Herds are powerful. Book#37
This was my first read from Malcom Gladwell The Tipping Point: How Little Things Can Make a Big Difference, I got to it in July 2015 but it made me want to read his other books. The question here is what triggers exponential growth and contagion?
Answer? Trend leaders and Opinions makers. Why are we in the era or the word of mouth? Because we are in the age of isolation, people need to rely on influencers. It reminds us of the power of context and that our immediate environment shapes us.
The interpretation I make of it in the context of investing is as follows:
- Choose your influencers carefully.
- Be conscious of the influencial and seductive powers of mavens.
We are wired as human beings to enjoy following a leader and his herd. We are social animals. In most aspects of our lifes it gives plenty of benetifs. The problem is that in investing it’s a killer. Awarness of this is crucial.
Is my uncler a great investor to follow? Is the hedge fund manager I heard on TV last night but whose name I don’t even remember someone to follow? Should I take my investing advice from friends at barbecue parties? Following influencers feels good because we are comforted and reassured by their strong self confidence. But what if, their main quality is knowing how to talk, how to comumicate and how to generate enthusiasm. Are they necessarily good investors ? Maybe not. In the investing world, if you have to select one influencer then do your research. My advice? Start with W. Buffett.
On a side note, I loved the point that is made on optimal human network size: The law of 150.
A person can’t ‘know’ more than 150 people, so companies usually start to fail at that point. Gore-Tex broke up a company into 2 once it hits 150, because they’ve found things work better that way.
My purpose in life is independence, fulfilment and a better understanding of how the world works. Like Charlie Munger, I believe in the discipline of mastering the best that other people have ever figured out. And like Sir Isaac Newton, I believe in our ability to see further than any others before us by acknowledging that we are standing on the shoulders of giants. With this blog I hope to keep track of my learning about investing, business, decision making, entrepreneurship and self development while inspiring others to do the same. For the moment the format of this blog will be one post for each book that has influenced me, but I expect it to evolve over time. Join my Journey. John.
