Speaker unverified: belief

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…Right, or the thing you're selling. A huge amount of people's preoccupation, in my opinion, is with avoiding regret. Embarrassment in front of others regret themselves. Right, or the thing you're selling. A huge amount of people's preoccupation, in my opinion, is with avoiding regret. Embarrassment in front of others regret themselves. My view on selling is consistent with the general way that we talked about, the value and growth dichotomy, which is that what matters in investing is really deeply understanding what you own, why you are making the investment, and what you're playing for. When it comes down to making a decision about selling or not, what matters is understanding those sorts of things and then also understanding your opportunity cost. Your money has to go somewhere, so you have to think about decisions relative to each other. But the point of the memo was that, first of all, most people don't think about opportunity costs. Most conversations about selling are academic, thinking about, should you sell this investment in a vacuum or whatever? Outside of that, most people make selling decisions based on price action, if it's up, if it's down, or whatever. Most people confuse price action with fundamentals. Oh, this company has been up into the right for years, so it must be a compound or it must be compounding value intrinsically. I think you should make your selling decision based on why you made the investment, how things have evolved, and what you could be playing for. Take a simple example. Let's say you can buy $1 for 50¢. That's obviously a good thing to do. But if it reprices to $1, you should probably sell it, because there's no more in the investment. However, let's say there's a contract where you can get $1, but then every year, the value of what you can claim compounds by 20%, and you can buy that contract for 50¢. You can buy it for 50¢. Let's say it goes to $1. You doubled your money, but you shouldn't sell it. Next year, it'll compound value to $1.20. So if it goes up to $1.20, you're up 20%, you still shouldn't sell it. Next year, it'll go to $1.44. Let's say instead of $1.44, it goes to $1.60. You probably still shouldn't sell it even though it's "overvalued", because the right to compound at almost 20% in perpetuity is extremely valuable, and so on and so forth. You shouldn't just let price action alone determine what you should do. I think the other thing to note is things that can do that, these sort of compounding certificates in the form of companies, are extremely rare, but extremely, extremely valuable. If you just look at a DCF, if you really have something that can compound cash flows for 25 years, you're up 100x. If you can do that for 50 years, you're up 10,000x. It's really, really hard to price that in the near term. If you can really believe you found something like that, something crazy has to happen for you to sell it. The price can, of course, as my dad said, anything can be priced too high. Really recognizing what you have is really important. Also recognizing that we have a huge tendency to want to act, so sitting idle on something for decades and decades is really hard. But then, contrarily, those things are extremely rare, so most things are not that. ng that we have a huge tendency to want to act, so sitting idle on something for decades and decades is really hard. But then, contrarily, those things are extremely rare, so most things are not that. If something appears where the price appears to be compounding, and you get comfortable that it is one of those things, you better be sure that it is, and you better know why you own it. I just think it's a nuanced conversation that comes back to, why do you own what you own, what are you playing for, what's your confidence in the future, and then if I sold this work, where'd I put the money? It all comes down to, maybe we can think better about the selling decision if we rebrand it, and we call it the decision to unbuy. The thought process should be the opposite of the buying decision and not some chicken stuff about being afraid to lose. I think, Andrew, it points out a very important thing. In the olden days, you'll look at the classic value investments, and I did some of this. You get this chance to buy a dollar for 50¢, and that's a great thing. But once it hits $1, you got to sell it, you have to find another dollar for 50¢. The concept of the buy a $1 for 50¢, and then it goes on to be worth $2, $4, $8, and $16.…

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