By focusing on cognitive errors and structural inefficiencies, our goal is to identify where conventional thinking falls short, especially in moments of significant change.
Exploiting Behavioral Biases to Uncover Market Inefficiencies
We believe that if most market participants are burdened with behavioral biases that influence their decisions, they will systematically make bad investment decisions and create inefficiencies in the market.
Overconfidence
The tendency to believe that an individual's judgments are more accurate than they actually are, particularly when considering a range of outcomes.
Anchoring
The tendency to rely too heavily on an initial piece of information or data point, even when that data is random or even incorrect.
Confirmation Bias
Looking for evidence that supports one's theory (which is sometimes easy to find, even when the theory is invalid).
Insufficient Adjustment
Adjustments (or lack of) made from the initial anchor based on additional information.
Wall Street chronically underestimates the magnitude and duration of change.
“What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact."
– Warren Buffett
Human nature is such that at major fundamental inflection points, most people can't fully appreciate just how different things might become. This is true at both a micro and macro level. We look for inflection points. We approach every situation with an open mind.
We try to find situations where the potential outcomes are significantly above consensus and skewed positively.