A good investment process is really difficult to achieve and even harder to sustain. The variables are many and the problems challenging. Charlie Munger borrowed a highly useful idea from the great 19th Century German mathematician Carl Jacobi that provides a helpful way to deal with the myriad problems investors face in trying to establish a good investment process.
Invert, always invert (“man muss immer umkehren”).
Jacobi believed that the solution for many difficult problems could be found if the problems were expressed in the inverse – by working backward. As in most investment matters, we would do well to emulate Charlie here. Continue reading