James Dean Style Investing!
My first proposition to all clients is to view Investment as a frame of mind, kind of like being a Texan like James Dean in his legendary role in “Giant”.
A frame of mind: for a samurai duelist it is a calm disregard for human life and an animal ferocity attained through reclusive training in the wilderness for years. For an investor it can be simpler - as basic as an appreciation for randomness.
You live with the fact that a lightning strike might electrocute you during the rain. You are aware of this very small yet mostly random probability. You know that driving implies a similar, even higher degree of risk, even more random. You take some precautions; yet you still choose to drive onto traffic, or fly, or something. Life is vulnerable. Life implies risk. You acknowledge it; you live with it. Are you ready to acknowledge the same appreciation for risk and randomness in investing as well ? You must.
Does the majority of fund managers and financial institutions understand randomness ? No. Did Black and Scholes understand it ? Did Nassim Taleb who prides himself on dissecting each and every fallacy of the mainstream derivatives models understand it ? No. If they did, they would be billionaires by now. But how can humanity miss so natural a concept ? I don’t know, I don’t spend any time on why others may or may not acknowledge certain phenomena. Most ideas are even more predominantly subjective for such generalizations. But for the purposes of illustration we can dwell on an example, on the next post, Stay Tuned !!
With Warm Regards