4/20/2024

$206.13,  -$1.60 for the week*.  For the year, +1.94%**.  Holding 7% cash.

Collective Knowledge vs. Confirmation Bias

Most of the time the collective knowledge of all the participants set the prices for things as accurately as possible.  It works for the prices of oil, corn, houses the stock market, etc.  No one participant has all the information, but each individual imparts their knowledge into the market and the price for the asset or commodity settles in at the most accurate price. Some of the participants think the price should be higher, and some lower, it averages out to the best estimation.

It would be like taking an examination, one person in a room by themselves, and in another room, a large group of classmates, taking the same examination. Generally, the one person wouldn’t have a chance at outscoring the group. That’s the collective knowledge.

The collective knowledge is right most of the time. Yet, on the flip side, there is confirmation bias, groupthink, and herd mentality.  If enough people think a certain thing and it continues to go that way, it becomes a de facto truth. It becomes common knowledge, not to be investigated or even questioned anymore.  Why waste time thinking about something that we already “know” to be true?  Confirmation bias and groupthink can create positive feedback loops or negative feedback loops. That’s how Tesla goes from $50 to $400 back to $147.

In the investment world, if a company has had issues for an extended period and enough people have investigated it, investors will not bother giving the company a fresh look. They already “know” what is wrong, so why waste time?  Our competitive advantage is the ability to take a fresh look at a company when others have given up on it. To ignore the common knowledge.

Your money invested like our own, be assured we’re partners in every investment.

* Weekly prices are an estimate, the month-end price is precise when the accounting review is complete.

** Past results are no guarantee of future performance.