Some thoughts from this week

One of the key things we need to do if we are to make good quality decisions, is to be aware of our own internal biases and not let them cloud our judgement.  This last 2 months, I’ve really gotten into Charlie Munger’s wisdom (a starting point here).  For the uninitiated, Charlie Munger is Warren Buffett’s friend and business partner.  I’ve collected a number of his quotes, some examples below:

The worst thing to anchor to is your previous conclusion. Do the best you can to destroy your current ideas.

You don’t need to be the smartest or the most diligent to succeed. You need to be a learning machine, and go to bed smarter than you were the night before.

Not many people integrate multiple disciplines. If you do that you’re in a territory with not a lot of competition.

If you want to disagree with somebody, you should be able to state their case better than they can. Otherwise you should keep quiet.

It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying, “It’s the strong swimmers who drown.”

Any single one of the above quotes is enough to make you measurably more successful, and they all refer to certain biases and assumptions we all make as human beings.

I was reminded of that this week when Jumbo Interactive started dropping in share price, presumably off the back of the market becoming more aware of competitive lottery apps.  Jumbo are by no means the lowest cost player, they charge a large premium over The Lott (in the case of Ozlotto, $1.45 per game vs $1.30) and Lottoland charges $1.45 also but offers a $1m bonus on any winning jackpot.

The problem being, while Jumbo is a cash machine, they don’t have a significant moat (They do have an existing customer base and are part-owned by Tatts Group).  Looking at the current market price, I started my decision process in context of my buy price, which should not have been relevant to my decision.  What I should be asking myself is this: Is the company now a buy based on new information? (or in my case, information I always had at hand, but was too blinkered to pay attention to).

I concluded that while I wanted to continue holding JIN, I had too many shares (~10% of my total portfolio), so sold down about 60% of my holding at what was basically breakeven.  It feels good to have gone through a more logical thought process and to have had the self-awareness to make a better decision than I would have normally.  I am learning!



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