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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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The Most Important Thing Is … Appreciating the Role of Luck

The Most Important Thing Is … Appreciating the Role of Luck

(p.133) 16 The Most Important Thing Is … Appreciating the Role of Luck
The Most Important Thing

Howard Marks

Columbia University Press

This chapter discusses yet another much-expected requirement for successful investing: appreciating the role of luck. The investment world is not an orderly and logical place where the future can be predicted and specific actions always produce specific results. The truth is, much in investing is ruled by luck. Some may prefer to call it chance or randomness, but it comes down to the same thing: a great deal of the success of everything investors do will be heavily influenced by the roll of the dice. To fully explore the notion of luck, this chapter examines some of the ideas expressed by Nassim Nicholas Taleb in his book Fooled by Randomness. In particular, it considers Taleb's concept of “alternative histories”—the other things that reasonably could have happened—and its relevance to investing. It also suggests that investors have to practice defensive investing, since many of the outcomes are likely to go against them.

Keywords:   luck, investment, chance, randomness, investors, Nassim Nicholas Taleb, Fooled by Randomness, alternative histories, defensive investing

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