Contrary to general belief, an artist is never ahead of his time but most people are far behind theirs.
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All posts filed under “Notes”
Fixed Mindsets Miss Paradigm Shifts
The disadvantage of a mindset is that it can color and control our perception to the extent that an experienced specialist may be among the last to see what is really happening when events take a new and unexpected turn. When faced with a major paradigm shift, analysts who know the most about a subject have the most to unlearn. This seems to have happened before the reunification of Germany, for example. Some German specialists had to be prodded by their more generalist supervisors to accept the significance of the dramatic changes in progress toward reunification of East and West Germany.
Waiting To Buy
As a young analyst, I always started by looking for really cheap stocks, and after concluding they were indeed underpriced, I then tried to convince myself that neither the businesses nor managements were bad enough to offset the statistical cheapness.
Having completed all the valuation work before even meeting the maragement, you can guess how strongly biased I was to conclude that they were at least acceptable! Today, I encourage our analysts to reverse that process: Find businesses and managements they’d be excited to own and then do the wark to see if the valuation is attractive.
If it isn’t attractive now, monitor the stock price so you are prepared to act when it is more attractive. It is really amazing to see over the course of our holding period, typically five to seven years, how much value a great maragement can add that never was incorporated in our model, and conversely, how much value a bad management can destroy.
The Eyes Of Other People
Almost all the parts of our bodies require some expense. The feet demand shoes, the legs stockings, the rest of the body clothing, and the belly a good deal of victuals. Our eyes, though exceedingly useful, ask when reasonable, only the cheap assistance of spectacles, which could not much impair our finances. But the eyes of other people are the eyes that ruin us.
Education As Entertainment
Anyone who tries to make a distinction between education and entertainment doesn’t know the first thing about either.
How Ubiquity Affects Signalling
A universal law of economics says the moment something becomes free and ubiquitous, its position in the economic equation suddenly inverts. When nighttime electrical lighting was new and scarce, it was the poor who burned common candles. Later, when electricity became easily accessible and practically free, our preference flipped and candles at dinner became a sign of luxury.
Success Traps
Success traps can be harder to get out of, because at least with failure traps, there’s incentives to change things. With success traps, the incentives are to keep doing the same thing.
Avoiding Noise In Judgment Is Very Difficult
My own experience of how little this knowledge has changed the quality of my own judgment can be sobering. Avoiding noise in judgment is not really something individuals are going to be very good at.