Nikolas Kong
shared a chat session in group #The Most Important Thing
The Most Important Thing is... Second Level ThinkingSecond Level Thinking
Millions of people are competing for each available dollar of investment gain. Who’ll get it? The person who’s a step ahead. In some pursuits, getting to the front of the pack means more schooling, more time in the gym or the library, better nutrition, more perspiration, greater stamina or better equipment. But in investing, where these things count for less, it calls for more perceptive thinking . . . at what I call the second level.
Remember, your goal in investing isn’t to earn average returns; you want to do better than average. Thus, your thinking has to be better than that of others—both more powerful and at a higher level. Since other investors may be smart, well-informed and highly computerized, you must find an edge they don’t have. You must think of something they haven’t thought of, see things they miss or bring insight they don’t possess. You have to react differently and behave differently.
Second-level thinking is deep, complex and convoluted. The second- level thinker takes a great many things into account:
WHAT IS THE RANGE OF LIKELY FUTURE OUTCOMES? WHICH OUTCOME DO I THINK WILL OCCUR? WHAT’S THE PROBABILITY I’M RIGHT?
WHAT DOES THE CONSENSUS THINK?
HOW DOES MY EXPECTATION DIFFER FROM THE CONSENSUS?
HOW DOES THE CURRENT PRICE FOR THE ASSET COMPORT WITH THE CONSENSUS VIEW OF THE FUTURE, AND WITH MINE?
IS THE CONSENSUS PSYCHOLOGY THAT’S INCORPORATED IN THE PRICE TOO BULLISH OR BEARISH?
WHAT WILL HAPPEN TO THE ASSET’S PRICE IF THE CONSENSUS TURNS OUT TO BE RIGHT, AND WHAT IF I’M RIGHT?
The Most Important Thing is... Second Level Thinking
Second Level Thinking
Millions of people are competing for each available dollar of investment gain. Who’ll get it? The person who’s a step ahead. In some pursuits, getting to the front of the pack means more schooling, more time in the gym or the library, better nutrition, more perspiration, greater stamina or better equipment. But in investing, where these things count for less, it calls for more perceptive thinking . . . at what I call the second level.
Remember, your goal in investing isn’t to earn average returns; you want to do better than average. Thus, your thinking has to be better than that of others—both more powerful and at a higher level. Since other investors may be smart, well-informed and highly computerized, you must find an edge they don’t have. You must think of something they haven’t thought of, see things they miss or bring insight they don’t possess. You have to react differently and behave differently.
Second-level thinking is deep, complex and convoluted. The second- level thinker takes a great many things into account:
WHAT IS THE RANGE OF LIKELY FUTURE OUTCOMES? WHICH OUTCOME DO I THINK WILL OCCUR? WHAT’S THE PROBABILITY I’M RIGHT?
WHAT DOES THE CONSENSUS THINK?
HOW DOES MY EXPECTATION DIFFER FROM THE CONSENSUS?
HOW DOES THE CURRENT PRICE FOR THE ASSET COMPORT WITH THE CONSENSUS VIEW OF THE FUTURE, AND WITH MINE?
IS THE CONSENSUS PSYCHOLOGY THAT’S INCORPORATED IN THE PRICE TOO BULLISH OR BEARISH?
WHAT WILL HAPPEN TO THE ASSET’S PRICE IF THE CONSENSUS TURNS OUT TO BE RIGHT, AND WHAT IF I’M RIGHT?