A big reason a very select group of active investors can make a shedload of money in public shares is differences in opinion.

Opinions spike when volatility hits. See Twitter.

Bears will always sound smarter during vol.

Partly due to our wired psychology, but mostly because they have ‘facts’ in the form of historical numbers or financials.

Recency bias hurts.

Confirmation bias makes us jump at shadows. See Kahneman.

All of which make you doubt your ‘wish-washy’ forecasts of the future, which are based on qualitative factors & intangible beliefs that are hard to quantify.

Meaning, it’s incredibly hard to be optimistic in the intangibles of businesses at exactly the right time you need conviction in them. See David Gardner.

Because eventually it’s these intangibles that put the numbers on the financial statements the ‘second level’ thinkers see. See Charlie Munger.

A long term *investor* is someone who time arbitrages a better version of current reality. See Hans Rosling.

A long term investor in life-changing companies should have an average holding period of 5+ years. It takes a long time to change sectors or industry.

See a long-term drawdown chart of any great performing company.

If you can overcome the biases and do that, you’ll learn to sleep better because you never sweat the small stuff and achieve results far superior to what you thought.

Unfortunately, I’d say less than 1% of investors ‘get this’ and actually follow it.

Mostly because they manage other people’s money, are fearful, think risk = vol or because they focused on their batting average — not their slugging average. See academia.

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