Suppose you are a believer in the philosophy of value or focus investing. In that case, you inherently understand that market prices don’t always equate to the intrinsic worth of a company. Thus, market prices often fall short as a reliable yardstick for assessing a company’s real-time performance. This begs the question, what, then, should be your golden benchmark?
“If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a one-legged man in an ass-kicking contest.”
– Charles T. Munger
If you’re like me when I started learning how to invest, I knew I should know how to use probabilities in my process but I thought it would come later.