Application of Selected Sun Tzu Phrases to Portfolio and Risk Management
Before getting into the quotes and corollaries, there are several selected phrases, employed by translators of Sun Tzu's writings, that need to be defined within the context of contemporary portfolio management and risk management situations:
Enemy
Other participants in the market(s), not the market environment itself.
Terrain
The virtual terrain created by participants interacting in the market place. Means of providing us with information regarding what other market participants are doing.
Defeat
Catastrophic loss of business or trading capital.
Mistake
Given that to be human is to err, I view "mistake" to represent a series of errors, compounded in such a way as to result in catastrophic loss of business or trading capital. "Mistakes" of a catastrophic nature tend to result from failure to capture and isolate our intentions (plans, strategies, and tactics). I am not viewing "mistake" as an error that simply results from being human and one from which we can recover and learn.
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