What can be lost, how it is measured, and the difference between uncertainty and danger.
In distress, a claim is worth what its documents let it argue for, not where it sits on the slide.
Restructuring and distressed interviews, credit modelling, and any discussion of covenant-lite lending.
From The Caesars Palace Coup · Max Frumes and Sujeet Indap
A model predicts the past decisions in its training data; if those were biased, the model is a bias machine with a straight face.
Any model used on people, credit underwriting, hiring tools, and AI governance questions in a bank.
From Weapons of Math Destruction · Cathy O’Neil
Ask what a rating assumes about defaults happening together before trusting what it says about the pool.
Any question about 2008, about structured credit, or about why a highly rated instrument lost most of its value.
From The Big Short · 2015
A limit is an escalation rule: it decides when a problem must move up the firm, not just how big it may be.
Markets and risk interviews, especially the question of what a risk function actually does.
From Margin Call · 2011
Settlement takes days, and the collateral call arrives before the trade clears. That gap is where a squeeze does its damage.
Any long/short, prime brokerage or market structure conversation that touches GameStop.
From Eat the Rich: The GameStop Saga · 2022
Whatever you can measure and reward will be maximised literally, including the gaps between the measure and the goal.
AI product and risk discussions, designing any metric or bonus scheme, and evaluating a model's objective.
From The Alignment Problem · Brian Christian
Ask what period a model was fitted to, and whether that period contained the event you are worried about.
Any risk model, stress test or structured product that reports a probability of loss.
From Berkshire Hathaway's 2008 letter to shareholders · Warren Buffett
Ask when the debt comes due, what it can reach, and what trips it, before asking how much there is.
Real estate, infrastructure and any capital structure question where leverage is measured only as a ratio.
From Brookfield Asset Management's 2008 letter to shareholders · Bruce Flatt
Lending cures illiquidity; only capital cures insolvency. Decide which problem you have before choosing the remedy.
Questions about why Lehman was allowed to fail and AIG was not, about central bank lending, or about any distressed situation.
From Too Big to Fail · 2011
State the liquidity first, because the argument that prices overshoot value is only available to those who can wait.
Any crisis communication, any question about buying in a crash, and infrastructure or real asset valuation.
From Bruce Flatt's March 2020 update to Brookfield shareholders · Bruce Flatt
Look for situations where the range of outcomes is wide but the chance of permanent loss is small, because the market prices both as risk.
Idea generation, special situations, and any pitch where the obvious objection is that the outcome is unknowable.
From The Dhandho Investor · Mohnish Pabrai
Find the narrowest step in a supply chain; that is where the risk, the pricing power and the politics all sit.
Technology coverage, macro and geopolitical questions, and any discussion of moats in hardware.
From Chip War · Chris Miller
Whoever can take a position must not be the person who confirms it. Separate the hands, and the rest of the controls become possible.
Risk, operations and compliance questions, and any time a process lets one person both act and verify.
From Rogue Trader · 1999
A track record with no bad months is a question, not a credential.
Due diligence on any manager, strategy or product that reports steady positive returns.
From Madoff: The Monster of Wall Street · 2023
Measure risk as the chance of ending the holding period with less buying power, which makes volatile productive assets safer than stable unproductive ones.
Any debate about what risk means, portfolio construction over long horizons, and questions about gold or cash as safe assets.
From Berkshire Hathaway's 2011 letter to shareholders · Warren Buffett
A hedge is a premium paid every year; over a long bull market the premium is the whole story, so account for it as a cost from the start.
Portfolio hedging decisions, insurance company analysis, and any discussion of tail protection.
From Fairfax Financial's 2016 letter to shareholders · Prem Watsa
The common factor among people who last is not how they pick trades but how they limit what a wrong one costs.
Sales and trading, hedge fund and any markets interview that asks how you would manage a position.
From Market Wizards · Jack D. Schwager
Seniority is a queue for losses; the thickness of the slices beneath you is your protection.
Any structured credit, securitisation or capital structure question, in an interview or on the desk.
From The Big Short · 2015