Edward Quince’s Wisdom Bites: The Via Negativa of Success

 We are obsessed with the "secret to success." We buy books on "How to Be Rich" and "The Habits of Billionaires." We look for the magic formula, the silver bullet, the "one thing" we need to do.

But what if we are looking through the wrong end of the telescope? What if we can't know what success is, but we can know exactly what it is not?

The Wisdom Bite:

"we are unable to apprehend by knowing what it is. Yet we are able to have some knowledge of it by knowing what it is not." — Thomas Aquinas

“A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.” — Charlie Munger

Inversion and the Avoidance of Ruin

This is the principle of Inversion. Instead of trying to be brilliant, try to be "consistently not stupid".

In finance, it is hard to know exactly which stock will go up 10x. It is much easier to know what causes ruin: excessive leverage, chasing fads, and panicking at the bottom. If you simply avoid those three things, you are ahead of 90% of investors.

As we discussed regarding Hyman Minsky, "stability breeds instability". We get comfortable, we get complacent, and we stop avoiding the bad habits. We drift into the "idiot" phase of the cycle.

Knowing What You Are Not

This applies to your identity as an investor. You might not know if you are a "value investor" or a "growth investor." But you should know what you are not.

"I am not a speculator." "I am not a day trader." "I am not a gambler."

By defining the boundaries of what you will not do, you create a safe harbor for what you should do. You create a Margin of Safety not just in your valuation, but in your behavior.

The Financial Takeaway

Don't strive for the perfect portfolio; strive for the portfolio that won't get you killed. Don't try to time the market perfectly; just ensure you never have to sell at the bottom.

Success is often just the result of surviving when everyone else has been eliminated by their own mistakes. As Munger said, "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent".