Buy companies that make ships. From Chris MacIntosh at internationalman.com:
Howard Marks of Oaktree Capital put out a note to clients sometime ago, “I Beg to Differ” and the below paragraph in particular resonated with me.
First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority). All the first-level thinker needs is an opinion about the future, as in “The outlook for the company is favorable, meaning the stock will go up.”
Second-level thinking is deep, complex, and convoluted. The second-level thinker takes a great many things into account:
- What is the range of likely future outcomes?
- What outcome do I think will occur?
- What’s the probability I’m right?
- What does the consensus think?
- How does my expectation differ from the consensus?
- How does the current price for the asset compare with the consensus view of the future, and with mine?
- Is the consensus psychology that’s incorporated in the price too bullish or bearish?
- What will happen to the asset price if the consensus turns out to be right, and what if I’m right?
The difference in workload between the first-level and second-level thinking is clearly massive, and the number of people capable of the latter is tiny compared to the number capable of the former.
First-level thinkers look for simple formulas and easy answers. Second-level thinkers know that success in investing is the antithesis of simple.
Here is a brief example of how to employ second-order thinking with Taiwan
It is worth considering a lesson from World War 2 because it’s vitally important, and — as far as I can tell — not only do most Americans not know it, but the current bunch of podium donuts in the US don’t appear to either.