Mark Cuban’s Knowledge Advantage 2.0
Reading more than the competition isn’t enough
Everyone knows Mark Cuban — especially if you’re a Miami Heat fan because his team, the Dallas Mavericks, beat us to a National Championship in 2012. Anyways, *hot take* with all the media Cuban’s putting out, it seems he could run for President this decade. Mark my words. (See what I did there?)
For a more in depth background of who Mark Cuban is look at the video below:
Cuban is famous for saying he doesn’t love the stock market because there is no “Knowledge Advantage”. In essence, his principle is to NEVER put money in something where you don’t have an information advantage. Since companies are publicly traded, their financial statements are online, and everyone has the same access to that information. Thus, the market “prices-in” all readily available information into the stock price. For this reason, arbitrage opportunities do not exist in the financial markets. (I just saved you the $55K of WashU tuition for a Finance major — you’re welcome.)
Why invest your money in a stock — because a broker told you to? “If the broker had a clue, he or she wouldn’t be a broker, he or she would be on a beach somewhere.”
Brokers make their money on commissions from fees their firms collect for selling financial products. Cuban’s argument is that the interests of the broker and the investor are not necessarily aligned. The broker makes more if he sells more, and he or she will say whatever is proven to sell well. Finance is not rocket science, and any greased-up frat star in a monkey suit can be a broker.
Say we cut out the broker and we seek the information arbitrage ourselves. Is that possible? The best stock market investors find the relevant information and act on it before the rest of the market. It costs a lot to compete. A Bloomberg Terminal — the industry standard for a financial search engine, costs $20K a year per license and supporting an investment team requires multiple licenses. A small price for the millions and billions of AUD (assets under management.) When these firms trade, they move millions at a time. Thus, they change the supply and demand of stock for a company and resultantly, the spot price. Cuban wants you to internalize that the average person cannot afford to have an information arbitrage in the financial markets. Wall street pays a lot to be able to move at the same time as the rest of the market.
So how did Cuban seek information arbitrage early-on? He jumped into the software industry as a business major and came out on top because he was a reader. That’s it. Cuban read more than the next guy. He knew the software industry was hot and he strived to learn more to stay ahead.
“Everything I read was public. Anyone could buy the same books and magazines. The same information was available to anyone who wanted it. Turns out most people didn’t want it.”
He wanted to be more knowledgeable about the industry and he knew the knowledge gained would translate directly into new customers and help his business grow.
“I remember going into customer [meetings] or talking to people in the industry and tossing out tidbits about software or hardware. Features that worked, bugs in the software. All things I had read. I expected the ongoing response of ‘Oh yeah, I read that too in such-and-such.’ That’s not what happened. They hadn’t read it then, and they haven’t started reading yet.”
That’s how he found his information arbitrage.
I’m sure you’re scrolling and saying okay, I understand the message here “the more you read, the more you breed”, my grandmother could’ve told me that. How does that help me in today’s world?
Ding ding ding. I want to take Mark Cuban’s Philosophy to the next level.
Today, you need to be able to read and communicate.
Two things. First, with the internet, it is easier for people to read more. In seconds, you can start a google search, find valuable free information and just read about it. If you want to learn more but not read more, you can watch videos on YouTube or pay little to no cost for Udemy or Audible. **If you’re a college student, search if your university provides a free subscription to WSJ or LinkedIn Learning **. If you want to come out on top, take advantage of everything that’s available and use it routinely.
Second, efficacious people may not read the most but can communicate the best. Engineers, who are usually the smartest people, aren’t the best at writing and communicating. I would see the brightest kids do poorly in class because they refused to devote time and effort to improving their communication skills. You can be the biggest Enginerd who reads 750 words per minute (that’s Bill Gates speed in case you’re wondering) but if you cannot communicate effectively your team will make mistakes and your operations will slow-down as a result.
In 2020, the most successful people will be the ones who read more and communicate better. The Knowledge Advantage 2.0 is when you can read, absorb all available information, and know what to communicate and with who (team, customer, industry colleagues etc.) to find the solution faster. The competition can also absorb available information quickly, but if they can’t communicate both internally and externally as well as you, they will never beat you.
Knowing COMMUNICATION IS KEY is the Knowledge Advantage 2.0.
Original article: https://phintech.substack.com/publish/post/216970
