The Joys of Compounding: The Passionate Pursuit of Lifelong Learning


Value investing is not just a system for success in the market. It is also an intellectual toolkit for achieving a deeper understanding of the world. The author takes a holistic approach to value investing and philosophy from his wide-ranging reading, combining practical approaches, self-cultivation, and business wisdom.

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Key Takeaways

  1. The best investment of time is to invest in personal development.
  2. The way to achieve success in life is to learn constantly. And the best way to learn is to read, and to do so effectively.
  3. rich have money. The wealthy have control over their time.
  4. Knowledge is overrated. Wisdom is underrated. Intellect is overrated. Temperament is underrated. Outcome is overrated. Process is underrated. Short-term outperformance is overrated. Long-term adherence to one’s investment philosophy is underrated. Gross return is overrated. Stress-adjusted return is underrated. Upside potential is overrated. Downside protection is underrated. Maximization of returns is overrated. Avoidance of ruin is underrated. Growth is overrated. Longevity is underrated. Entry multiple is overrated. Exit multiple is underrated. Price-to-earnings ratio is overrated. Duration of competitive advantage period is underrated. Categorization of stocks into large cap, mid cap, and small cap is overrated. Categorization of businesses into great, good, and gruesome is underrated. Being more frequently right than others is overrated. Being less wrong than others is underrated. Forecasting is overrated. Preparation is underrated. Confidence is overrated. Humility is underrated. Conviction is overrated. Pragmatism is underrated. Complexity is overrated. Simplicity is underrated. Analytical ability is overrated. Personal behavior is underrated. Having a high income level is overrated. Inculcating a disciplined saving habit is underrated. Competition with peers is overrated. Helping our peers is underrated. Large personal net worth is overrated. Good karma is underrated. Talent is overrated. Resilience is underrated. Being the best investor is overrated. Being the most authentic version of yourself is underrated.
  5. Study the science of art. Study the art of science. Develop your senses—especially learn how to see. Realize that everything connects to everything else. —Leonardo da Vinci
  6. excellent resource to build up one’s latticework.1) As the Chinese proverb goes, “I forget what I hear; I remember what I see; I know what I do.” Because the best way to learn something is by practicing it, we must routinely apply the mental models to different situations in our daily lives.
  7. deliberate practice, it helps us identify our leverage
  8. Doubt is not a pleasant condition, but certainty is absurd. —Voltaire
  9. Charles Collier writes, in his guidebook on philanthropy Wealth in Families, that “according to Aristotle and his latter-day student, Thomas Jefferson, the ‘pursuit of happiness’ has to do with an internal journey of learning to know ourselves and an external journey of service of others.”
  10. Buffett’s key takeaway from The Intelligent Investor was this: If you eliminate the downside, then all that remains is the upside. After that, the key is to keep emotions in check and be patient. It really is that simple.
  11. Investing is not about being original or creative; it is about looking for the greatest amount of value (for the price paid) with the least amount of risk. Putting in more time and effort does not guarantee better results in investing. Rather, it is more beneficial to do less and make fewer but better choices.
  12. As Charlie Munger says, “The goal of investment is to find situations where it is safe not to diversify.”
  13. One of the hardest things to do in life is to avoid good opportunities so that you have time to devote to great opportunities—and having the wisdom to know the difference.
  14. Instead, ask yourself, “What is the most important thing I can do today? What is the one thing that would make everything else in my life either easier or unnecessary?”
  15. There is no path to peace. Peace is the path. —Mahatma Gandhi
  16. The parable of the Mexican fisherman and the American banker is one of my favorite stories and contains an important life lesson. It is habitual for most of us to build incessantly and forget that the endgame should really be happiness and a fulfilling life. It is equally easy to overlook all the goodness we are surrounded by today. It doesn’t take a lot of money to have a truly wealthy life, but it does take financial independence, which gives us control over our time.
  17. The goal of financial independence is to stop depending on others (bosses, clients, a schedule, a paycheck). True wealth is measured in terms of personal liberty and freedom, not monetary currency. Money alone does not signify independence. Control over time does. The only definition of success is to be able to spend your life in your own way.
  18. Growth and contribution are the bedrocks of happiness. Not stuff.
  19. Personal freedom allows us sufficient time to think. Making good decisions requires quiet time alone in our heads to think through a problem from multiple points of view. Uninterrupted personal time is life’s most valuable limited resource. Several notable creators, including Bill Gates and Mark Zuckerberg, regularly take “think weeks” to invigorate their thinking and to allow their minds to wander.
  20. Do you ask what is the proper limit to wealth? It is, first, to have what is necessary, and, second, to have what is enough.
  21. A contrarian isn’t one who always takes the opposite path just for the sake of it. That is simply a conformist of a different sort. A true contrarian is one who reasons independently, from the ground up, based on factual data, and resists pressure to conform.
  22. To invest in companies with “the capacity to suffer,” we must be willing to suffer along with them. In other words, we need a high tolerance for short-term pain.
  23. Embracing deferred gratification is what leads to the single biggest edge for an investor. Human nature makes it difficult to utilize this edge. This difficulty is the very reason the edge exists, and because human nature will never change, this edge is a durable one for those who possess the right temperament to capitalize on it. Bezos
  24. The path to lasting wealth is deferred gratification, savings, and compound interest. Develop the habit of saving in such a way that you enjoy your present reasonably well and also ensure a bright future tomorrow.
  25. Ask the right questions; you’ll get valuable answers.
  26. Markets systematically underprice quality over long time periods.
  27. High quality always beats a bargain over time. Although there are certainly exceptions, in the long run, bargains never outperform solid investments. This simple yet profound principle can be applied to virtually every area of life. Crash diets, predatory pricing, dishonesty, and shortcuts can work well for a while, but they are never sustainable.
  28. Techno-Fund investors tend to believe in two key principles, in addition to strong earnings growth and industry fundamentals, when analyzing potential buys: first, stocks that show relative strength, that is, that go sideways or consolidate during significant market pullbacks, tend to outperform significantly during the subsequent market recovery; and, second, the first stocks that break out to new fifty-two-week highs after, or during, a major correction tend to become the leaders of the next rally.
  29. When you truly embrace lifelong learning, Lady Luck and serendipity eventually reward you in a big way.
  30. The right book at the right time will speak to you in a way that the right book at the wrong time just won’t.
  31. Well-managed low-cost commodity producers usually do not generate higher returns. High-cost producers do, because they show a higher percentage gain in profitability. This is highly counterintuitive for most investors.
  32. Commodity stocks are not long-term investments. They generate alpha in portfolios in a short period of time, driven by a combination of financial and operating leverage, and you exit them not on peak reported earnings but when the expectations of margin improvement peak out. A good time to begin planning your exit from a commodity industry is when the government decides to curb its profitability.
  33. When only a single firm in the entire industry is profitable, then the commodity in question may be at or near the bottom of the cycle.

What I got out of it

  1. A comprehensive, fun read on the benefits of compounding in various life domains. Even if you don't care about investing, the mindset and examples Gautam shares will be useful regardless of age, industry, or passions

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