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Stocks B / Berkshire Hathaway
|Subject: Re: Is there one idea above the rest?||Date: 11/19/2000 1:31 PM|
|Author: kro56||Number: 38156 of 228091|
I especially like the druken judge analogy.
If you can execute those four steps well, you WILL be successful.
It's a surprisingly simple truth. Anybody should be able to do it.
How come so few do?
As Charlie Munger has said, "just because it is simple doesn't mean it is easy."
As Keynes said in differnt words, many investors concern themselves with trying to predict the judges opinions rather than looking at the actual performance.
If you read about behavioral finance , the concept of social proof suggests that humans have a tendency to look at the actions of others for guidance when faced with a complex situation. To me, it appears that this human adaptation serves one well most of the time in making many decisions (is that crowded resturant I've never been in likely to be good?, Is that movie my friends rave about worth seeing?), but is harmful in
an endeavor where the opinion can greatly increase the price you pay (for what is the same merchandise as those
who bought before you at a lower price received).
I think human psychlogy makes it difficult for many investors to ignore the drunken judges. Even those who should know better have trouble when the judges keep giving out high scores and they are not playing.
Those who can ignore the judges and focus on the actual performance are a minority who, IMHO, have a huge long term advantage. I think many on this board are members of that minority, and hope to include myself in their company.
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