So… being an investor is hard
Have you ever bet a friend that you could beat them in a game of pool?
(Knowing they were better than you, but convincing yourself you had a chance).
First match, they pocket the 8 ball - BOOM! You win.
...you chalk it up to luck, but you let yourself loosen up a little, now that you're ahead.
Second match, double or nothing. You hold your ground, and (somehow) they make the same mistake twice - 8 ball. In the pocket. You win!
...you start to think 'wait, am I secretly really good at pool?'
Third match, double or nothing - let's go.
...you're drunk on confidence, thinking to yourself 'come on baaaby, I'm on a roll here - I LITERALLY CAN'T LOSE!'
And then everything falls apart. Your friend finds their feet, and absolutely buries you.
Do not pass go, do not collect $200.
(It's a sobering return to reality).
Playing a game of skill like that - with zero knowledge and little to no practice? It's essentially gambling.
It feels like crypto speculators have taken a similar approach to investing over the past twelve months and learned a similar lesson.
This time last year the market was in its 'come on baaaby, I'm on a roll here - I LITERALLY CAN'T LOSE!' phase.
Now we're coming back to reality.
In a recent interview at the Christie's Art+Tech summit, Mike Novogratz reflected on this trend and gave some sobering insights on speculation vs. investment:
“Greed is a powerful emotion...
It’s really hard to be a good investor.
It takes training, it takes pain, it takes knowledge, it takes practice.”
Ol' Mikey makes a good point - and while it all feels a bit grim, there's a silver lining here:
Based on Novagratz's thinking, the current market downturn has the potential to form stronger investors, because it's walking them through everything he says is required:
Pain - there’s been plenty of that
Training and knowledge - this downturn is teaching us all a hard lesson (and hard lessons hold the strongest).
Practice - bear markets are a great time to get reps in, because everything is discounted and greater upside is available in the long term.
Are we bending over backwards to pull a positive out of a negative here?
Absolutely we are.
(But the point still stands).