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Gambling and Investing

Investing is an action that defers consumption in the present in the hope that you will be able to consume more in the future. An investor has an expectation of a positive real rate of return, even though it is possible that this will not happen (especially in the short run). In other words, an investment is a net present value-positive activity (the likelihood of the net present value of the potential benefits minus the likelihood net present value of the potential losses is positive).

Gambling is a form of present – moment consumption, and the net present long-term value of the activity is negative. Many people who think they are investing are actually gambling.

Some people try to outperform the market by saying essentially “ I can be smart about picking other people who will outperform the market via active investing.” Munger believes that if something related to active investing is worth doing, then it is worth doing yourself.
I think you’ll at least make fewer mistakes than people who think they can do anything, no matter how complex, by just hiring somebody with a credible label. You don’t have to hire out your thinking if you keep it simple. -Charlie Munger

Investing

The Market Can Price Things Wrong

“Price is what you pay. Value is what you get.”

High Returns With Low Risk is the Key

“Risk comes from not knowing what you are doing.”

It’s Easier to Look Back Than to Look Into the Future

“In the business world, the rear view mirror is always clearer than the windshield.”

Buy Wonderful Companies

“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” Warren Buffett

Gambling

If you must play,
decide upon
three things at the start:
the rules of the game,
the stakes,
and the quitting time.

Chinese Proverb

Luck is what happens
when preparation
meets opportunity.

Seneca

If you would be wealthy,
think of saving as well as getting.

Benjamin Franklin

The gambling known as business
looks with austere disfavor
upon the business
known as gambling.

Ambrose Bierce

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