孫子兵法 The Art of War – Chapter 1: 道天地將法


孫子兵法 has been truly prominent through 2022 and we shall use it to understand the underlying principles of 道天地將法

The most prominent factor that ravaged the entire 2022.

We can see why 天 is second in line just behind 道. When macro factors come into play, almost nothing else matters. It was the same with covid, it was the same with the Fed’s interest environment, inflation and it will be the same moving forward. 順天者昌、逆天者亡. From “Growth Stocks”, to banks, to oil corporations, all did pretty much the same as 2021 (effort wise), but their change in valuation is drastically different.

Again, it is easy with hindsight to be able to see where’s the peak and where’s the trough. More importantly, it will be the commensurate effort in measuring and understanding the cascading effects of any macro factors, the extend of it and the duration of it.

Understanding and undertaking the appropriate risk returns will be the key to better manoeuvre such environments again.

The fundamentals of the business, its moat, business model, books health and simply internal capabilities, strength and advantages or disadvantages.

One of the clear outcomes of 2022 is that matching 地 with 天 produces incredible results.

A fortress built on a hilltop coupled with blazing sun during noon has an almost unstoppable downward attack momentum.

An army of well-equipped well-trained archers are pretty useless when the wind is against them and should only wait for the wind to turn.

Understanding 地 is critical to understanding how one’s strengths or weaknesses is able to perform against the current macro climate. And along with it, the risk and reward arising from the short and long-term valuation difference created by market forces.

The one that can make or break the entire business and perhaps one of the hardest to assess.

As previously discussed, I believe there are generally two different scenarios on management. 1. Where the business is absolutely reliant on it (mainly startup phase) and 2. Where the business can totally do without it.

The wisdom of Buffet and Munger would also tell us that it is best to be invested in businesses that can perform well independent of who is running it.

This is the ultimate truth as businesses are perpetual entities and should be seen as an entity by itself rather than an extension of the person that is running it.

The Elon Musk saga perfectly narrates the 將 factor in this particular case.

Nevertheless, it does not mean to ignore or disregard the 將 factor, but rather to understand it. What risk and reward does this 將 brings to the business during their charge.

And finally on the topic of 調兵遣將.

Understanding the business deeply and the effects of 將 on the business allows us to uncover risks and rewards in management changes. 遣將.


The right management with the right business can add incredible value or can drag the whole team down.

Steve Jobs founding Apple.

Steve Jobs getting kicked by Apple.

Steve Jobs coming back to head Apple.

Steve Jobs handing over to Tim Cook.

In my opinion, the above 4 situations are all positive decisions, especially when Steve Jobs was being kicked. If he had not, I believe he would run Apple down to the grounds at that time.

霸王不過江 焉能捲土重來

Nonetheless, management changes always come with high short-term volatility where previous structures are torn down and new ones to be painfully rebuilt.

As we can see, under the influence of all the previous factors, it is tough and generally slow for any 法 to significantly impact the state of the business in the short run.

Strategies takes time to implement and execute, culture takes time to inculcate. However, getting the ball rolling is important as well, especially in the right direction.

What we can do is to keenly observe the strategies and operations to understanding the risks and rewards of the strategies and derive the difference between the short-term and long-term position of the business.

And finally, 道.

The most important/special intangible factor that can make or break everything else.

To say that it holds the priority or is the top factor in 道天地將法 would be slightly inaccurate.

Instead, I would say it is closer to a trump/ joker card. A special “out of factor” factor.

Mission, Reason, Calling, the Why, the Way, whatever you call it, divine or mortal.


It is similar to what is written in our articles’ disclaimer, that words used are mere words, as if and where philosophies can be conveyed without using written letters, we would do so. Or the likes of Bruce Lee’s Jeet Kune Do philosophy where Jeet Kune Do is not Jeet Kune Do, it is not a system, it is but a philosophy.

We see that 道 can seemingly perform miracles and go against all odds regardless of the situation. And at the same time, it can destroy everything once it is lost.

It is perhaps simply the basis of the start of something or nothing.

From this 道, we had witnessed the miraculous uprising of Tesla from its inevitable demise from 2018 – 2019 and the fall from grace from 2022.

It would probably be beyond human to fully assess this factor accurately but perhaps to be appreciated and risk adjusted for our own objectives.

It succeed because it succeed. It fail because it fail.

There is no why and it isn’t due to a choice. It is because it is.

孫子兵法 The Art of War – Chapter 1.3/4: 智信仁勇嚴

The 5 critical traits of a leader

Different from personalities, these are the traits of what a leader should possess.

Again, it can be applied to many aspects of life, but we would just focus on applying it to business management and leadership in my own understanding and interpretation.

智: to be wise and be able to see the big picture

信: ability to command absolute trust

仁: capacity to allow failures to happen

勇: innate desire to take on challenges and disrupt undesirable status quo

嚴: the will to uphold discipline and fairness

孫子兵法 The Art of War – Chapter 13.1/2: 出於眾者,先知也,用間




Those that win every time sees what’s coming. To foresee/predict/estimate what might happen, one should not rely on superstitious predictions or gut feelings, one should not over rely on drawing direct comparison with history or similarities, and one should not be over reliant on statistical data or estimates. It must come from people, people who know the enemy.

– Understanding –

We must know the affairs of the business and the market inside out, current and future in order to return a desired positive return to our investments. History does not equate to future. There is no such thing as “market feel”. Do not over rely on quantitative data. We have to use or know the people who know the business.

