Margin of safety is room for reality

A margin of safety is an admission that our estimate may be wrong.

The future can disappoint through events we did not model, variables we misunderstood, or ordinary errors in judgement. Paying a price that requires every assumption to work leaves no room for reality to be untidy.

This idea travels beyond investing. Plans need time buffers. Companies need financial resilience. Decisions need a way to survive being approximately right rather than perfectly right.

Confidence makes action possible. A margin of safety makes error survivable.