INVERT, ALWAYS INVERT

“If you want to understand something, take it to the extremes or examine its opposites” John Boyd

"Our checklists have been invaluable in helping us reduce pilot error and they have become a platform to remind us of previous lessons learned. These lessons can be soon forgotten when animal spirits and biases emerge to prove a theory. Our checklists were built to invert our thinking the way a scientist would seek to prove the null hypothesis. For example, if we want to know if the investment is mispriced, the checklist seeks to invert the question to solve why the investment is NOT mispriced. We have found that this inversion helps reduce the biases that bleed into any investment process. Christopher Begg

“Long ago, Charlie laid out his strongest ambition: “All I want to know is where I’m going to die, so I’ll never go there.” That bit of wisdom was inspired by Jacobi, the great Prussian mathematician, who counselled “Invert, always invert” as an aid to solving difficult problems. (I can report as well that this inversion approach works on a less lofty level: Sing a country song in reverse, and you will quickly recover your car, house and wife.)” Warren Buffett

“Once a person has an idea, we then start whacking at it. We invert the concept. Instead of trying to prove a person’s idea, we try to kill it, and if we can’t kill it then the person is onto something. Whether it is my own idea or someone else’s, that is the process we go through” Bruce Berkowitz

Invert, always invert” Jacobi said. He knew that it is in the nature of things that many hard problems are best solved when they are addressed backwards” Charlie Munger

“Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Where don’t we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead – through sloth, envy, resentment, self-pity, entitlement, all the mental habits of self-defeat. Avoid these qualities and you will succeed. Tell me where I’m going to die, that is, so I don’t go there.’ Bruce Berkowitz

"We spend a lot of time asking such questions as: “How does the business work?” “Why does this opportunity exist?” And then, “What if?” Knowing that successful investing is as much about finding winners as it is about avoiding losers, we invert a favourable thesis so as to see it through less rose- colored lenses, all of which hopefully limits negative surprises." Steven Romick

“Our research process reverses the analytical framework that most traditional value investors use. Many value investors determine whether a security is cheap. If it is they seek to determine whether it is cheap for a good reason. Greenlight takes the opposite approach. We start by asking why a security is likely to be misvalued by the market. Once we have a theory, we analyse the security to determine if it is, in fact cheap or overvalued” David Einhorn

"The mental habit of thinking backwards forces objectivity - because one of the ways you think a thing through backward is to take your initial assumption and say, "Let's try and disprove it".  That is not what most people do with their initial assumptions.  They try and confirm it.  It's an automatic tendency in psychology - often called "first-conclusion bias".  But it's only a tendency.  You can train yourself away from the tendency to a substantial degree.  You just constantly take your own assumption and try to disprove them"  Charlie Munger

"We tackle things not by trying to prove them, but trying to disprove them.  Falsifying a thesis is the fundamental approach of the scientific method and it's an approach we use and like"  Ken Shubin Stein

"I don't look for reasons to buy a given business.  I look for reasons to reject buying the stock.  I'm looking for why should I turn it down.  If I can find what I call the slightest pretext to turn it down, I'm done" Mohnish Pabrai

"Jim Sawyer's retirement, after more than a decade as CFO at Praxair, offers the opportunity to reflect on a stellar record.  Jim pursued value creation through "inverted" thinking.  In other words, before he began the journey, he worked out where he wanted it to end.  With a destination firmly fixed in his mind, he traced the route back, step by step, to its starting point.  Other corporate managers - not to mention many of today's investors - might benefit from apply just such a "backwards" process in their own thinking" Marathon Asset Management

"Charlie Munger is famous for the pioneering concept of inverting as an investor, of thinking backwards to find one's way to the beginning of an idea or concept.  In our application, an advantage can be gained in the competitive world of active investment management by preparing for the unknown by inverting, reasoning backwards to attempt to learn how others in the past have coped with the unforeseeable and the unpredictable"  Frank Martin

"When Charlie [Munger] thinks about things, he starts by inverting. To understand how to be happy in life, Charlie will study how to make life miserable; to examine how business become big and strong, Charlie first studies how businesses decline and die; most people care more about how to succeed in the stock market, Charlie is most concerned about why most have failed in the stock market. His way of thinking comes from the saying in the farmer’s philosophy: I want to know is where I’m going to die, so I will never go there." Li Lu