本日佳句 - The Making of Goldman Sachs, Part V
Posted in Investment, Quote on Feb 21st, 2010
Risk arbitrage is based on the simple idea that if there are two market prices for the same thing or two equivalent things, they will converge at some points as though pulled together by a rubber band. Arbitrageurs take disciplined actions to create profits by capturing differences in prices for the same item in different markets or of different but interchangeable items in the same market. The price differences they exploit are caused by market inefficiencies or mistakes caused by imbalances of supply and demand due to differences between uncertainty and risk, which differ in ways only experts usually care about. Arbitrageurs increase market efficiency and – indirectly and unintentionally, as Adam Smith famously explained in The Wealth of Nations – they increase the consistency and fairness of markets and therefore the confidence investors have in markets; that helps improve overall economic performance. Arbitrageurs are working in free, competitive markets that are open to everyone, so to earn profits they need to see what others do not see, to see more clearly than others do, or to take actions others would not have considered.
The Partnership, The Making of Goldman Sachs, p.464
Insurance companies earn profits by making a market between an individual’s uncertainty and a population’s true risk.
The Partnership, The Making of Goldman Sachs, p.465
Three factors are crucial for success in arbitrage: extraordinary, unemotional rationality or objectivity in all decisions and actions; superior access to information; and the ability to understand that information and the ability to think unconventionally and rigorously about it.
The Partnership, The Making of Goldman Sachs, p.466
The facts are king. You always start with the facts – all the facts you can possibly get – and then you develop a logical line of reasoning or argument, and then – and only then – do you develop a opinion. Opinions always come last. Facts, analysis, and logic matter. Ego has no role in analysis or in developing an opinion. Age and experience do not matter – once you’re on the team.
The Partnership, The Making of Goldman Sachs, p.475
Fife explains, “Leaders should always set the bar high – very high – and then find the way to meet that standard. Trust and consistent execution make you the preferred supplier. Any compromise on standards, and you’re sowing the seeds of your own destruction.”
The Partnership, The Making of Goldman Sachs, p.516
“I learned a long time ago that when somebody spits in your face, if you’re really any good, you do three things: One, declare it must have been a rain drop. Two, wipe it off. And three, renew your determination and commitment.”
The Partnership, The Making of Goldman Sachs, p.530
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