Quote for the Week
Warren Buffett refers to staying within your circle of competence. Social psychologists tell us, though, that we are prone to overconfidence when it comes to assessing our abilities, so even when we think we have an advantage, we may well be mistaken.
In markets, competitive advantages are three: informational, analytical, or behavioral. Informational advantage is when you know something material that someone else doesn’t. It is the easiest to exploit and the hardest to find…
Analytical advantages come from taking publicly available information and processing or weighting it differently from the others…
Behavioral advantages are the most interesting because they are the most durable. The field of behavioral finance is still in its infancy yet has already yielded results that can be incorporated profitably into a sound investment process. The best part is that such results are likely to be systematically exploitable and not able to be arbitraged away as they become more widely known. That is because they represent broad findings about how large groups of people are likely to behave under well-defined circumstances. Until large numbers of people are able to alter their psychology (don’t hold your breath), there is money to be made from prospect theory, support theory, cognitive psychology, and neuroscience. — Bill Miller (source)
From the Archives
Last Call
- Warren 95: A Collection of My Favorite Buffett-isms – Kingswell
- A September to Remember? – J. Zweig
- Good for Who? – Behavioral Investment
- Why Bond Fund Investors Missed Out – J. Ptak
- A Good Memory Makes You a Better Investor – Klement on Investing
- Self Awareness and the Luck-Skill Gap – S. Godin
- GDP: We Really Don’t Know How Good We Have It – Asterisk
- In Stablecoins We Trust? – Chicago Booth Review
- AI Will Not Make You Rich – Colossus
- People are Openly Bragging about AI Spam Operations – Hot Takes