Monday, November 21, 2005

Its all Greek to Me

One of my students, Atul Kumar Tiwari, recently forward a link to a marvellous article which appeared in the Harvard Business Review. In my view, everyone interested in value investing should read this article. Here's the link:

You will also find references to "physics envy" in this talk by Mr. Charlie Munger (see page 7).

Of course, the desire to be precise in economics and its subset, security analysis, is an example of Mr. Munger's availability misweighing tendency whereby overemphasis on useless numbers that are easily available (beta, for example), and underemphasis of factors that cannot be precisely measured but are, nevertheless, critical for rational decision making, results in much avoidance of the practise of Keynes' wise advice that its better to be approximately right than to be precisely wrong...