Warren Buffett’s advice: If the crowd disagrees with you, maybe you are right
“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”
Have you ever abandoned a business idea because your friends or relatives thought that was a bad idea, even when the technical analysis or the market analysis showed the opposite thing? If yes, maybe you lost a good opportunity.
Something curious happens in the world of the money many times: the market trends end up contradicting what most of people think it will happen. And, for that reason, the rich people get richer, the poor people get poorer and middle class people end up fighting eternally with the debts. The popular wisdom doesn’t work very well in the world of the money, and for that reason 10% of people have 90% of the money.
This doesn’t mean we should only value our convictions. At the moment of creating a business or making an investment it is good if we ask the opinion of the other people. The problem is when many times we ask for opinion from people even less successful than us or people that doesn’t have knowledge about the world of the money: employees who spend everything what they earn, or our brother who are more interested in cars than money, or the supermarket guy who buys lottery every week hoping to win.
The common sense should tell us that if we need an advice on some topic, we need a person who has or have had success on that topic. Therefore, if you plan to create a business ask for the opinion from some successful business owners. Or if you plan to make an investment, ask for the opinion from people who really make money with their investments.
We should not discard the opinions of who don’t have the experience or the appropriate knowledge, because any person could have some great ideas by seeing the things from a more objective point of view. But we should assign the appropriate weight to the opinions of the other people according to their personalities and actions with regard to the money, specially when we have made our own analysis with numeric data or investigations about trends of the market.
When do you think that there are better opportunities to make money in a business?:
1. When there is an unsatisfied demand in the market and the offer is little or nonexistent (or)
2. When the offer is huge and people see this as the business of the moment
Usually more money could be made in the first situation. However, in that point, most of people will not notice that could be a good business. A visionary entrepreneur will take advantage of that.
When do you think that there are best opportunities in order to invest in the stock market?:
1. When the market is weak and people sell their stocks with low prices (or)
2. When there is euphoria in the market and many people invest in high-priced stocks, including people without financial education.
Logically the good investors take advantage of the opportunities when the stocks are cheap. For that reason, sometimes the good investors seems operating contrary to the market.
In the world of the business and the investments, it is much better to ask for opinions of the crowd to discover trends or necessities instead of using these opinions to know if we will have financial success. If the crowd knew enough about businesses or investments, then they would have enough money. And you know that is not true.
Remember: “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”
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