Source: Smart investors.

Recently, Oaktree Capital founder Howard Marks had a conversation with Morgan Housel.

Morgan Housel is the author of the best-selling books "The Psychology of Money" and "Same As Ever", as well as a partner at Collaborative Fund.

Howard's memo "The Impact of Debt", published on May 8th, was inspired by one of Morgan's blog posts titled "How I Think About Debt".

This conversation revolves around the background of the memorandum and focuses on the topics of patient investment and leverage. These are seemingly basic concepts in investing, but often overlooked by many.

Interestingly, in our past conversations, we often saw Howard as the main contributor of ideas, but this time Morgan added many supplementary perspectives.

He is the protagonist.

He is a very independent thinker and investor. Especially after reading many of his blog series, you will understand why Howard said he often gets inspiration from Morgan.

In the conversation, Morgan shared a story about endurance, starring Rick Green, one of the "three group" in the investment world in the 1960s who conquered the investment world with Buffett and Munger. But later he withdrew from this golden group.

In Buffett's words, Green is a very smart person, but too eager to get rich.

Morgan told the story and said, "I don't think it's an exaggeration to say that Warren and Charlie have deliberately exerted 70% of their potential throughout their lives. They could have borrowed and borrowed money to get higher returns. But they willingly act in a way below their potential because they value long-term endurance."

Morgan himself adheres to this principle of long-term endurance to formulate his investment strategy.

He also mentioned how important it is to take history as a lesson and observe "what people's psychology and behavior are like in these events" because history won't repeat itself, but human behavior tends to repeat.

I also like the point Morgan made, "People often forget the most important basic knowledge. Maybe it's similar to medicine, where many people are studying mRNA and the most advanced topics, but the most important thing in medicine is to eat vegetables, not smoke, and get 8 hours of sleep."

So this conversation may be about some very basic cognition, but it is definitely very, very beneficial for achieving long-term good investment results and investment experience.

It will be very useful for professional investors and ordinary investors.

The more debt you have, the more limited the range of bad consequences you can bear.

Host: Morgan, let's start with you. First, we want everyone to understand what kind of institution Collaborative Fund is, and why you decided to write this blog post about debt?

Morgan: Collaborative Fund is a private investment company that covers everything from venture capital to public market investments. I have been publishing my blog posts on its official website.

I have been a financial writer for 17 years. The blog posts I publish here are quite different from the books I have published.

(In April) The starting point of this article I wrote was very simple, using almost elementary level financial knowledge, and it was more about thinking about debt from a philosophical perspective.

Compared to stocks, people always treat debt as if it were a mathematical investment, as long as you calculate it accurately in a spreadsheet.

But I think considering only the cost of capital and interest rates is not enough. In my opinion, the more debt you have, the smaller the range of volatility you can afford in life.

With all investments, you have to pay the price for two things. One is mispricing, and the other is enduring volatility.

When you see debt as the range of volatility you can bear, its true meaning goes up a notch.

The idea described by Howard Morgan just hits the essence, but it is often forgotten, especially when things always show cyclical patterns.

You always hear about people getting into financial trouble, hedge funds collapsing, and so on... Whatever the reason, these things are closely related to debt. Basically, if you don't have outstanding debt, you won't be subject to redemption suspension, and you won't go bankrupt.

Of course, this doesn't mean that if you have $1 of debt, you will be in a precarious situation.

In my memo "The Effects of Debt", I mentioned the casino owner in Las Vegas who came over and said, "Remember, the more you bet, the more you win when you win."

This is my favorite saying because it is irrefutable. But it overlooks one fact: the more you bet on losing cards, the more you will lose.

If you bet with borrowed money, you may be forced into bankruptcy. So, this is a very important concept.

Morgan's point of view is that the more debt you have, the more limited the range of bad consequences you can bear.

This is really important, and when I read it, I remembered this point.

It reminds me of a memo I wrote at the end of 2008, during the global financial crisis following the Lehman crisis, called "Volatility + Leverage = Dynamite".

In short, the larger the leverage you use, the more trouble you will have; the more unstable the assets purchased with leveraged funds, the more trouble you will have.

High leverage combined with volatile assets can sometimes lead to significant losses, even occasionally fatal.

These are the two main ideas that resonate with me.

The disappearance of Galin, one of the "Omaha Three", is inspiring to us.

Almost every investor says, "I am a long-term investor", or at least they aspire to be. But in practice, it means you have to be willing to give up short-term returns, which is much more difficult to do.

