There is a fine line between stubbornness and conviction. Money managers shouldn’t complain about the wind but should just adjust the sail. We always have to guard against that over-confidence and give greater weight to our flight instinct.

Q:  When would a company like Apple in the pre-iPod era appear on your radar?

A: It wouldn’t have - before the iPod. Pre-iPod Apple was just a marginal computer company. But I remember how difficult it was to download and play music on MP3 players in the preiPod era. Then the iPod came, and just seeing the ease with which my kids adopted it, I knew that it was going to be huge. Apple wasn’t the first MP3 player, but it was the first userfriendly MP3 interface for the masses. Likewise, Henry Ford didn’t have the first car, but his Model T was the first broadly usable car.

More importantly, Apple didn’t rest on its laurels and that’s where innovative management comes in. They came out with a new iPod, and then another version of the iPod and then another, cementing that relationship and staying ahead of competition.

Q:  What are your views on risk control?

A: I control risk in two ways. The first one is not letting any position get out of hand because I don’t think that the returns justify positions larger than 5%. That means that any single mistake is not going to affect a large part of the portfolio.

But the greater risk control is my willingness to sell at the first whiff of trouble and not to give anyone the benefit of the doubt. If events show that I was wrong, I can always buy back in. I don’t let my ego get involved. My trading costs are low enough to enable me to avoid the stress and the downside of a mistake. When the cost is virtually nothing, it removes the necessity to stick with something when in doubt.

Q:  How do you try to protect your shareholders against companies like Enron and WorldCom?

A: Fraudulent practices are something that I cannot control. What I can control is my reaction. I don’t waste time worrying about corporate governance, because that isn’t going to make any difference. But when something is rumored or an event occurs, I will shoot first and ask questions later. To me this is the only way to reduce risk because when a company is trying to hide stuff, it always can, at least for a while. But when something blows up, my willingness and ability to move very fast helps my shareholders.