process
Good Enough Beats Optimal
The rule
A simple rule that never breaks beats a clever rule that works well until it suddenly snaps. Think of a plain strong rope, not a fancy thin thread.
Where it flips
'Good enough' can turn into an excuse for lazy work. You skip the real homework and call it being sturdy. So keep the rule simple but still careful. Cut the complex parts that make it fragile, not the homework that keeps you safe.
It is tempting to make investing perfect. The exact price, the exact model, the last bit of extra return. But a very finely-tuned rule is fragile. It works well until the one thing it did not expect. Then it fails badly. A plainer rule that is only 'good enough' but survives every kind of market usually wins over a lifetime. It never suffers the big, ruinous fall. So aim to be sturdy and hard to break, not perfectly tuned and easy to shatter.
A worked example
Vikram drops his complex ten-part buying model. He keeps a simple, strict rule instead: only good businesses at a fair price. The plainer method never blows up, and over a full cycle it quietly does better than the fancy one. [illustrative]
How to spot it
- ·prefers a simple rule that survives every market
- ·avoids fragile, over-tuned models
- ·values never blowing up over squeezing the last bit
Pulak Prasad · What I Learned About Investing from Darwin