It's easy to say, "I am a long-term investor", but it's much harder to say, "I will invest below my potential in the next 1 or 5 years".

I think this is the reason why many people stumble.

You have to realize that: I can make more money using leverage in the next 1 or 5 years, but it's hard to sustain. But if I can stick with it for the next 30 years, the returns from compounding will be extraordinary.

PIMCO once followed a saying that I really like, called "strategic mediocrity." It means that in any given year, they rarely rank in the top half among their peers. But over a span of 10 years, they always manage to enter the top 10%, or even the top 5%. I think this is very important.

In fact, there is a super attractive investment story that has been overlooked by many people. The protagonist of this story is Rick Guerin, a very lovely gentleman who passed away not long ago.

If you go back to Omaha in the 1960s, you will find that three investors were doing all the investments together. They were Warren Buffett, Charlie Munger, and Rick Guerin. We are all familiar with Warren and Charlie, the "dynamic duo," but back then they were actually a trio.

A few years ago, hedge fund manager Mohnish Pabrai had dinner with Buffett. Mohnish asked, "What happened to Rick Guerin? He was a legend in the early history of Berkshire Hathaway, but now he seems to have disappeared. What's going on?"

Warren laid it all out. Back in the day, Warren, Charlie, and Rick made the same investments, but Rick did something different. He invested heavily in margin. In the bear market of 1974, he got hit hard.

(Note: Guerin was Munger's longtime friend who first discovered the investment opportunity in Blue Chip Stamps. He approached Munger who said, "Let me introduce you to my friend who knows a lot about float." That friend was Buffett.)

The trio successfully controlled Blue Chip Stamps Company, with Buffett as the largest shareholder, Munger as the second largest shareholder, and Gellen as the third. Later, their investment projects also included Hershey's confectioners, Wesco Financial, and Buffalo Evening News.

After suffering catastrophic losses in the 1973-74 market crash, Gellen faced margin calls. As a result, he was forced to sell stocks that later became enormously valuable to Buffett. These stocks were Berkshire Hathaway, sold at $40 per share, which considering Berkshire's latest stock price, was a tremendous loss.

There's a quote from Warren that impressed me deeply, it's really captivating. He said, 'Rick is just as smart as us, but he's a bit too eager.'

I don't think it's an exaggeration to say that Warren and Charlie have deliberately played at only 70% of their full potential throughout their lives. They could have borrowed money to obtain higher returns. But they willingly acted in a way that was below their own potential because they valued long-lasting endurance.

Buffett has stuck to his principles for 80 years. It can be said that this is the sole reason for his continuous wealth accumulation. Compared to the practice of willingly giving up one's full potential in the short term, it's too easy to just say 'I'm in it for the long run.'

Howard, including the story of Rick Gellen, I've never heard you mention it before. But it's true that every investor must make choices between optimization and maximization.

Optimization means striving to do well, but also making an effort to set your (buy) price so that you can stick with it in the long run, as Morgan said.

Maximization means doing everything you can to achieve the maximum profit in the shortest time possible.

This reminds me of one of my favorite three sayings, which I think summarizes 90% of the knowledge in the financial world. "Never forget that a creek with an average depth of five feet can drown a person who is six feet tall."

The concept of average survival rate is meaningless, you have to survive every day. This means that you must endure on bad days.

If you set your goal as maximizing, every step you take is to maximize. Going beyond the optimal point will reduce your survival probability.

When you borrow to increase your position for the purpose of gaining bigger profits, it's like putting stones in your backpack and then trying to cross a creek.

The more stones in the backpack, the less likely it is to cross the creek when you encounter a low point.

Everyone invests for a reason, believing they will win. No one says, "I want to have a diversified investment portfolio, with some winners and some losers," when buying investments. Every investment is made with the belief of being a winner, but at the same time, not everyone can win.

You must be prepared for unfavorable situations. This means optimizing and taking a reasonable approach to positive capital structure and total investment, rather than maximizing.

Morgan also has many people in investment history saying, no one could predict that such a thing would happen, who knew that such a thing would happen? However, without exception, such events occur regularly every 10 years in the past 500 years.

So, for example, I hope to continue investing in the next 30 to 50 years. During this period, what are the chances of experiencing a 50% bear market, a 10% unemployment rate, and an inflation rate of over 10%? What are the chances of encountering these situations?

100%. The chances of experiencing these things can be said to be 100%.

