Show pageOld revisionsBacklinksBack to top This page is read only. You can view the source, but not change it. Ask your administrator if you think this is wrong. ====== Ariane ====== Ariane is a term popularized by investor [[Guy Spier]] in his book, //The Education of a Value Investor//. It refers to a personalized, formal investment checklist or a set of guiding principles an investor creates and commits to following //before// making any investment decision. Think of it as a pilot's pre-flight checklist, but for capital allocation. The primary purpose of an Ariane is to serve as a rational anchor in the stormy, emotional seas of the stock market. It forces a systematic, unemotional review of a potential investment against a consistent and pre-determined framework. This disciplined process acts as a powerful defense against the common [[Cognitive Biases]]—like [[Overconfidence Bias]] or [[FOMO (Fear Of Missing Out)]]—that so often lead to poor financial outcomes. By creating a structured path, Ariane helps ensure that decisions are rooted in the sound principles of [[Value Investing]] rather than in market noise, hype, or fear. ===== The Myth Behind the Method ===== The name "Ariane" is the French spelling of Ariadne, a figure from Greek mythology. In the famous tale, Ariadne gave the hero Theseus a ball of thread to help him find his way out of the Minotaur's labyrinth after slaying the beast. Spier brilliantly adapts this metaphor for investing. In this analogy: * **The Labyrinth** is the complex, confusing, and often treacherous stock market. * **The Minotaur** represents our own worst enemies: our emotional impulses, psychological biases, and the constant temptation to abandon our long-term strategy. * **The Ariane** is the "thread" of logic—our checklist—that we lay down in a calm, rational state. It ensures we can find our way back to a sound decision-making process, even when we are deep inside the labyrinth, feeling the pressure and fear of the moment. By externalizing our investment process into a physical or digital checklist, we create a tool that guides us when we are most likely to get lost. ===== Ariane in Practice: Your Investment Thread ===== An Ariane is not a generic, one-size-fits-all document. It is a deeply personal rulebook that reflects your own investment philosophy, temperament, and [[Circle of Competence]]. It's a living document that you should refine over time as you learn from both your successes and, more importantly, your mistakes. The core function is to create a "cooling-off" period and a structured analysis between the //idea// of an investment and the //act// of investing. Before you can click "buy," you must first honestly and thoroughly answer every question on your list. ==== Crafting Your Own Ariane ==== Building your first Ariane can seem daunting, but you can start by drawing on the wisdom of investing legends and tailoring it to your own style. Your checklist should force you to think through the most critical aspects of any potential investment. Here are some example questions you might include, grouped by category: === The Business === * Do I truly understand how this business makes money? Is it within my [[Circle of Competence]]? * Does the company have a durable [[Competitive Moat]] that protects it from competitors? * What are the key risks to this business over the next 10 years? Have I actively sought out reasons //not// to invest? (This helps fight [[Confirmation Bias]]). === Management === * Is the [[Management Quality]] high? Do they have a track record of integrity and skill? * Are their incentives aligned with long-term shareholders? (e.g., through ownership, not just short-term stock options). * How do they communicate with shareholders in their annual reports? Are they transparent and candid about problems? === Financials and Valuation === * Is the [[Balance Sheet]] strong? How much debt does the company have? * Is the business consistently profitable and does it generate strong [[Free Cash Flow]]? * Is the current stock price significantly below my estimate of its [[Intrinsic Value]]? Is there a sufficient [[Margin of Safety]]? === Personal Psychology === * Why am I considering this investment right now? Am I being influenced by a news story or a "hot tip"? * How would I feel if the stock price dropped 50% right after I bought it? Would I buy more, or would I panic and sell? * Have I waited at least 48 hours after completing this checklist before making a final decision? ===== Why Ariane Matters for a Value Investor ===== For a value investor, temperament and process are just as important as analytical skill. The Ariane is a practical tool that strengthens both. * **It Enforces Discipline:** It is a pre-commitment device that prevents you from making impulsive decisions based on emotion. It institutionalizes the patience that [[Benjamin Graham]] preached. * **It Combats Behavioral Errors:** The entire field of [[Behavioral Finance]] is dedicated to studying how our minds lead us astray. An Ariane is one of the most effective, self-administered remedies for these predictable errors. * **It Creates a Repeatable Process:** Great long-term results come from a sound process applied consistently over time, not from a few lucky bets. Your Ariane is the backbone of that process. * **It Facilitates Learning:** By documenting your reasoning for each investment, you create an invaluable decision journal. When an investment doesn't work out, you can go back and see where your analysis or process was flawed, allowing you to improve your Ariane for the future.