Private Equity investor Chris Douvos has been watching a lot of Indiana Jones movies with his kid. In his current fave, The Last Crusade, Douvos finds in the three tests Indy has to pass to obtain the Holy Grail some essential lessons for investors:
Challenge #1: The Breath of God… This challenge is a warning that bad things can befall overconfident people. A mentor of mine once told me that a great analyst has no ego; one must be wary of confirmation bias and remember that big ideas often come from unexpected places. With each passing day, he concluded, you’ll realize that you know less and less, for there is no business as constantly humbling as investments.
Challenge #2: The Word of God… this challenge is a metaphor for the diligence process: you’ve got to ask the right questions and call upon your experience and skills to get the answers. Agility, wit (in both senses,) patience, and confidence will serve you well as you traverse uncertain terrain.
Challenge #3: The Path of God… sometimes an investor just needs to take a breath and step into the abyss, knowing that their preparation was sound.
Read the whole thing.