Therefore, when some people encounter investment portfolios that cannot withstand similar situations, basically what they mean is, 'Well, I will liquidate this investment portfolio before this situation occurs.' The probability of this situation occurring is zero.

That's why investing below your potential (not pushing yourself to the limit) is actually the way to maximize long-term wealth.

Howard, one of the books I enjoyed reading in the mid-1990s was 'A Short History of Financial Euphoria' written by John Kenneth Galbraith.

In the book, he says that one of the standout features in the investment field is short memory. After people experience a period of prosperity, everyone predicts that it will last forever.

The extreme negative events described by Morgan have become part of history and will soon be forgotten. And anyone who has a memory of these negative events and keeps talking about them will be seen as disconnected from modern times, unable to appreciate the wonders of new industries and financial mechanisms, whatever they may be.

This point is very important.

People think they will learn from their lessons, but in reality, lessons are always forgotten.

Moderator: The topic you two discuss the most here is investor psychology, as investors do not understand the magnitude of the risks they actually bear, which is indeed one of the biggest risks.

Howard: The most dangerous thing in the world is believing there is no risk. Because when people believe the environment is safe, they will increase the risk of what they do. Therefore, true risk is self-reinforcing.

After a prosperous period, people always tend to forget the possibility of negative outcomes, while we know what the outcomes are.

This is a significant factor that contributes to the cyclical nature of our world: the forgetting of past lessons.

It's simple. When greed and caution clash, greed wins. Therefore, you must ensure that you maintain some caution in a mature and adult way to balance the desire for greed.

Morgan: I also want to say that from a macro perspective, investment risks come in two forms.

One, which you can call macro risks, means what the market will be like, what the economy will be like, and what does it mean for me?

Another type is psychological risk, that is, how should I deal with it?

Both of these risks are easy to forget and easy to underestimate.

For macro risks, I think we often review the Great Depression and inflation in the 1970s and then say, 'Well, that happened back then, but it won't happen again. We have learned our lesson.'

In terms of specific events, this may be true. What is easily overlooked is that we may not experience the exact same Great Depression as in the 1930s, but we may experience other things that have equally terrible consequences.

From certain indicators, the first few months of the COVID-19 pandemic were worse than the beginning of the Great Depression. We certainly won't encounter the same situation, the same war, but there are still other underestimated new wars happening today.

As for psychological risks, people often believe that they have learned from their past mistakes. So some investors may say, 'I panicked in October 2008, but I have learned my lesson and I won't make the same mistake again.'

Most of the evidence from behavioral finance suggests that you will make the same mistake again. It is a deeply rooted part of your character, and your brain chemistry reaction caused your panic at that time, and you are likely to panic again in the future.

The solution to this problem is to accept that this is your personality and allocate your assets based on your personality.

What really matters here is when the economy and market conditions are booming, if you ask someone, for example, if the market fell 30%, what would you think?

When everything is going well, people imagine a world where everything is the same as now except for a 30% drop in stock prices. In that world, people would think, "Oh, that would be nice. A big drop is an opportunity, and I like it."

But what you overlook is that the market may fall 30% due to terrorist attacks, wars, economic recessions, or pandemics.

In this case, if I say, "If the market falls 30% because of a virus that causes a global economic collapse and you and your family may die as a result, how would you feel?"

In this case, people would say, "I don't know. In this situation, I might panic and flee in a hurry."

Therefore, it is very difficult to understand your true psychological reaction when you are truly in the trenches and in a critical situation.

What is important is to recognize that these cycles are inevitable.

Host: Howard, clearly, this relates to some of the issues you have been talking about today, namely the attitude cycle associated with leverage. So can you clarify what you mean, which is also something you mentioned in this memo?

Howard, as Morgan said, nothing is more unstable than mindset.

Reality, or what we call fundamentals in the investment field, does not change much. The economy grows at 2% to 3% annually, with good years seeing 4% growth and bad years at 1%. Obviously, the changes are not so dramatic.

The fluctuations in company profits are more because of the leverage they have, both operational and financial, making the profit fluctuations much larger than the economy. However, when reflected in stock prices, the fluctuations are much greater. If you look at a chart comparing stock prices to company earnings, what you see is the drastic fluctuations of psychology relative to reality.

As Morgan and I described, when things are going well, people feel empowered, inspired, and believe they will cautiously leverage the future potential through expanding their investment portfolio. They will have a very positive attitude towards the future, leverage, and buying risky assets.

At the same time, financial institutions also feel good, so they are willing to lend more to specific investors for specific purposes.

