This is a great article. I completely disagree with Greenwald. IMO superior performance comes not from deluding oneself into thinking they are better able to predict the future than others, but in better recognizing investors' inherent limitations in predicting the future.
https://twitter.com/ebitdaddy90/status/1446173341409153028
Expertise and specialization are often a hindrance in this regard, leading to higher degrees of confidence in one's predictions without higher levels of accuracy. This has a tendency to lead investors hubris and to underestimate risk which can have devastating impacts on results.
Many of the most important determinates of future outcomes in markets are issues with inherent, irresolvable uncertainty that no amounts of specialized expertise will resolve, and/or future surprise developments that none of the experts previously expected or foresaw.
Taking the "outside view" anchored in base rates is also a superior approach to forecasting outcomes with inherent uncertainty than the "inside view", IMO. Narrow fields of expertise tilt people towards the inside view which is much more susceptible to catastrophic error.
Instead of trying to predict the future, IMO it is better to recognize the difficulty of so doing and instead look for *favourable asymmetry*. Investors tend to only price in consensus base case expectations and ignore the capacity for surprise favourable and unfavourable change.
I like to look for situations where "the base case is also the bear case". Typically such stocks will be priced to deliver a circa market return if that base/bear case eventuates, while unlikely but possible materially favourable asymmetry is typically discarded.
A lot of the time such unlikely but possible favourable developments do not occur, but sometimes they do, and such surprises happen with a degree of regularity that investors underestimate. Absolutely huge money is made when such "free options" pay out.
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