1.
Why smart & successful people find it difficult to adapt to change.
A hedge fund manager who had a moment of brilliance and made a fortune in the 1990s might struggle to adapt, because their ego and their investors expect them to repeat whatever worked last time. A garbageman doesn’t face that risk. They are much more attuned to the current reality, without the intellectual baggage of past accomplishments.
The biggest risk to an evolving system is that you become bogged down by experts from a world that no longer exists. The more evolution you have, the more you should expect that expertise has a shelf life. And those most susceptible to that risk are the people you’d least suspect: The smartest and most intelligent, who at one point flashed their brilliance but struggled to admit that it can’t be repeated.
2.
Time is a very effective hurdle
Building conviction is the same thing as building a relationship. Time and effort are necessary ingredients in all great relationships.
Relationships and stock selection have a bunch of similarities. When you start dating someone it’s normally because they passed your initial “hurdle”. The person has the right look, education, background, faith, and/or values.
For some, it only takes one date to realize “this person isn’t the one.” For others it can take 6-12-24+ months to decide yes or no. The person you are married to today is the special one. The person you grew to love more the longer you got to know them.
Most investors rush into things too soon. Shoot first, ask questions later.
The truth is we over-emphasize the importance of discovery. Only on a few occasions over a 20-year career do I ever remember buying a stock where the stock immediately went up and never came back down.
Think of your own portfolio. It always feels like you’ll never get another shot to buy a company, but almost every year the market gives you another opportunity to buy that same company.
Thought of the Week
“Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.” ~ Morgan Housel, The Psychology of Money
“The four most dangerous words in investing are: ‘This time it’s different.'” ~ Sir John Templeton, The Devil’s Financial Dictionary
Video of the Week
Intelsense Insights
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