📖Jeremy Grantham
Manage Career Risk
Career risk prevents rational investment decisions.
The biggest risk for professional investors is career risk, not investment risk. This distorts behavior.
🏠 Everyday Analogy
📖 Core Interpretation
Jeremy Grantham treats survival as the first objective. Limiting permanent capital loss, controlling leverage, and avoiding single-point failure are prerequisites for long-term compounding.
💎 Key Insight：Professional investors fear losing clients more than losing money. Underperforming for 2-3 years can end your career, even if you're ultimately proven right. This creates a bias toward hugging benchmarks and following the herd. Grantham argues that true long-term value investing requires institutional structures that tolerate short-term underperformance. Career risk is the enemy of rationality.
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❓ Why It Matters
A single large drawdown can erase years of progress. Risk control is not timidity; it is the operating system that keeps compounding alive.
🎯 How to Practice
Define downside scenarios before entry, cap position size, avoid fragile leverage, and maintain liquidity so mistakes remain survivable.
🎙️ Master's Voice
Be patient and wait for the fat pitch.
Grantham waits for extreme undervaluation. He holds cash during overvaluation, deploying aggressively when opportunities appear.
⚔️ Practical Guide
✅ Decision Checklist
- Is this a fat pitch?
- Am I being patient?
- Should I wait?
📋 Action Steps
- Wait for fat pitches
- Hold cash when needed
- Deploy aggressively when cheap
🚨 Warning Signs
- Impatience
- Swinging at bad pitches
- Always fully invested
⚠️ Common Pitfalls
Equating volatility with all forms of risk
Oversized positions without an exit plan
Using leverage to compensate for uncertainty
📚 Case Studies
1
Avoiding the Tech Bubble (1999)
Grantham underweighted expensive tech stocks despite client pressure as valuations broke from historical norms.
✨ Outcome：Clients lagged during the final bubble phase but were largely spared the 2000–2002 crash, preserving capital and careers for patient managers.
2
Early Exit Before Global Financial Crisis (2007)
GMO reduced risk in equities and housing-related assets as Grantham warned of a major credit and housing bubble.
✨ Outcome：Some clients left due to short-term underperformance, but remaining investors suffered far smaller losses in 2008–2009, validating a risk-first approach.
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