As a result, leverage and investment portfolios both increase.

As the good times pass, the leverage amplifies profits and investors do more. With rising stock prices, investors use more borrowed money to buy more stocks, thereby increasing the risk of the investment portfolio.

Eventually, the situation reverses, with poor company performance, market decline, and falling stock prices. Now, investors begin to suffer greater losses. They may be margin called or liquidate their positions themselves, using less and less leverage, selling stocks at lower prices because they cannot handle the pressure. They overestimated their risk tolerance, leading to a more stringent attitude towards leverage.

At the same time, banks became unwilling to provide leverage and, in fact, tried to recover some of the leverage they had previously released.

Therefore, during the upswing, everything goes smoothly and the risks people take become greater and greater; but when the economy hits rock bottom, people's emotions sink, and things can become very bad. Investment portfolios often have lower leverage and hold fewer assets, even though they have become much cheaper.

Therefore, it is a highly cyclical process, but it follows the patterns of most other things, especially in the financial field, particularly when it comes to human nature.

Morgan, I think it's important to recognize that these cycles are inevitable, in addition to what Howard just said.

Every time there is a boom-bust cycle, it does not mean that people have lost their minds. It does not mean that we are all crazy. It does not even necessarily mean that regulators have made mistakes. They are completely inevitable.

There was a great economist named Hyman Minsky who proposed a concept called the "financial instability hypothesis." In simple terms, when there is no economic recession, people become optimistic. When they are optimistic, they go into debt. When they go into debt, the economy becomes fragile. When the economy is fragile, a recession occurs.

The underlying meaning of this statement is that when the economy is not in recession, it is actually sowing the seeds for the next recession. That's why we always have recessions.

The same applies to the stock market, to any asset class, the lack of volatility sows the seeds for future volatility.

In the stock market, if there is no volatility, people will rationalize and raise valuations. When valuations rise, they become fragile. Once they become fragile, there will be fluctuations. This is completely unavoidable.

I think this is important because it is why people underestimate volatility.

I think at least intuitively, people would think "the market is crazy or politicians messed up, so there will be an economic recession." No, it doesn't require people messing up. You just need to achieve natural fluctuations across all asset classes based on Hyman Minsky's theory 50 years ago. That's why these things are completely inevitable.

It can be said that they don't need an economic crash. It's just the natural law of the market.

Howard: People may think that cycles are composed of a series of events that usually develop in a certain order. If you only consider the cycle without considering the causal relationship, you are making a big mistake.

I think the most typical example is the boom of mortgage loans, especially subprime mortgage loans, that led to the global financial crisis. In short, people look back at history and think that there has never been a nationwide wave of mortgage defaults, but all the practices led to the inevitable mortgage default crisis.

It's as simple as that.

Morgan: Here's an interesting thing, it's a great thing for the whole world, that our current economic recession is much less severe than in the past.

If you look back at the economic history of the late 19th and early 20th centuries, we would have a recession every 18 months. The recessions were often shallow, but they occurred every 18 months, making the situation very unstable.

One explanation for why this situation (the lengthening of the recession cycle) occurs is that central bank leaders have done a better job in managing the business cycle, although some people disagree with this explanation.

Now, it is not uncommon to have an interval of five or ten years between two economic recessions, which is a good thing from a societal perspective.

However, this also makes it easy for investors to forget what happened. Some investors have been in the market for 10 years but have never experienced a major downturn. This makes it difficult for them to accept.

Many investors truly do not understand the volatility of the assets they invest in or the economy because the interval between these major events can be quite long.

History does not repeat itself, but human behavior tends to repeat.

Moderator: Many investors today have never experienced a period of sustained rising interest rates. They have become accustomed to cheap capital, but now we may be transitioning to this new environment. What do you think the impact of entering this new era will be?

Howard: That's right. You have to have worked in the 1970s to see that interest rates were either falling or extremely low. That was 45 years ago, and most people haven't worked for 45 years before retiring, so very few people who are currently working remember the 1970s.

In fact, it was difficult to find a job in our industry in the 1970s because the situation at that time was very bad.

However, from 1980 to 2020, the impact of declining interest rates was gradual and slow, but it was everywhere. It made assets more valuable, reduced the book cost of leverage positions, stimulated the economy, made companies easier to make money, and easier to avoid bankruptcy and default... All of these made the environment more relaxed.

