at one point declined 95% before later rising 58,000%). But in an aggregate sense, the dot.com bubble was just a big version of the biotech bubble: one of the greatest investing frenzies the world has ever seen – yet just about a wash for investors.It was likely worse than a wash forinvestors. Academic evidence from Brad Barber and Terrance Odean shows that individual investors tend to buy at the top, and Dalbar Research found that individual investors tend to underperform a market index .
Maybe hot trends and their resultant bubbles aren’t great for investors in aggregate, but new industries tend to be winner-take-all-ish – a few winners and scores of losers – so I’ll just identify the ultimate winners and buy them.work. And if it does work, it will make you extremely rich. There’s a “but” and there’s a “but” to the “but.”Few things changed the world – and the US in particular – as much as the automobile. But more than 3,000 US car makers have come and gone.
If you’ve bought a pack of Pokemon cards , you understand that most cards in the pack are going to be duds. In fact, many packs areduds or near-duds. Therefore, anyone aspiring to invest by buying Pokemon packs – probably a dumb thing to do, but this is theoretical – would need to consider two histogram-y questions:Will the aggregate winning-ness of my winners offset the aggregate dud-ness of my duds?... i.e.
It’s a bit unfair to equate Pokemon card pack investing to VC investing, because randomly buying Pokemon packs requires no skill*, whereas VCs at least try to apply skill to separate wheat from chaff.a bit closer to Pokemon pack investing, although most index investing isn’t an attempt to net runaway winners per se.
I’m generally skeptical of VC returns data – shop around and you’ll see “averages” ranging from stock market-ish returns to
Thanks, guys!