Law #1: Optimism and pessimism will always overshoot because the boundaries of both can only be known in hindsight, once they’re passed.
Law #2: Calm plants the seeds of crazy.
Law #3: Career realities create a mismatch between cash flows and time horizon, antagonizing the power of compounding.
Law #4: People with different time horizons and different goals want different things out of the same asset, creating reasonable differences in opinion that can be misinterpreted as disagreements.
Law #5: Luck and risk are the opposite sides of the same coin but we treat them very differently.
Law #6: The biggest risk is always whatever no one is talking about, because if no one’s talking about it they’re not prepared for it.
Law #7: Narratives become self-fulfilling and can override visible capabilities that are easier to measure.
Law #8: Technology will be ridiculed proportionally to how groundbreaking it is because it’s hard to distinguish familiarity from utility.
Law #9: Big results are driven by tail events, so winning while losing much of the time is normal.
Law #10: Effective strategies change as the metrics investors care about evolve.
Law #11: The most persuasive evidence is what you want to be true and/or have experienced personally.
Law #12: A gap between the timing of investment opportunities and faith in an investment manager will influence professional investment decisions.
Law #13: Diagnosis errors creating a tendency toward action in a field where the first rule of compounding is to never interrupt it unnecessarily.
Law #14: Speculation is rational because low-probability events can be massively rewarding when leverage and huge sums of money are involved.
Law #15: Behavior > analytics, because one can’t be taught and the other can.
Law #16: An attachment to investment entertainment because money is a universal product with powerful tail-driven anecdotal stories and emotions that are easily triggered.
Law #17: The humble math of savings, fees, and taxes.