Your Simple Solution to Filter Investment Advice and Avoid Burnout

In this week’s edition: 

• The 2 most frustrating things about following Finance Experts

• The realization that changed everything

• The 4 Types of Investment Storytellers

• How to practically use this information

When I first started working at Google, I would religiously follow anything about the company’s results. 

Analyst reports, articles or social media posts; anything with influence, I was consuming it.

It was the first time in my Life I followed expert opinions so closely since so much of my net worth was tied to the stock.

I had the naive expectation that I would get clarity about its future by doing so.

There were 2 things that annoyed me about exposing myself to so many different opinions:

1. Why are their conclusions so different ?
   All these experts are looking at the same numbers and facts. They are probably using the same formulas and models.
   
   I get there would be some deviation, but how can one think a company’s best days are behind it while another is going all in ?

And how can they all be so confident about it ?

2. Most analysis felt limited. 
   There was always something missing.
   
   Too short term, too focused on today’s market conditions and competition, too unrealistic.
   
   Don’t get me wrong, I wouldn’t be able to do a better job than the pros.
   But, I was hoping they had all the answers.

Truth is, it’s too complex.
There are too many factors at any given time for any one analysis to account for.

The World is too dynamic to predict. 

That’s when I realized Experts resort to what humans have done for thousands of years when they have to explain the unknown: 

Storytelling.

(Or, the more professional sounding “Crafting a Narrative”) 

This might sound like an insult to some. But, it’s not.
Storytelling is one of the most powerful skills one can possess. A Story is not necessarily a lie. It can be based on facts and educated guesses. And, it can teach us valuable lessons (Of course, some are absolute crap). 

What’s more is some stories serve short term purposes while others are lifelong.

When I started to look at “Expert Opinion” as Stories, everything changed. The FOMO and frustration were gone. 

Which brings me to the 4 Four Types of Investing Storytellers:

1. Linear View: These experts assume things will keep going the way they are now. Apple makes most of their money from iPhones => They deep dive into the prospects of the iPhone.
   

2. Horizon Watcher: They look at what companies/competitors have announced they're going to do. Apple's Vision Pro headset? That's a big factor in the narrative.
   

3. Stargazer: These experts are gazing into the distant future, factoring in projects that haven't even been announced yet or drastic impact of technology. They might predict, for example, that Neuralink brain chips will make iPhones obsolete.
   

4. The Ideologue: They have a macro-economic or finance wide theory and everything is seen through its lens. The most common type would be those constantly predicting a crash. For example: “Who cares about how good the iPhone or Apple Vision Pro are ? THE ENTIRE ECONOMY IS DOOMED!!”. 
   They might also be eternal optimists “Don’t worry about major problem X, AI will solve everything”

(PS: let me know if you find others!)

The Chicken and the Egg

Now here’s the question: do the numbers lead to the story, or does the story shape how the numbers are interpreted? How do their own incentives shape it ? 

It's a chicken-and-egg situation, and I'm not entirely sure which comes first. As hard as we might want to make Decision-Making data-driven and objective, it’s not.

What This Means for You

• Keep in mind these are all opinions: No matter who you’re listening to, they are sharing an opinion which may or may not pan out.
  

• Your Timeline and Risk tolerance matter: if you’re close to retirement and an expert is a Stargazer (i.e.: making predictions that may or may not pan out in 20 years), maybe this isn’t for you.
  
  And, the most important one:
  

• Learn to filter out questionable “experts”: 
  Here are some Rules of Thumb I apply: 

  • If they say anything like “Don’t miss out on the next Hot stock!”

  • They’re more likely to be Lucky (or Lying) than insanely Great.

  • No one wants to make you rich, especially for free. 

  • No one can “guarantee” results.

The information contained in this newsletter is for general informational purposes only. It should not be construed as financial or investment advice. Please consult a qualified financial advisor before making any investment decisions.