Fear Uncertainty & Doubt (FUD)
Who doesn’t like a new acronym?! In this post, I want to highlight how laziness and psychology can hurt somebody’s chances of finding a great investment opportunity. It is easy to cast doubt on something, fear what you don’t know, and be paralyzed by uncertainty- but I urge people to find out for themselves. Do the homework, infer what the future could be based on the core principles of your investment thesis. Start from bottoms up in your analysis and your conviction will help you have confidence your investment will have great returns in the long run. Think 5 years, at least, into the future; not 5 weeks or 5 months like short-minded Wall Street thinks.
For example, many smart people didn’t think the iPhone was going to do well. Look at this quote from former Microsoft CEO Steve Ballmer in 2007:
“There’s no chance that the iPhone is going to get any significant market share. No chance,” said Ballmer. “It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”
Again easy for someone to scoff at a computer company making a new smartphone, but those who dug deeper saw technology disruption being run by visionary CEO Steve Jobs. Sure the product was expensive, but the experience and powers the phone gave consumers were worth paying for. People raved about their new toy to their friends and family and the rest is history. Apple now is the most valuable publicly-traded company on this planet worth $2.2 trillion. If you looked into the future a bit before the mainstream media and investors saw the writing on the wall you would have done phenomenally!
Business disruption going forward will be spurred by new technologies that are getting better exponentially, which can be very rewarding for those seeking out facts and trends. Media loves headlines that conjure up FUD- fear uncertainty & doubt, but if you go down the rabbit hole and find out yourself you will be rewarded with outsized investment returns. Fear prevents people from taking action and prompts retreat. I’ve noticed more open-minded people will ask the right questions when discussing investment opportunities, which is refreshing and makes a better back-and-forth conversation. However, people rush to conclusions allowing FUD to clout their reasoning. Critical thinking can get you much further, but it does take effort. Nothing worthwhile is easy.
Lastly, let’s assume you think you are sitting on a gold mine. What do you do in the long run? Seek out the bearish point of view and see how people around you still view your thesis. If the opinion is divided the opportunity is still there. I like to then ask myself, using a sports analogy, what inning are we in? I’d prefer to be starting my investment in the early innings, as this is where you will achieve phenomenal returns. Investing isn’t kind to the fashionably late crowd.