# 10½ Lessons from Experience ## Metadata * Author: [Paul Marshall](https://www.amazon.comundefined) * ASIN: B085JXD811 * Reference: https://www.amazon.com/dp/B085JXD811 * [Kindle link](kindle://book?action=open&asin=B085JXD811) ## Highlights The opportunities to make money in business and in markets lie precisely in the points of disequilibrium. — location: [107](kindle://book?action=open&asin=B085JXD811&location=107) ^ref-10148 --- The most important corrective in equity markets is a properly functioning market for corporate control. Ultimately, if a company becomes too cheap and the value margin becomes too appetising, a corporate buyer will step in to take advantage – providing, of course, that the governance mechanisms allow it. — location: [170](kindle://book?action=open&asin=B085JXD811&location=170) ^ref-6964 --- Loyalty to tribe is much more powerful than loyalty to truth. — location: [188](kindle://book?action=open&asin=B085JXD811&location=188) ^ref-28175 --- Optimism bias and the gambler’s fallacy/mean reversion bias map in their respective ways on to the style factors which have become the staple of most risk models and risk premium businesses, namely momentum and value. — location: [252](kindle://book?action=open&asin=B085JXD811&location=252) ^ref-42348 --- Managers and analysts need to specifically seek out contrary opinions and hold up their own theses to scrutiny. They need to know what their own biases are. They need to be challenged from within and without. — location: [285](kindle://book?action=open&asin=B085JXD811&location=285) ^ref-26621 --- Machines typically do not fare well in a crisis. They are not good at responding to a new paradigm until the rules of the new paradigm are plugged into them by a human. During the Brexit referendum or around the Trump presidential election our discretionary traders fared much better than our systematic business as they were better suited to make the leap of imagination to understand the implications of what had just happened. — location: [600](kindle://book?action=open&asin=B085JXD811&location=600) ^ref-11047 --- [I]nsight, receptivity and risk management. It takes insight to formulate a battle plan or thesis, receptivity to change the battle plan as the facts and circumstances change and risk management to avoid large losses and/or commit your resources to the most vital parts of the battle – proper risk management is how you become an old soldier. — location: [632](kindle://book?action=open&asin=B085JXD811&location=632) ^ref-41478 --- The art of risk management is to anticipate or identify emergent risks so you are ahead of the wave before it breaks. — location: [672](kindle://book?action=open&asin=B085JXD811&location=672) ^ref-52679 --- The best hedge against unknown unknowns is structural prudence in the use of liquidity and leverage. Liquidity and leverage are the two grim reapers of the financial markets. They drive the forced selling which turns a crisis into a rout, whether that be through liquidity mismatches, margin calls or leverage withdrawals. And they bring down the curtain on poor investment managers. — location: [709](kindle://book?action=open&asin=B085JXD811&location=709) ^ref-5572 --- In the investment world, many of the worst financial accidents of the last 30 years can be traced back to this type of financial hubris. — location: [716](kindle://book?action=open&asin=B085JXD811&location=716) ^ref-42023 --- never be in a position where you lose your flexibility to exit. And that includes making allowances for a crisis environment. — location: [755](kindle://book?action=open&asin=B085JXD811&location=755) ^ref-23199 --- even a really good fund manager is wrong with at least 45 per cent of his or her trades and is bound to have periods – sometimes quite extended – of poor performance. It matters enormously how the fund manager reacts to these poor periods. The combination of client pressure and peer pressure can be intense. You need deep reserves of resilience. Confidence in your convictions. Confidence in yourself to come through the valley. a strong character will use the period of underperformance to lay the foundation for the next period of good performance, by re-examining every assumption, every thesis, discarding some and doubling down on others. a weak character will freeze, their decision-making impaired. Or they might take flight, mentally at least, and avoid the difficult thinking. — location: [806](kindle://book?action=open&asin=B085JXD811&location=806) ^ref-28059 --- You need to keep your feet on the ground at all times and always remember that you are never as good or as bad as you (or others) think you are. — location: [821](kindle://book?action=open&asin=B085JXD811&location=821) ^ref-1391 --- The auriga would continuously whisper in the general’s ear ‘memento mori’ – ‘remember you are mortal’. at the peak of his triumph, the general was reminded of his mortality. At Marshall Wace, we don’t have any aurigae, but we have developed a number of protections against the failings of character. The most important is the partnership structure. Distributed leadership spreads a culture of excellence and of challenge. It also makes each of us dispensable. — location: [828](kindle://book?action=open&asin=B085JXD811&location=828) ^ref-54156 --- When it comes to modelling the future of a pandemic, just like modelling the direction of markets, we need to rely as much as practically possible on empirically verifiable inputs and as little as possible on a priori assumptions. Above all we need to stay modest about the degrees of uncertainty. — location: [864](kindle://book?action=open&asin=B085JXD811&location=864) ^ref-64668 --- A key trading skill is to deploy your capital like Napoleon deployed his troops, applying your masse de manoeuvre at the right place and at the right moment in the battle when your conviction of success is highest. — location: [892](kindle://book?action=open&asin=B085JXD811&location=892) ^ref-2612 --- Whatever else you can say about 2020, it was not a great advertisement for the Efficient Market Hypothesis. — location: [956](kindle://book?action=open&asin=B085JXD811&location=956) ^ref-17371 ---