Be Okay with Being Wrong

My graduate advisor at Harvard said that his most successful PhD student was a guy who graduated and became a comedy writer in Hollywood.

What, did you think it was gonna be the kid who graduated and took a $150k salary at Intel for the rest of his life?

From Howard Marks at Oaktree Capital: You can’t take the same actions as everyone else and expect to outperform.

Passive investors, benchmark huggers and herd followers have a high probability of achieving average performance and little risk of falling far short. But in exchange for safety from being much below average, they surrender their chance of being much above average.

In order to be first to the game, you have to do something that no one else wants to do, at least for a while. And there’s probably a pretty good reason why no one else wants to play that game. And there’s a very real risk that no one will ever join the game, and you’ll look like an idiot playing with yourself forever.

It’s even harder for institutional investors, because not only do they have to risk being wrong, they have to risk being wrong with other people’s money.

It’s not easy to say, “Hey sorry, I lost all of your money investing in this company that lets you hail a cab from your phone. I know everyone said it was a low-margin business in a tiny market, but I like to gamble.”

Public figures need to care about their reputation, and rightly so. John Maynard Keynes: Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.

Anyone without a reputation to uphold is free to shoot for the moon. Or be content with average. We all have different definitions of success.

See Also:
Dare to Be Great II –Howard Marks, Oaktree Capital

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