Casualties of Perfection by Morgan Housel

Discussion of the Cash portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 3839
Joined: Sun Sep 16, 2012 5:28 pm

Casualties of Perfection by Morgan Housel

Post by Kriegsspiel » Fri Jul 02, 2021 5:57 pm

Cash is an inefficient drag during bull markets and as valuable as oxygen during bear markets, either because you need it to survive a recession or because it’s the raw material of opportunity. Leverage is the most efficient way to maximize your balance sheet, and the easiest way to lose everything. Concentration is the best way to maximize returns, but diversification is the best way to increase the odds of owning a company capable of delivering returns. On and on, if you’re honest with yourself you’ll see that a little inefficiency is the ideal spot to be in. link
You'll have to read the article for more context.

I remember working for a major manufacturing company when I got out of the military, and (apparently) like all other manufacturers, they were fully into the lean JIT logistics. Coming from the military, that was almost the antithesis of everything I had known, so adjustments had to be made (by me). They also didn't like hearing young Kriegsspiel say "fuck" so much.
Cato suggested that women would live long, healthy lives if they washed their genitals in the urine of a cabbage eater. He was listened to on health matters, since in an age of short lives and high infant mortality he lived to be over 80 and claimed to have fathered 28 sons, all of which he credited to eating cabbage with salt and vinegar.
- Kurlansky, Salt
User avatar
I Shrugged
Executive Member
Executive Member
Posts: 1524
Joined: Tue Dec 18, 2012 6:35 pm

Re: Casualties of Perfection by Morgan Housel

Post by I Shrugged » Fri Jul 02, 2021 6:58 pm

Good article, thanks.
User avatar
vnatale
Executive Member
Executive Member
Posts: 6523
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Casualties of Perfection by Morgan Housel

Post by vnatale » Fri Jul 02, 2021 7:27 pm

Read it.

It's similar to what my Macrobiotic friend said to me about 45 years ago:

"It's two sides of the coin. Carried to the extreme your greatest strength can turn into your greatest weakness."
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
vincent_c
Executive Member
Executive Member
Posts: 485
Joined: Wed Dec 02, 2020 10:58 am

Re: Casualties of Perfection by Morgan Housel

Post by vincent_c » Fri Jul 02, 2021 8:45 pm

Kriegsspiel wrote:
Fri Jul 02, 2021 5:57 pm
Cash is an inefficient drag during bull markets and as valuable as oxygen during bear markets, either because you need it to survive a recession or because it’s the raw material of opportunity. Leverage is the most efficient way to maximize your balance sheet, and the easiest way to lose everything. Concentration is the best way to maximize returns, but diversification is the best way to increase the odds of owning a company capable of delivering returns. On and on, if you’re honest with yourself you’ll see that a little inefficiency is the ideal spot to be in. link
You'll have to read the article for more context.

I remember working for a major manufacturing company when I got out of the military, and (apparently) like all other manufacturers, they were fully into the lean JIT logistics. Coming from the military, that was almost the antithesis of everything I had known, so adjustments had to be made (by me). They also didn't like hearing young Kriegsspiel say "fuck" so much.
I feel like this way of thinking is just a poorly defined form of efficiency. More like efficiency is probably not the right metric for determining what is the best investment approach.

Although I do not think that there is a universal allocation right for everyone, I do believe there is a universal philosophy and rules that anyone can just apply to come up with their ideal investment approach. But even on here I think an ideal approach may not be practical to most.

The best example that comes to my mind is how people can divide their money into various buckets or different portfolios. In my mind since money is fungible it is the overall exposure that matters. There must be some on here that think they run a PP but the PP is only one of their portfolios and I’m not talking about VP philosophy.
User avatar
vnatale
Executive Member
Executive Member
Posts: 6523
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Casualties of Perfection by Morgan Housel

Post by vnatale » Fri Jul 02, 2021 9:08 pm

vincent_c wrote:
Fri Jul 02, 2021 8:45 pm

Kriegsspiel wrote:
Fri Jul 02, 2021 5:57 pm

Cash is an inefficient drag during bull markets and as valuable as oxygen during bear markets, either because you need it to survive a recession or because it’s the raw material of opportunity. Leverage is the most efficient way to maximize your balance sheet, and the easiest way to lose everything. Concentration is the best way to maximize returns, but diversification is the best way to increase the odds of owning a company capable of delivering returns. On and on, if you’re honest with yourself you’ll see that a little inefficiency is the ideal spot to be in. link


You'll have to read the article for more context.

I remember working for a major manufacturing company when I got out of the military, and (apparently) like all other manufacturers, they were fully into the lean JIT logistics. Coming from the military, that was almost the antithesis of everything I had known, so adjustments had to be made (by me). They also didn't like hearing young Kriegsspiel say "fuck" so much.


I feel like this way of thinking is just a poorly defined form of efficiency. More like efficiency is probably not the right metric for determining what is the best investment approach.

Although I do not think that there is a universal allocation right for everyone, I do believe there is a universal philosophy and rules that anyone can just apply to come up with their ideal investment approach. But even on here I think an ideal approach may not be practical to most.

The best example that comes to my mind is how people can divide their money into various buckets or different portfolios. In my mind since money is fungible it is the overall exposure that matters. There must be some on here that think they run a PP but the PP is only one of their portfolios and I’m not talking about VP philosophy.


Also sometimes the concepts of efficiency and effectiveness are mixed and not kept separate.

One can be extremely efficient at doing something that is extremely ineffective.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
Post Reply