What else were investors buying if not Apple? They were buying stocks of those ‘great ideas’ like Iridium satellite phones and Hummers. Did you know that Google was passed over by several VC’s who thought “search is cooked”? Do you think it was obvious that Facebook would take over the world before it did?
“Don’t worry about people stealing an idea. If it’s original, you will have to ram it down their throats.”
“Put one dumb foot in front of the other and course-correct as you go.”
- Big 5 year budgets and business plans? They’re a crock, don’t bother. You’ll just be revising it again every 6 months. And if you do manage to stick to it, you’re admitting that you hadn’t learned how to get better since writing the budget. Instead put in place great metrics and then learn to measure and respond quickly.
- ‘Playing’ the share market? If you beat the average, it was a fluke. Even Buffet says you’re better investing in index funds. We always see some people outperforming the market, but we always pick them with the benefit of hindsight. They are statistical flukes, who rarely back it up.
“In retrospect, all revolutions seem inevitable. Beforehand, all revolutions seem impossible.”
Further reading (only for the geeks amongst us)
The scary thing about how our minds work is that we remember our good predictions, and rapidly forget those we got wrong. We have a much lower hit rate than we realise.
If you’re still not convinced, here are some great reads about how we are fooled by randomness. Most of them retell similar anecdotes, so you really only need to read one or two for some strong insights.
Index Funds vs Active Managed Funds: The Economist had a wonderful edition a couple of years ago looking at investment approaches. Two articles discussing the superiority of Index funds from it are:
(It’s subscriber only content, but you can get a free 14 day pass).Or for a similar summary: http://mutualfunds.about.com/od/activevspassivefunds/a/indexvsactive.htm