A few rules for life: trust no one

Topic: Never act (blindly) on recommendations. always do the math yourself, always make sure you understand the level of certainty of the premises and facts, the solidity of the logic, and the probability of the conclusion.

Discussion: A recommendation, be it regarding an investment or a life altering decision, should only be a starting point and inspiration for your own investigation; and preferably one of several such inputs

Rule of thumb: trust no one


As an investor and portfolio manager I received as many recommendations a day I had time to listen to. They proved “right” within a reasonable time horizon about half of the time, i.e., as recommendations per se they were useless. No matter, I still got tremendous value from my analyst meetings.

I never cared about the recommendations as such; I only listened to the facts that had been painstakingly collected and documented. If anything, I made it a point to pay extra attention to the points brought forward by analysts with a different conclusion than mine. I then constructed a bigger picture of all the various data sources I had access to, some conflicting, some supporting. Not least, I gauged what the weighted average of important analysts views were.

Owing to my particular vantage point as a billion dollar hedge fund manager with access to all the largest Wall Street firms, I thus had an informed view of both all the facts, and what all other players thought were the facts and what their recommendations were. Consequently, I could slightly more reliably than most other investors take outperforming positions. Despite my privileged and advantageous position, I still had to build my own models, draw my own conclusions from a wide array of data, and not least make assessments of the relevance and reliability of the information I received.


“Try pouring a ton of steel without rigid principles”


You wouldn’t put your hand through molten metal without understanding the principles, would you? Or pouring a ton of steel without all the facts. So, why would you invest your own or clients’ money without understanding the risks, the facts and the logic involved?

Investing is hard. Anybody who claims it’s not is either stupid or selling something. If it seems to good to be true, it is, so make sure you know what the relevant facts are, and how they interact causally for the required conclusion.


Please note that this principle is valid in all aspects of life and decision making — trust no one to make your decisions for you.

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2 Comments

  1. Cant agree more. My learning is trust no recommendation given to you and dont trust yourself to be able to single out good recommendations. Most people ask for tips when they understand that you invest full time, but people always get disappointed when the answer is to not trust any single source. I keep a printed list in front of me with examples of highly qualified investors and their big mistakes – just as a reminder of the trust no one rule. Recent examples are strong track record holders as Bure with their investment in Lauritz, or DidnerGerge with their bet on Deutsche Bank and many others. I also follow my dear friends experiences – contrary to me, he believes (or believed) fully in listening to the smartest people that he know – and they are surely very smart people IQ wise. Last time I talked to him, he just said a bit laconic that he has stopped investing in stocks.

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