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Why I Never Ask "What Are You Looking For in an Investment?"
Edward John von Komorowski Menge highlighted precisely how major developments in science and technology do not occur in his 1930 article “Biological Problems and Opinions” published in the scientific periodical The Quarterly Review of Biology:
“But merely extending knowledge a step further is not developing science. Breeding homing pigeons that could cover a given space with ever increasing rapidity did not give us the laws of telegraphy, nor did breeding faster horses bring us the steam locomotive.”
Decades later, a variation of this theme was expressed in a quote (disputedly) attributed to Henry Ford:
"If I had asked people what they wanted, they would have said faster horses."
Regardless of whether Ford actually uttered those words, the principle stands.
The overwhelming majority of beliefs people hold—with respect to all manner of subjects—are demonstrably false, but that doesn’t stop people from dogmatically adhering to them.
The realm of investing is no different. Ironically, the more credentialed the financial professional, the more dogmatically he will tend to adhere to his false beliefs.
The objectively accurate means of evaluating the quality of an investment or portfolio was developed only as recently as 2014 via Michalis Kapsos’s mathematical restatement of Keating and Shadwick’s Omega Ratio.
Instead of the institutional finance community celebrating this discovery and broadly adopting it, they have largely ignored it. It remains an esoteric concept quietly applied by fewer than a handful of supersophisticated asset management firms and the upper echelon of quantitative finance academics.
When I begin to explain the mechanics of accurately measuring investment risk to my colleagues, I can see the cognitive dissonance welling up inside them. It manifests as a stunned expression searching hopelessly for the argument to disprove my postulate. What invariably comes out is a brief, incoherent attempt to defend their current beliefs about asset allocation quickly followed by an urgent retreat from the conversation as they realize the vacuity of their position.
Most financial professionals forged their self-esteem through decades of laboriously earned indoctrination by corrupt and incompetent—yet publicly-respected—institutions. To ask these people to change their belief system is tantamount to asking them to reject their identity—an identity they’re proud of.
Financial professionals are not alone…
Within every domain, the overwhelming majority of people choose self-destructive beliefs over demonstrable truths that would substantially improve their lives but challenge those beliefs.
This is why I don’t ask investors what they are looking for in an investment—regardless of their credentials or years of experience. They simply don’t know what to look for as they have been reduced to dogmatic adherents to cultural norms characterized by misguided heuristics.
Those who posses the personality traits of intelligence, curiosity, and independent-mindedness—the traits required to choose reason over belief—are exceedingly rare, and I greatly value them.
If you have those fundamental traits, we can help you assemble any combination of interests, skills, and resources into a bespoke solution to the problem of achieving absolute financial independence—to literally create and monetize capital at scale—regardless of your current role in the market.
To get started, read The Shadow Banker’s Secrets: Investment Banking for Alternatives, then schedule your free private consultation.