Speed over perfection : Swift but Imperfect Investment Decisions
"Speed over perfection"
(The Art of War : Waging War)
It means, “In warfare, we have heard of clumsy haste, but we have never seen cleverness associated with long delays.” The idea is that when favorable conditions arise, a military force should act quickly, using the advantage of speed to defeat the opponent before those conditions change.
Warren Buffett, one of the most successful investors of our time, echoes a similar sentiment in his investment philosophy. He famously said, "If we can’t make a decision in five minutes, we can’t make it in five months." This quote reflects his belief in the importance of decisive action when a rare and valuable opportunity presents itself in the stock market. Buffett emphasizes that when such opportunities arise, investors should not hesitate but should make a quick, informed decision to seize the moment, rather than delaying and potentially missing out on the opportunity.
Strategic Decisiveness in Investing
Both Sun Tzu and Warren Buffett highlight the importance of timely decision-making in their respective fields—warfare and investing. Sun Tzu's strategy teaches us that speed and decisiveness can be powerful tools when the conditions are right. Similarly, Buffett's approach to investing underscores that when a rare opportunity arises, hesitation can be costly.
Balancing Analysis and Action
While thorough analysis is crucial, there comes a point where further deliberation may lead to missed opportunities. Buffett’s principle of making swift decisions within five minutes when the right conditions appear aligns with Sun Tzu's idea of acting swiftly under favorable conditions. The key takeaway is that successful outcomes often depend not only on how much you analyze but also on how quickly and decisively you can act when the time is right.
In the stock market, information and opportunities are constantly changing. If investors hesitate, they may miss the best opportunities to buy or sell, resulting in potential losses. Some opportunities or issues require quick responses because unnecessary delays can lead to missed chances or increased risks. For Warren Buffett, it is essential to conduct proper thinking and analysis before making decisions, but over-analyzing and procrastination can be more detrimental to investment decisions. Investors should make wise decisions when they have enough information, rather than endlessly analyzing and waiting for more data.
When the stock market is bullish and prices keep rising, many investors secretly resolve to buy heavily if the market corrects. However, when the real opportunity arises, why do these investors become hesitant, afraid to make a decision and take advantage of the situation? The reason the market offers buying opportunities is that it is often shrouded in bad news: a significant drop in non-farm employment, a spike in unemployment rates, escalating tensions between the U.S. and China, or crises like a depression, financial panic, oil crisis, political turmoil, or pandemics. All these negative factors make investors cautious and adopt a wait-and-see attitude, constantly waiting for the situation to improve. As a result, the situation does improve, but the opportunity to buy stocks at low prices disappears along with it.
Without these bad news events, how would we, as investors, have the chance to pick up quality stocks at a bargain? The real test at such times is whether you have the courage to buy quality stocks during market panic. Buffett once said, "Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble." It’s like discovering that everything in a store has suddenly dropped in price by 30%. Would you panic and leave? Certainly not. This is the time to stock up on the products you need.
Buffett believes that when making investment decisions, investors should focus solely on the quality, value, and price of the business itself, without worrying too much about macroeconomic issues. He famously said, "We don't want to make the mistake of thinking about the wrong things when buying a business. This also applies to securities, just as if we were buying 100% of a business. If our forecast for the business is correct, macro factors won't have any impact. If our judgment about the business is wrong, macro factors won't save us."
Buffett has also emphasized that those who predict a company's success should pay less attention to short-term economic outlooks and focus more on long-term trends. As long as you choose the right company and the price is reasonable, you can quickly make an investment decision. Excessive concerns only interfere with the speed of decision-making and do little to improve investment performance. Buffett stated, "We have no opinions on interest rate changes, market outlooks, the economy, or anything of that sort. We don't know what those things will do in the future. Even if we did, it's unlikely to help us. If we find a business we like, if we think its operations are very attractive, and we don't act just because we believe something might happen in the market, that would be foolish."
Thus, the concept of "speed over perfection" in The Art of War applies here. When a good opportunity arises, it’s important to prioritize key factors and quickly make an investment decision. Overthinking and trying to consider every possible detail, leading to excessive hesitation, could cause you to miss out on a great opportunity.
