📖David Swensen
Understand Before Investing
Only invest in what you can explain simply.
Never invest in a business you cannot explain in simple terms. If you can't describe why a company is valuable, you don't understand it well enough to own it.
🏠 Everyday Analogy
📖 Core Interpretation
David Swensen emphasizes durable business quality over short-term noise. A strong model, real competitive edge, and disciplined capital allocation matter more than quarterly excitement.
💎 Key Insight：Simplicity of explanation tests depth of understanding.
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❓ Why It Matters
Without business-quality filters, investors drift toward stories rather than economics. Durable cash generation is what supports long-term valuation.
🎯 How to Practice
Use a checklist covering moat, management, unit economics, and capital allocation; track long-term cash generation instead of quarter-to-quarter noise.
⚠️ Common Pitfalls
Buying narratives instead of cash-generating economics
Overreacting to short-term operating noise
Ignoring management quality and capital allocation
📚 Case Studies
1
Yale Endowment and Illiquid Alternatives (2000)
Swensen increased Yale’s allocation to private equity and venture capital, aligning with long-horizon, equity-oriented partners whose compensation depended on long‑term results, not asset gathering.
✨ Outcome：Generated superior risk‑adjusted returns versus traditional 60/40 portfolios over the following decades.
2
Staying the Course in the Financial Crisis (2008)
Despite severe drawdowns in equities and alternatives, Swensen’s team, whose incentives were tied to long-term performance, resisted pressure to de-risk at market lows.
✨ Outcome：Maintaining target allocations allowed Yale to participate fully in the post-crisis recovery and outperform many peers.
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