One of the things I look for when getting into a new venture, investment, etc is that most people don’t understand how it would succeed. If I have a deep, realistic understanding of how it will work, that’s all I need. Big gains come when you have vision that no one else does, but you know they will all see your reality as the truth with time.
My biggest investment returns have been from doing exactly what you are saying. However I only notice opportunities like this every few years. Obviously there are more opportunities than what I am perceiving in my industry.
Investors don't work with perfect information. They work with imperfect information. This means that it is impossible to predict with certainty what will happen.
So it's important to remember that an investor who passes on a product that goes on to become very successful may have actually made the best possible decision given the information that she had.
That's why the spectator sport hindsight-investing is so popular.
It's funny how many people are so sure of the soundness/lack of soundness of a business model, yet surprisingly few put their money where their mouth is.
This reminds me of a quote I heard during the dot.com bubble. "If I can't expect 1000% return I'm not investing in a company". It's such a high level of expectation that you just know a correction is coming.
I think of it like when Warren Buffet or George Soros buys a new stock. It's not that they can't be wrong - it's that people who are really, really good at this thinks it is a good investment.
I've heard this basic idea from all kinds of really successful businesspeople. This idea that there's some minimal level of buy-in (10%, or whatever) that you can just take for granted. It comes up most often when someone is challenging the premise of their idea. "Well if we only get X% it'll still be a win" etc.
Most investors are very predictable: They look at companies who wrote success stories in the past to determine future successes of emerging companies. This attitude is exactly the same as looking through a rear-view mirror while driving into a new country or having sex with your girlfriend while looking at a picture of your ex...
They'll convince themselves that it is standard practice, comparable with what others in the industry are doing, conformance is critical for attracting investment, etc. etc.
"Biggest thing to remember is that this is an exit"
Which is always interesting because regular people think about whether ideas make sense and investors think about whether they can simply get the idea to the point where a greater fool buys into it. At that point they are right and everyone who thought that the idea wouldn't work is wrong. Ironically.
These folks need to fully understand the amount of luck and timing they need to benefit from this. Early adopters easily cashed-in, but will be much harder going forward. Everyone is a genius when it's going up, not so much on the way down.
For sure!
The point is that simply replication the behavior of winners is not any guarantee of winning.
Replicating SOME of the behaviors of SOME winners, upon careful study of what in their process actually allows them to differentiate themselves from others is the key, and is usually a process that requires a lot more work.
The work here was that they had some sort of investment process that required time & effort evaluating projects & their prospects over long time horizons. These sorts of processes require entire investment teams and are not the sort of thing that make it into their Fortune magazine blurb or pithy twitter posts.
The process cannot be summarized in a paragraph blurb, and even if you were to read a 300 page book you may not have the man-hours, technical skills or knowledge to replicate it.
Investors routinely make big mistakes, but they also routinely get wiped out and replaced by someone with a more long-term vision.
Think how much money all the day-traders put together make (probably less than zero) versus someone like Warren Buffett (a lot more than zero!), or the many successful owner-operated or founder-owned companies out there.
Most of the top tier investors are pretty consistent with this message. Ironically, they're also the ones who get approximately all the returns, probably as much because the best entrepreneurs would prefer to work with them vs. mediocre investors, as much as because of the direct value these investors add.
And most people will never fully understand that until it happens to them. Then you have this eye opening moment, and you understand.
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