Key insights
- The author reflects on whether the value investing community exhibits crowd-like behavior, potentially hindering independent thinking. While value investors pride themselves on contrarianism, shared beliefs and investment in similar stocks suggest a degree of groupthink. The piece raises concerns about the community's susceptibility to spectacle and myth, urging members to counteract potential biases.
Reading a passage of a book (Big Money Thinks Small) and it made me think, here’s the passage:
“French polymath Gustave Le Bon wrote The Crowd in 1895 as a rant on French politics, but his observations also describe how stock market manias occur. Under the influence of crowds, individuals act bizarrely, mentally unified at the lowest, most barbaric, common denominator of their collective unconscious - instincts, passions, and feelings - never reason. Being unable to reason, crowds can’t separate fact from fiction. Crowds are impressed by spectacle, images, and myths. Prestige attaches to true believers who reaffirm shared beliefs, crowds will chase a delusion until it is destroyed by experience.”
To what extent is the value investing community a crowd? To what extent is it not?
We definitely have our spectacles (the Berkshire AGM), icons and myths..
We come on here to reaffirm our shared beliefs and often invest in the same “religion” stocks (Berkshire, constellation software, etc…).
Value investors like to pride themselves on independent thinking and contrarianism, but to what extent are we just following a different crowd, and how do we counteract this groupthink?
Calling out myself as much as anyone else here….