However, this is not a normal environment, it is a very beneficial benign environment. If people assume that the environment will always be as benign as the average level during this period when they combine investment portfolios and choose leverage levels, they are likely to encounter the negative conditions described by Morgan.

The success rate of leveraged investment strategies will be greatly discounted. I think this is self-evident.

Morgan, I would also like to add two points. First, I joked that the three most important investment skills are patience, diversification, and aligning your investment peak with the perfect match of 40 years of declining interest rates. These are the three things you need to do well in the long run.

I would like to add one more point, which I think is very important, and that is that using history as a perfect guide for the future is very dangerous.

Overall, history is a study of surprises, and ironically, people study surprises while trying to get a guide for future actions, and many people will be greatly disappointed.

People who have not experienced a rising interest rate environment would usually say, "So when was the last time this happened? It was in the 1970s, what happened then?"

They turn around and say, 'Oh, what's performing well? Gold is performing well, small cap stocks are performing well,' no matter what it is, and then they say, 'Great, we should do that now.'

The world doesn't work that way. Things will adapt to change. Today's economy is completely different from the past. Society, investment concepts, and so on are all very different.

So I think many people, when they look back and ask, 'What method worked last time,' and then conduct retrospective testing from there, encounter problems.

The way this world adapts doesn't allow you to do that.

My solution is to review history and observe 'how people's psychological behavior was in these events.' This is often repeatable, behavior is often repeatable, even though specific investment concepts are largely non-repeatable.

Howard, this is what Mark Twain said (if he really said it), 'History doesn't repeat itself, but it rhymes.'

In other words, historical events, historical facts, investments benefiting from interest rate declines, these things don't repeat, but the themes of history, and of course, human behavior as Morgan said, will produce rhythms between cycles.

Therefore, if you are a strict history student and believe that history can be linearly extrapolated, you might go and buy railroads, which were huge beneficiaries in the 1860s and 1870s.

But what you should really ask is, "What will the environment be like in the next few years? How will investors deal with this environment in the future? What kind of new investments should I be looking for?"

Certainly not the investments that were successful 150 years ago.

Morgan: My favorite quote from Voltaire is, "History never repeats itself, but mankind always does." I think this is the best summary of investment history. Events never repeat, but human behavior always does.

Host: If everything is changing, how can anyone use anything from history to figure out how to move forward?

Morgan: At a high level, I think we can (through historical study) say, I don't know what will cause the next economic downturn, or when it will happen, but I'm very clear on how people will respond, because that never changes.

But the financial industry always focuses most of its attention on predicting when these things will happen, while the relevant records are very poor.

A better approach is to understand what people will do and what will happen when these things occur, which is something we can learn from history.

Keep in mind, these behaviors have been occurring for centuries. Looking back at how people dealt with bear markets and economic downturns in the 19th century, it's no different from today.

I have talked about this example many times, but there is an impressive investment book called "The Great Depression: A Diary", written by a bankrupt lawyer named Benjamin Roth in Ohio during the Great Depression of the 1930s.

If you read this diary, you will immediately think that what he described in 1932 and 1933 is exactly what happened in 2008, how people responded, and their behavior is no different.

Benjamin Roth himself also wrote in the diary: "What was shocking about 1932 is that it seemed to be exactly the same as what people experienced in 1894. So, these things continue to repeat, even though the triggers for these events are very different."

Truly understanding risk, and smartly taking on risk to gain profits.

Host: We have been talking about people taking on too much risk, shouldering too much debt, underestimating risk, but I am also thinking about the other side, the risk of not taking on enough risk. I would like you both to discuss this issue.

Howard: The title of my previous memo was "The Inevitability of Risk", and I believe that avoiding risk often leads to avoiding returns.

Risk is an essential element for driving returns. As an investor, you can make money and validate your decisions by taking on risk.

As I said, this is risk management, not risk avoidance.

Most people understand this rationally, but human nature makes it difficult for many people to accept the view that being willing to endure some losses is a fundamental element of investment success.

This sounds like a contradiction. How can losses be a part of success?

This doesn't mean that we desire losses, but rather that we must understand that in an investment plan aimed at success, the possibility of enduring losses is an essential part.

So when some of your investments are unsuccessful, there's no need to be alarmed. It doesn't mean you're doing poorly. The real question is, what is the ratio of winners to losers?

Morgan, I would also like to add that this is a general definition of risk.

If you live in Florida, encountering thunderstorms is not a risk, it's inevitable. It will happen, without a doubt.

