Can Turtles Fly?

Let me present a few of my impressions associated with the downside of being a value buyer. Personally, I don’t consider myself a value buyer but am heavily affected by it; I consider myself a contrarian with a value tilt. Now, this is of a value investor varies but one common feature I find in value investors is their avoidance of macroeconomics. This is actually the reason behind the major downside to value investing. Pure value traders do not pay much attention to macroeconomics because you can’t ever forecast the future–which is precisely what the majority of macroeconomics deals with. Who really understands if things are going to be much worse now than before?

We are just pretending to be soothsayers, are we not? The macro picture still gets into the investment decision of value investors but usually with a lesser emphasis. Warren Buffett, for example, doesn’t care, and attention what the Federal Reserve will or what the future expectation of GDP development in China is, but he reads a great deal of industry publications (supposedly). So, he gets a feel for the macro-picture from industry styles actually. The downside of ignoring the macro-picture (or at least not putting much weight into it) is that you’ll invest in seemingly questionable assets than can inflate. In addition, value investors have a tendency to miss “macro developments” which can produce hugely profitable investments.

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For instance, very few value investors have capitalized on the recent commodities boom. Yes, you had Warren Buffett invests in ConocoPhillips and PetroChina; yes, you had Jean-Marie Eveillard invests in gold; etc. But these investments are a small portion of their portfolios. I personally pay attention to macro a little quite. I lose out on a lot of opportunities this way likely, but I avoid a great deal of problems also. Before I get trashed, I should make it clear that I’m just pointing out the downside of value investing so that investors are aware of what can happen with value investing. This post will not deal with the upside. Obviously, the upside is much larger than the drawback so value investing is of interest in the long-run.

One, the simplest way to create a network is to build up a reputation for really caring for individuals who work with you. Be overly good with sharing the upside; it shall get back to you 10x. Also, learn how to evaluate what folks are excellent at, and put them in those roles. You want to have a reputation for pressing people hard enough that they accomplish more than they thought they could, but not so difficult as they burn out. Many people are better at some ordinary things than others. Define yourself by your strengths, not your weaknesses.

Acknowledge your weaknesses, and work out how to work around them, but don’t let them stop you from doing what you want to do. “I can’t do X because I’m bad at Y” is something I listen to from entrepreneurs amazingly often and almost always reflects a lack of creativity.

The easiest way to make up for your weaknesses is to hire complementary team members instead of just recruiting people who are good at the same things you are. An especially valuable part of creating a network is to get good at discovering the undiscovered skill. Spotting intelligence Quickly, drive, and creativity gets easier with practice. The easiest way to learn is just to meet a lot of people and keep track of who goes on to impress you and who doesn’t.