Primary and non-primary

In investing, only two principles are first-order.

First: Value is the discounted present value of future cash flows generated by an asset. You can say it's vague, but this is first-order, and precisely the charm of investing—it encompasses everything in one sentence.

You need to think about it word by word: generate, how is it generated? Future, how far into the future? Cash flow, what kind of cash flow? Discount, discounted at what rate?

Second: Investment returns come from the gap between the starting price and the final value over a certain period of time. This sentence seems similar to the first, but it's not. There's a key element here: time. Time represents change, the game between certainty and uncertainty, leading to the final value.

Apart from these two, everything else is non-first-order.

First-order is the never-wrong mathematics. Non-first-order is a narrative, a viewpoint, a quick answer that depends on when and where.

Listing the non-first-order can eliminate all investment myths and return to correct understanding. All non-first-order expressions are biases.

Concentrated investing is non-first-order.

Diversification is non-first-order.

Long-term holding is non-first-order.

Growth investing is non-first-order.

Low valuation multiples are non-first-order.

Asset allocation is non-first-order.

Investing in good companies is non-first-order.

Investing in technology is non-first-order.

Investing in explosive-growth industries is non-first-order.

Investing in excellent CEOs is non-first-order.