In Part 1 of this column, I argue it's important -- whether thinking about investing or geopolitical matters -- to collect information, seek out all points of view, and keep an open mind. Then, as a salient example, I outline the major arguments surrounding the debate over Iraq and Saddam Hussein. Today, I will highlight the similarities between how one should think about investing and Iraq.

Focus on what's important, and have a margin of safety
In both investing and geopolitical issues, the key is to focus on what's important in the long run, filter out the short-term and/or less-relevant issues, and have a big margin of safety.

The most important goal, by far, of our actions vis-à-vis Iraq (and the broader war on terrorism) is reducing the chances of an attack with weapons of mass destruction (WMD), especially an attack on the U.S. Very little could be as devastating to our country.

Consider the enormous harm inflicted upon us on 9/11, and then multiply it by 10 or 100. Beyond the immediate effects, such as the tragic loss of life and direct damages, large-scale terrorist attacks typically result in widespread, long-lasting, pernicious outcomes: a damaged national psyche, loss of confidence, less spending and investing, capital flight, a "brain drain," higher security costs and inconveniences, a reduction of personal liberties, and so forth. These are not speculative consequences. Israel faces all of these things today.

Sadly, a WMD attack on our country is no longer beyond the realm of possibility. Last year, Warren Buffett -- whose primary business is mega-catastrophe insurance -- said he feared an attack of that nature is "virtually a certainty." Why? Just consider the math: If there's a 1% chance of such an attack each year for the next 50 years, then the odds of it happening during this period are an alarming 39.5%. If we can cut this to 0.5% per year, the odds drop to 22.2%. And at 0.25% per year, the odds are "only" 11.8%.

So the debate about what to do in Iraq boils down to one question: What course of action is most likely to minimize the long-term chances that WMD will fall into the hands of those hostile to us, who might then use them against us?

In considering the answer, it's reasonable to insist on a huge margin of safety. For example, even if the costs over time were hundreds of billions of dollars (whether the costs to attack and occupy Iraq, or to maintain a strong military presence in the region as part of a containment strategy), this would be money well spent if it reduced -- even by only a small degree -- the odds of a major terrorist attack against us. Regardless of what course of action people believe to be warranted at this time, it's safe to assume most people agree that this is a -- if not the -- primary goal.

Develop scenarios and assign probabilities
Problem is, how to minimize the risk of such an attack is by no means clear. Some argue removing Saddam will reduce the odds of a future WMD attack. Others say that if we attack Iraq now, especially without international support, we would create more resentment and increase the long-term probability of such an attack.

To make your own judgment, try to develop scenarios in your mind, and then, setting emotion and biases aside, estimate probabilities for each scenario (in the context of investing, I went through this exercise in one of my all-time favorite columns, Cisco's Formidable Challenge).

At one end of the spectrum of scenarios, perhaps Saddam is like Hitler in 1938, when Chamberlain made a fateful misjudgment to appease him at a time when, by Hitler's own admission, the French and British armed forces could have easily trounced his. At the other end of the spectrum, perhaps Saddam today is like Qaddafi 15 years ago. (Recall that Libya was once an active sponsor of terrorism, and was directly implicated in the 1988 bombing of Pan Am 103. Yet, Libya has largely been contained since then without going to war or removing Qaddafi from power.)

Not to act is to act
When faced with stress or uncertainty, a natural reaction is to do nothing. That's fine most of the time, but not when it comes to deciding whether to sell a stock. Assuming it's a liquid stock (and ignoring taxes), the decision to continue holding is economically identical to the decision to buy it. Yet investors persist in hanging on to a losing stock in which they have lost all confidence, in the often-vain hope that it rebounds to the price at which they bought it.

In the case of Iraq, the best course of action today may be, essentially, to do nothing (e.g., don't attack, continue the inspections and sanctions, and adopt a strategy of containment). But let's be clear: Not to act is to act.

This can work out well. For example, one could argue that President Kennedy avoided nuclear Armageddon by not attacking Cuba during the Cuban Missile Crisis. But it can also lead to catastrophes, such as the Rwandan genocide of 1994. (For more on this tragedy and the appalling failure to act by the U.S., UN, and other Western powers, I recommend this PBS website.)

Investors and national policymakers have very different positions in this situation. To use one of Buffett's favorite analogies, there are no called strikes in investing. Investors can wait and wait until a juicy pitch comes along before swinging at it. But as one of my friends noted, "In politics, leadership has to hit all kinds of pitches. With this pitch, Saddam's on the mound; Osama's on first base; Kim Jong Il's on second; and Al Qaeda's in the outfield. The French and Germans are screaming bloody murder in the stands. There's a fast screwball to the head, and Bush is trying to hit it. Tough job."

We are where we are
I often hear investors say, "I'm not buying the stock today at $30 because it was at $28 two days ago." This is highly irrational, as the only thing relevant today is whether the stock is a great buy at the current price. Past decisions -- in this case, the decision not to buy the stock two days ago at a better price -- are water under the bridge.

Similarly, I frequently hear statements like: "I don't support the war because the Bush administration could have done a better job of building international support." Or, "Let's get Saddam now to fix the mistake we made by not getting him during the last war." Both of these statements miss the point: We are where we are.

Difficult decisions should be made based on a clear, unemotional assessment of the current situation rather than wishful thinking about what might have been. That's not to denigrate the importance of studying and learning from the past, but successful drivers focus on the road ahead, not the rearview mirror.

Think independently
The ability to ignore the herd, evaluate the facts, and reach independent conclusions is the single, most important characteristic of successful investing. As Buffett said, when asked if it bothered him that people called him a has-been during the tech bubble:

Never. Nothing bothers me like that. You can't do well in investments unless you think independently. And the truth is, you're neither right nor wrong because people agree with you. You're right because your facts and your reasoning are right. In the end, that's all that counts. And there wasn't any question about the facts or reasoning being correct.

In the same way, we Americans have to decide independently what is the best way to ensure our future security. While we, of course, should listen to our allies and world opinion, ultimately we must decide for ourselves what to do with Iraq (and in all other matters of critical national interest).

To make good decisions about geopolitical matters, as well as about investing, it's critical to set emotions aside and calmly analyze the numerous variables and uncertainties. The future is always somewhat unpredictable, but one can make better decisions by approaching the problem rationally.

Whitney Tilson is a longtime guest columnist for The Motley Fool. Under no circumstances does this information represent a recommendation to buy, sell, or hold any securities. Mr. Tilson appreciates your feedback on the Fool on the Hill discussion board or at The Motley Fool is investors writing for investors.