The Mind of Wall Street: A Legendary Financier on the Perils of Greed and the Mysteries of the Market

Risks don’t disappear from markets or businesses; they are merely transferred or sold. In the end, Amazon was nothing more than a mail-order house.

INVESTORS, we deceive ourselves a thousand different ways, both small and large. We attribute gains to acumen when they are the product of luck, and attribute losses to ill fortune when they are often the product of stupidity or inattention. We believe that the market remembers or cares about the price we paid for a stock, or that our stocks will g

We hired Milton Pollack, a brilliant lawyer who later became a distinguished federal judge. The suit unfolded slowly, and I fell into a ritual of having dinner with Pollack once a month during which he would update me on our progress and his methods. At that time he had a daughter in elementary school; he told me that before he asked any question o

The message is that mood or investor psychology is as important to markets as is information. It requires tremendous discipline to apply this understanding to one’s behavior.

Those most adept at profiting from a particular market are often least likely to notice when the game is over, and probably the least psychologically prepared to profit from the successor market.

both cases, psychology proved critical. Napoleon’s delusion was to believe in military strategy and underestimate the role of morale; his generals failed to appreciate that Russian citizens battling for their lives on their home soil had far greater incentive to fight than did a poilu from Paris yearning for the Champs Elysées. The LTCM strategists

A good idea, a long-term perspective, and the creativity to implement a strategy to profit from your insight are necessary to prosper in finance, but they are not sufficient. None of these qualities will bear fruit unless you have the discipline to stay with your strategy when the market tests your confidence, as it inevitably will.

the proper perspective on an investment is not what you have made so far, but rather the risk and reward ratio at any given point. The price you paid for a stock is irrelevant.

Investors are very good at recognizing the moods of the past—for example, the Roaring Twenties, the Great Depression, the Swinging Sixties—but we tend to be oblivious to the mood of the present. When do we notice that the world has changed? Sometimes change arrives with a bang. The dropping of the atomic bomb on Hiroshima instantly and permanently