No. of Recommendations: 15
I found the last exchange very interesting:
"Q: You've spoken about the importance of psychology in investing. Is there a cognitive bias that you think is particularly significant in the markets today?
A: There are lots of cognitive biases that are very significant. One is the constant tendency to overrate your own intelligence and skills in deciding what to do and what not to do."
Most of us probably don't appreciate that 50 years ago or so most people did not believe to be as smart as we think of ourselves. Presumably this is because of the overload of information and all that tech we are drowning in. Yet in today's stock market you rarely get ahead because of some piece of information few people have, and you never get ahead because of information everybody has.
Being smarter than others today means having a better system to filter out the noise, having better mental models, being more efficient. Charlie Munger is paradigmatic in this respect: Own a few great companies and sit on your ass. The problem is of course identifying those great companies, have the patience to wait for a great entry point and the psyche to be able to sit there doing nothing.
As a note aside, COVID made "vaccine experts and statisticians" out of total idiots who got their information from Twitter or Mr. Trump. In Germany, out of distrust in the FDA, big pharma Pfizer etc. hundreds of people lined up outside of an airport to take a totally untested "vaccine" made by a self-proclaimed biotech innovator (who was arrested on the spot).
We may laugh about these fools, but are they really that much different from us, when we become retail, media, accounting or tech "experts" and try to outperform the indices? Why are we trying to build our own egg beater, as Charlie calls it, instead of letting the real pros do the job for us?