鄉間, 內間, 反間, 死間, 生間

Not like for like, but below are my understanding of the types of people we would want to know when making an investment decision

– Consumers who use the product/services

– Employees who work for the company

– Suppliers who sell to the company

– Distributors who help the company to sell

– Marketers who help the company to advertise

– Regulators who approves/regulate the company’s products/services/patents

– Shareholders who invested in the company

– Investors who are looking to invest in the company

– Traders who are trading the company counter

Central idea is that all these people gives us a leading indicator of what is about to happen, what will happen or where the company is going towards.

孫子兵法 The Art of War – Chapter 7.3: 風林火山陰雷


The core of Military is deception, you must only move advantageously. Rush like the Wind, Silent like the Forest, Spread like Fire, Immovable like Mountains, Unpredictable like the Cloud, Quick as Lightening. One wins by knowing the opponent’s move.

Understanding –

We should only invest when we are certain of the outcome.

There are multiple perspective to apply the following either at investment strategies or looking at the business wise.

風: Massive Continuous Tailwind

林: Secrecy of information

火: Widespread Adoption/ incur massive following quickly

山: Ability to Hold/ Defend position/ Moat

陰: Constant Evolution/ Ability to cause competitors to run in circles

雷: Ability to move resources quickly/immediately when the time is right

孫子兵法 The Art of War – Chapter 6.8: 水因地而制行,因敵變化而取勝


The form of military is like water, the flow of water runs high to low. Success comes from avoiding resistance and attacking the weakness. Water flows with the ground, military wins according to the opponent. If one could be formless and adapt to overcome, one would be divine. There’s no ultimate winner among the 5 elements, Time changes constantly, Day can be short and long, Moon is never the same.

– Understanding –

There is no one sector or business that will win forever.

Cycles come and cycles go.

Be dynamic and go with the path of least resistance.

Be like Water.

孫子兵法 The Art of War – Chapter 5.6: 求之於勢,不責於人


The ones who thrives in battle, knows how to spot and rely on the macro momentum/opportunities rather than over-relying on the soldiers to turn the tide. Identifying the momentum and then tune the people to ride it is similar to rolling a tree log. When the ground is flat, the log is still, when the ground is steep, it moves by itself, if the log is square, it is stopped, when the log is round, it rolls. One who master this understanding would be as if rolling down a rounded log down a very steep slope.

– Understanding –

It is important to understand where the cycle is. Akin to Ray Dalio explanation of economic cycles, it is comparatively much easier to ride a huge macro wave up than to oppose one.

Momentum is important, winners win more (business wise).

It is far easier and safer to roll a snowball down a steep hill than rolling a snowball up one.

孫子兵法 The Art of War – Chapter 4.1: 不可勝在己,可勝在敵


The ones who thrives in battle, first knows how not to be won, and wait to win. It is up to oneself to not lose, and up to the opponent for our victory. Winning can be known but not be forced.

Understanding –

This relates to the core principle of in order to win, first we must not lose. And we must take necessary steps, actions and plans in order for us not to lose.

When we have the ability to not lose, then, we will be able to seize the opportunities to win.

The ability to not lose lies on us, the opportunity to win lies in the market.

We cannot force a winning situation when the market is not right. What we can do is to place ourselves in an unlosable state and seize the winning opportunity when the market presents it.


孫子兵法 The Art of War – Chapter 3.8: 知彼知己,百戰不殆

Skipping to the core principles which I believe should be how the book should be read (which are more interesting too) instead of from Page 1. I will cover what I feel are the main principles then jump back to continue in sequence.

– Original Text –


Understand others + understanding ownself grants you an unlosable position

– Understanding –

The common mis-read version is 知彼知己,百戰百勝 (win everytime). In fact, the book never mentioned this and the accurate version should be 百戰不殆 (never lose).

There is a drastic difference between the two.

Furthermore, the core principle states that 百戰百勝 (winning every battle) mindset is a subpar one while 不戰而屈人之兵 is superior (win before battle). I’ll go through this in subsequent posts.

In essence, the core principles to be applied to investment is not to seek to always win but to seek to never lose. It is akin to the famous quote of Warren Buffet “the first rule of investing is to never lose money” and the second rule “is to remember the first rule”. Making money was never mentioned.

Yes, so 孫子 had said it first about 2500 years ago. (there are many other modern day quotes which also coincides with the book)

孫子兵法 The Art of War – Chapter 0

The most important book in investing and in human society.

There are many books by many great accomplished investors but I believe the best one is but a tiny 50 page book, 孫子兵法, that is over 2000 years old which we can read in under 1 hour.

Although the words written are short and few, the meaning behind them will benefit us far greater and allow us to ponder/savor it for a far greater duration than any other books.


*The second most important “book” in my opinion is perhaps Warren Buffet’s Letters to Shareholders. No it is not a literal book but over decades of annual shareholder letters to Berkshire Hathaway investors which can be found on their company website.

孫子兵法 vs investing

Despite being a 兵法 (military strategies) it focuses on the concept of success rather than specific tactics. It is also based largely on tackling against human adversaries in the human society. (the keyword is “human”)

So instead of 兵法 it can totally be titled 勝法 (Success strategies/ Principles for Success or the Art of Success).
*in a later article, I will discuss why it should also be instead named 不敗之法 instead of 勝法 (Art of “Not Losing” vs Art of Winning)

In this series, I will attempt to document and discuss 孫子兵法 in multiple chapters and my personal understanding of how we can use it for investing.

I will also loosely translate ancient literature into my personal modern understanding which may differ from widely adopted translations/ interpretations.