📖Ray Dalio
Systematic Selection
Use tested systematic rules for stock selection.
Rather than picking individual stocks based on intuition, use systematic rules tested against historical data. The best investors have systems, not just instincts.
🏠 Everyday Analogy
📖 Core Interpretation
Ray Dalio advocates a repeatable process: define criteria, execute consistently, and review decisions against evidence. Process quality drives outcome consistency.
💎 Key Insight：Systems beat intuition over the long term.
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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
Enron’s Off–Balance-Sheet Deception (2001)
Enron used opaque special purpose entities to hide debt and inflate earnings. Management, auditors, and some bankers knew of the structures but kept details from investors, employees, and even many directors. For years, enormous effort went into maintaining the illusion of strong profits and low leverage.
✨ Outcome：Enron collapsed into bankruptcy, wiping out shareholders and employee pensions and sending executives to prison. The scandal spurred Sarbanes–Oxley reforms. The case shows that secrecy consumes resources, destroys internal culture, and ultimately harms everyone when reality finally surfaces.
2
Buffett Backs Seabury Stanton Over Believable Analysts (1957)
In the late 1950s, young Warren Buffett bought Dempster Mill shares largely on the bullish assurances of CEO Seabury Stanton, despite skeptical assessments from more experienced analysts who doubted the business quality and management. Buffett effectively overweighted Stanton’s optimistic view and underweighted the track records of more seasoned, dispassionate observers.
✨ Outcome：Dempster Mill badly underperformed, forcing Buffett into a protracted restructuring. He later cited it as a mistake in not properly weighing the credibility of opinions, reinforcing his shift toward Graham-style, evidence-based and later Munger-influenced qualitative judgments.
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