📖Bill Ackman
Know Your Limits
Stay within your circle of competence.
The most successful investors stay within their circle of competence. Know what you understand well and resist the temptation to venture outside it.
🏠 Everyday Analogy
📖 Core Interpretation
Bill Ackman advocates a repeatable process: define criteria, execute consistently, and review decisions against evidence. Process quality drives outcome consistency.
💎 Key Insight：Self-awareness about knowledge limits prevents costly mistakes.
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❓ Why It Matters
Without process, there is no reliable feedback loop. Structured execution and review improve decision quality over time.
🎯 How to Practice
Run a decision loop of research, thesis, execution, and post-mortem; document assumptions and update playbooks with evidence, not hindsight bias.
⚠️ Common Pitfalls
Having opinions without execution criteria
Reviewing outcomes but not decisions
Abandoning rules during volatility spikes
📚 Case Studies
1
Warren Buffett’s Dempster Mill Disaster (1962)
Buffett bought Dempster Mill, a windmill manufacturer, very cheaply, assuming mean reversion in earnings. Operations kept deteriorating; management was weak and the industry structurally challenged. The investment stagnated for years and consumed attention and capital before Buffett brought in new management and eventually liquidated/sold assets.
✨ Outcome：Buffett concluded that buying mediocre businesses just because they’re cheap is dangerous. He shifted toward “wonderful businesses at fair prices,” paving the way for Berkshire’s focus on quality franchises like See’s Candies and Coca‑Cola.
2
Long-Term Capital Management’s Near-Collapse (1998)
LTCM, led by John Meriwether with Nobel laureates, used heavy leverage to exploit tiny arbitrage spreads. In 1998, Russia’s default triggered a global flight to quality; LTCM’s positions moved violently against them. With leverage over 25–30x, losses spiraled, forcing a Fed-brokered Wall Street bailout.
✨ Outcome：The episode highlighted that historical models can fail in extreme conditions and that leverage amplifies small errors into existential threats. Many future hedge fund managers reduced gross and net leverage and improved stress testing and liquidity risk management.
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