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The Most Important ThingUncommon Sense for the Thoughtful Investor$
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Howard Marks

Print publication date: 2011

Print ISBN-13: 9780231153683

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231153683.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 20 September 2021

The Most Important Thing Is … Second-Level Thinking

The Most Important Thing Is … Second-Level Thinking

(p.1) 1 The Most Important Thing Is … Second-Level Thinking
The Most Important Thing

Howard Marks

Columbia University Press

This chapter describes an important requirement for successful investing: second-level thinking. Would-be investors can take courses in finance and accounting, read widely and, if they are fortunate, receive mentoring from someone with a deep understanding of the investment process. But only a few of them will achieve the superior insight, intuition, sense of value and awareness of psychology that are required for consistently above-average results. Doing so requires second-level thinking. As an investor, the goal is not to earn average returns; it is to do better than average. Thus, the investor's thinking has to be better than that of others—both more powerful and at a higher level. For their performance to diverge from the norm, their expectations—and thus their portfolio—have to diverge from the norm, and they have to be more right than the consensus. Different and better is an apt description of second-level thinking. This chapter explains what second-level thinking is and how it differs from first-level thinking.

Keywords:   second-level thinking, investment, investors, first-level thinking, portfolio, consensus

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