Margin of safety is a hard to understand concept. Morgan Housel once explained it with a story about cats. In 1988 two NYC veterinarians asked: What happens to cats that fell out of the city’s high-rise windows ? Curiously the injury-height graph was an inverted U.
Short falls caused least injury. But a medium fall had a ⬆️ chance of injury than a long fall (> 90 feet). Why? When cats fall their instinct is to lock their limbs. In a short fall this helps them land on their feet. But in a medium fall locked limbs cause broken bones.
In long falls, they reach ‘free fall’. This helps them relax, go beyond instincts & spread their limbs horizontally. This avoids injury. So, margin of safety: something that, in a crisis, gives you enough time to go beyond instincts & calmly decide the best course of action.
