Casualties of Perfection
Evolution has spent 3.8 billion years testing and proving the idea that some inefficiency is good. The key thing about evolution is that everything dies. The best species can be good at some things but then it dies because of the things it’s not good at.
A century ago, a Russian biologist named Ivan Schmalhausen described how this works. A bigger lion can kill more prey, but it’s also a larger target for hunters to shoot at. A taller tree captures more sunlight, but becomes vulnerable to wind damage. The lion could be bigger and catch more prey; the tree could be taller and get more sun. But in general, they’re all normal and not bigger or taller, because it would backfire.
Many people strive for efficient lives, where no hour is wasted. But an overlooked skill that doesn’t get enough attention is the idea that some amount of inefficient time can be a great thing.
Psychologist Amos Tversky once said that “the secret to doing good research is always be a little underemployed. You waste years by not being able to waste hours.” A little inefficiency is wonderful.
Same in investing. There’s an investing pun that it’s better to be approximately right than precisely wrong. But where does the investor intellect effort go? Toward the pursuit of decimal-point-exactness of prediction that misleads people into thinking they’re investing in best portfolios.
Just like evolution, the more perfect you try to become, the more vulnerable you are.
Precisely for that reasons, market is not perfect. It is always little inefficient and hence there are bull phase and bear phase.
At Shalibhadra, We are sure that no one can find 100% perfect investment scheme. So we have little room always available in every portfolio. In the end the odds that the economy will become more productive over a good long period is pretty much same for most of the market.
Nishit Siddharth Shah