rabbit holes when I started researching the Co. I tried to forecast the revenues, margins, etc. It was crazy because I am a value investor who buys stocks when news, business performance, and outlook is very negative and the stock has fallen 50-70%. When I realized that all I needed to know was... will this business survive this downturn? Is this a temporary or structural problem? Is it industry-wide or company-specific? And is the valuation rock bottom?
My focus turned more to the valuation, balance sheet, and cashflows and away from the income statement. Usage for income statement for me is ....till GPM it informs me about the business and beyond GPM it informs me about the management and their decisions/priorities.
For my kind of stocks, they go up when they just stop bleeding. If sales and margins go up then I get multi-bagger in the Indian market. I stopped forecasting. I asked different questions and tracked different metrics. It left me a lot of time for my other interests like motorcycle riding and photography.
I don't agree with the idea that learning new things crowds out what we learned before—in fact, integrating new information makes the whole network stronger, easier to work with, and so on.
But your broader point stands, and I love the ROMC label you came up with, because a lot of what we focus on, or reportedly take in, is a waste of time, of resources, of energy.
One thing I've found lowers my ROMC immensely in addition to what you've said is simply to invest with management teams that I respect because they know what they're doing (and have proven so).
I wish I had all those hours back, mostly spent when I was younger, thinking about what this management team should be doing or should not be doing!
Intresting, thanks
Nice mental model. Worthy of storing in my attic. Can’t help but wonder what Munger’s analogue mental model would be.”Ignore the macro. Focus on the micro.” maybe. I’m also seeing shades of the Pareto principle in focussing on the 2 or 3 factors that matter.
I too sometimes find myself digging deeper for the sake of it. A written process or a checklist system might help us in this case.