If you are an investor, then facing$S&P 500 Index (.SPX.US)$A 10% or 20% decline is not a risk, but rather an inevitable event. It will happen, you just don't know when or how long it will last.

In your personal life, being involved in a fatal car accident is a risk because it doesn't happen to 99.9% of people. It is indeed a risk.

But if you are an investor, and you define risk as something that will definitely happen to you, then your definition of risk is incorrect. What you are facing is just normal volatility.

As I mentioned before, in investing, there are two things that you have to pay for: mispricing and enduring volatility.

For the majority of investors, whether professional or otherwise, in the long run, what you need to endure is volatility.

Howard, one of my favorite stories to tell is when I started managing high yield bonds for Citibank in 1978, and around 1981 I was interviewed for a TV program. The interviewer asked, "How can you invest in high yield bonds when you know some of them will default?"

I don't know why, but a perfect answer suddenly popped into my head. I said, "Even the most conservative life insurance companies in the USA know that everyone will die, so how do they guarantee that everyone won't die?"

This brings us back to the topic Morgan just mentioned, are you taking on the risks that you are aware of or the risks that you are unaware of?

Life insurance companies know that everyone will die. They can analyze the health condition of each person and diversify their investment portfolios. Most importantly, they charge insurance premiums assuming that death will occur and still make a profit. This is exactly what I see in high yield bond investment.

We take credit risk, diversify investment portfolios, and research borrowers, only investing when we believe that the additional return (called the yield spread) is sufficient to compensate for the risk we take.

I call this approach 'wisely taking risks to make a profit.' This is what you must do.

If my job is to avoid risks, if my job is to have no risks in my investment portfolio, then that would be extremely foolish!

Emphasizing the most important fundamental knowledge in investments

Host: Returning to the topic we started with today, it's all about trying to position yourself to be able to withstand inevitable risks. This brings us back to the view of optimizing debt levels, rather than maximizing debt levels.

Morgan: I think everyone's situation is different and needs to be analyzed based on the specific circumstances.

I've talked about my own personal financial situation. The debt level in my family's financial situation is zero, with no liabilities on the house and other things.

For me, there are two reasons for this. One may be psychological. I have two young children and being debt-free makes me feel good and able to maintain a stable standard of living. The other reason I believe is strategic. I just want to maximize endurance because I know that even if I can be an average investor for a period of time above average, I will eventually get extraordinary returns.

It depends on how you choose. If you want to maintain the best return for the longest time, then this is what you want.

I recently heard a story and I want to share it, if I got some details wrong, please don't sue me.

That was in 2002, when the dot-com bubble burst, and there were many bonds being traded at huge discounts.$Amazon (AMZN.US)$There were a few types of bonds. Let's say Amazon had a 10-year bond with a yield of 12%, and another 5-year bond with a yield of 15% (the specific numbers are made up by me).

In theory, this situation shouldn't exist, you shouldn't go for long-term bonds with lower yields, especially since the longer the maturity, the higher the probability of the company going bankrupt.

But there was a large investor who bought longer-term bonds at a lower interest rate, and that investor was Warren Buffett. When asked why, he said because earning 12% over 10 years is much better than earning 15% over two years.

So, when you take the time to look at it from a longer perspective, many investment issues that trouble everyone in the short term become clear.

Host: Do you have any additional thoughts before I conclude today's discussion?

Morgan: I'll interject. Howard mentioned this right at the beginning of the conversation, and so do I. The topics we're discussing today are like the ABC of financial knowledge in kindergarten, but they're also the easiest to forget.

In the financial industry, often times you can make a lot of money, which attracts people who are highly intelligent, have PhDs, and strong analytical abilities. However, these people are often the most likely to forget the most important fundamental knowledge.

It may be similar to medicine, where many people are researching mRNA and cutting-edge topics, but the most important thing in medicine is to eat vegetables, not smoke, and get 8 hours of sleep.

And those highly intelligent people are the most likely to overlook these things.

In the field of investment, I believe Howard has been a master of this for decades: the most successful people are those who are smart enough to do things right and humble enough to pay attention to the basic elements that many people overlook.

Howard: Churchill said he was a humble man, and there were many aspects in which he needed humility.

In fact, why is this a complex process? Because when things are going well, people easily forget the lessons we are talking about today. In difficult times, people tend to be complacent and think that good times will not come again.

It's all about balance, risk and safety, prudence and greed. You can use some leverage, but only within the limits of what you can financially and emotionally withstand.

Editor/rice