The Upside Of Not Being Stupid

So much is written about how to be a superior investor. For the vast majority of people, their efforts would be better spent avoiding big mistakes, i.e. not being stupid. This is easier said than done when the modus operandi of the financial services industry is to drive people into higher fee, higher complexity investment vehicles.

Eric Markowitz recently interviewed Alex Morris, author of Buffett and Munger Unscripted: Three Decades of Investment and Business Insights from the Berkshire Hathaway Shareholder Meetings. This interaction spoke to this very issue.

Eric Markowitz: If you had to distill one lesson from Buffett and Munger to pass along to your own children, what would it be?

Alex Morris: Avoid stupidity. Avoid the first step on a bad path. It applies to life — steering clear of destructive habits like gambling or addiction. It applies to business — avoiding bad deals, bad leverage, bad incentives.

So much of success isn’t about brilliance. It’s about avoiding unforced errors. Buffett and Munger built careers on discipline and restraint—waiting for the fat pitch, resisting fads, preserving optionality. That mindset is immensely powerful.

This echoes the themes in Barry Ritholtz’s new book How NOT to Invest: The Ideas, Numbers, and Behaviors That Destroy Wealth and How to Avoid Them. Adam Grossman at Humble Dollar took a look at Barry’s book and noted the many potholes investors face these days. Maybe the solution for investors is not to try so hard. Grossman writes:

As Charley Ellis first pointed out 40 years ago in Winning the Loser’s Game, investors don’t need to do anything sophisticated to succeed. We don’t need to find the next Apple or Nvidia. Instead, the most important thing is to simply avoid making mistakes. Avoid the potholes, and the path to success is surprisingly simple.

Saying ‘don’t be stupid’ may sound stupid itself. Who thinks they are doing something actually stupid before they do it? Then again, taking a beat, before heading down a a potentially ruinous path at least gives a chance to catch yourself.