Moats Versus Boats - Part 3

In the final part, Chetan Parikh talks about reducing errors and increasing insights

What is deconstruction?
The late investing legend Chandrakantbhai Sampat, who I remember and whose presence I miss, used to always talk about philosopher Jacques Derrida’s deconstruction theory. I’m going to try to explain this in absolutely simple language. If you have ever listened to someone explain a book, a movie or even a magazine article and you wanted to interrupt and say that you had seen something that contradicts what he or she were saying, then you have practiced deconstruction. I’m using the term here as a philosopher and not as a systems engineer, who would define deconstruction as breaking down a larger system into its modules. The philosophical interpretation is that the world is understood in terms of binary oppositions, one element of which is generally suppressed. Deconstruction is central to good investing.

What is Michael Steinhardt’s variant perception but holding a strong viewpoint that is substantially different from the market or consensus viewpoint? Or, take second-level thinking, which Howard Marks writes is thinking that is different and better. Here is how Marks describes it: “The first-level thinker simply looks for the highest-quality company, the best product, the fastest earnings growth or the lowest P/E ratio. He’s ignorant of the very existence of a second level at which to think, and of the need to pursue it.

The second-level thinker goes through a much more complex process when thinking about buying an asset. Is it good? Do others think it’s as good as I think it is? Is it really as good as I think it is? Is it as good as others think it is? Is it as good as others think others think it is? How will it change? How do others think it will change? How is it priced, given its current condition; how do I think its condition will change; h


You don’t want to be left behind. Do you?

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