Connecting the Dots
Charlie Munger

Connecting the Dots

One of the first real creative challenges we face as children is the Connect the Dots exercise. This is the first time we are forced to integrate a number of concepts at the same time – visual, numerical and conceptual. We are required to follow a numerical sequence, draw straight lines with a degree of accuracy and skill and somehow also believe that once complete we will have created something we would never have been able to draw on our own. “Look at me dad! I drew a bird!”

“The stock market is a game of imperfect information and even resembles bridge in that both have their deceptions” Ed Thorp


Even the great Investment Masters see this as one of the most important attributes for success. The ability to gather a wide range of abstract informational pieces, and then string them together to identify a trend or investment opportunity is invaluable if you want to remain ahead of the game.


“Look, my job is essentially just corralling more and more and more facts and information,and occasionally seeing whether that leads to some action” Warren Buffett


"I combine lots of information coming at me from all directions" Steve Cohen
“It is important to know that idea generation comes from having a consistent understanding of the world and synchronizing it will all the information you have accumulated. It is a disciplined process, and the sooner you begin this exercise, the more prepared you will be when opportunities arise. Ideas are not generated simply by waking up one day and saying, “Let’s look for an idea!” They require the accumulation of investment experience and the desire to learn over time.” Francisco Garcia Parames
“Tremendous insight is built from intense curiosity and study for your whole life.” Li Lu
"As Thoreau said, "It's not what you look at that matters, it's what you see." Warren Buffett
Visionaries are not people who see things that are not there, but who see things that others do not. As Einstein quipped, “Why do some people see the unseen?” Bennett Goodspeed


"You really have to keep your eyes open" Peter Lynch
“For me, market analysis is like a tremendous multi-dimensional chess board. The pleasure is purely intellectual.” Bruce Kovner
“The money game is played in the third and fourth dimension.” Barton Biggs
“I enjoyed using mathematics to solve certain interesting puzzles, which I found first in the world of gambling, then in the world of investing. Making money confirmed my theories by showing that they worked in the real world.” Ed Thorp
“It‘s an intellectual puzzle with partial information. The process is messy and imprecise.” Howard Marks
Information has become more readily available these days, and one of the issues with that is that everyone has access to the same material. So how do you differentiate? How do you take that same information and turn it into investment gold? Through curiousity and imagination. First by being interested enough to look for the information, and then imaginative enough to turn it into something so different that its valuable.


“I believe that being a stock market investor is a lifestyle. A capitalist’s antennas must always be tuned and receptive. Being interested and passionate about the business world provides a continuous source of new ideas, while staying in front of your computer or a Bloomberg Terminal is not enough. You learn much more in movie houses, in restaurants, in shopping centres and even by going to a library.” Francois Rochon


And ideas are hard to come by. Even though information is readily available, those great ideas remain like hens’ teeth to most of us. Most of the ideas that the Investment Masters come up with spring from sometimes unexpected sources. Constant searching, reading, learning, talking and listening are all invaluable for providing the springboard to innovation and imagination.
Ideas come to me from all sources, principally from reading and talking.  I don’t discriminate how they come, as long as they are good ideas. You can recognize good ideas by reading a great deal and also by studying a lot of companies and constantly learning from intelligent people – hopefully more intelligent than you, especially in their field. I try to read as much as I can.”  Li Lu
“Our game is to recognise a big idea when it comes along, when one doesn’t come along very often.  Opportunity comes to the prepared mind.”  Charlie Munger
“Our ideas come from reading newspapers, books, magazines, analyst reports, and even our competitors’ investment holdings. We also frequently brainstorm with people from different industries.” Francisco Garcia Parames
“Where do we find our investment ideas? There’s no one answer to that. It comes down to reading, a lot of reading, be it SEC filings, conference-call transcripts, Street research and a variety of industry publications. Our network of professional contacts also serves as a good source for new ideas, and clients even have contributed some of the better names that we’ve come out with. So when people ask where we get these ideas, I don’t have one answer because they come from all different places.” Chris Mittleman


“The further you look for ideas the greater the chance you will see a unique idea.”  Jim Chanos
True creativity and imagination is very rare, which is why the world is full of mediocre investors, while only a few truly great Investment Masters exist. It is vital to seek information, and to continue to seek it, and then integrate that knowledge using multi-disciplinary skills. Its not enough to know a lot about finance and investment; you need to know about the businesses and industries you are investing in as well. Having a variety of sources that provide you with information on a regular basis is important, too, as is the imagination to pull it all together. Only then will you be connecting the dots and revealing your truly creative potential.

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