“Life is really simple, but we insist on making it complicated”


The same could be said of investing, where the complexity bias — a logical fallacy which equates complexity with accuracy — results in a proliferation of highly detailed models and valuations. 

But, to paraphrase Joel Greenblatt; if you can easily and simply explain why something’s a great business, and how and why it’s cheap, you’re likely on to a good thing. “You’re never sitting there on the 40th page of your spreadsheet, as Buffett would say, agonizing over whether you should buy or not.”

Still, I stumbled across a tweet which reminded me that this is a truth that is best understood by those that have had to learn the hard way.

This idea will resonate with a lot of investors, but it was this reply that really struck a chord for me:

So true.

This is why something as basic as the humble P/E ratio can be extremely powerful — if you can look at it through experienced eyes.

It’s a bit reminiscent of T.S. Elliot’s line 

“…and the end of all our exploring will be to arrive where we began and to know the place for the first time.”

Anyway, all of this is just to say that investing is about keeping things simple, but not too simple. And to recognise there can still value in leaning into the complex stuff.

Todd Combs — Buffett’s heir apparent at Berkshire — captured the nuance well, as per the following tweet reply:

Twitter (or ‘X’) can be a bit of a dumpster fire at times, but every now and then you stumble across great wisdom.

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