Load-Bearing Assumption

One of the two or three facts about the world that a thesis rests on, such that if it stopped being true the whole belief would fail.

Example

A thesis about specialist lenders taking share from banks rests on banks staying retreated from that loan size, on underwriting costs falling, and on the lenders' own funding staying cheap.

Important

Falsifiers get pointed at the assumption that is easiest to measure rather than the one most likely to break. List them separately and check which one your falsifier is actually watching.

Related terms

  • Investment thesis — A written statement of what you believe about an investment, at what price it is worth owning, and what specific observation would tell you that you were wrong.
  • Falsifiable claim — A statement specific enough that some future fact could show it to be wrong.
  • Disconfirming evidence — Information that would make your thesis wrong - facts you would have to explain away rather than cite.

Lessons that explain it

  • A projection is tested against the company's own history — Financial projections are most useful when compared with what the company has actually achieved and run through downside scenarios that show when cash would run out. (11 min)
  • Sort what you know from what you assume from what nobody can know yet — Before deciding, separate verified evidence, assumptions that could be tested, and genuine unknowns. The decision is about whether the unknowns are acceptable at this price. (10 min)
  • Amend, date and keep the original - never quietly rewrite — A memo is a record of reasoning at a moment. When facts change, add a dated amendment rather than editing the original, so the evolution of your thinking stays visible and reviewable. (10 min)
  • If nothing could prove you wrong, you have not said anything — A thesis becomes useful at the moment it names what would refute it. This is how to write that line so it is checkable rather than rhetorical. (12 min)
  • The annual hour that decides whether you learn anything — A thesis that is never reviewed is a belief you happen to have held for years. The review is where a written thesis converts into judgement, and it has to separate what you got right from what merely worked. (11 min)
  • Several methods give a range; the gaps show what you believe — No single method values an early company reliably. Running several and comparing the results shows the range of defensible prices and exposes which assumptions drive the difference. (10 min)

All 578 terms in the Investing glossary