As an extension to hmcproperties post (https://discussion.fool.com/at-this-point-i-am-in-the-quotkeep-a…), I would like to post a great section from a very good book I can recommend, called “100 Baggers - Stocks that return 100-to-1 and how to find them”.
Don’t Get Bored
People are dying of boredom.
— Raoul Vaneigem, The Revolution of Everyday Life
I was at lunch with a friend of mine and we were talking about the big
vote in Scotland on whether it should be independent of the UK. (Its citizens chose to stay.)
Then my friend offered up a reason why many people would vote yes:
“They’re bored! They just want something to happen.”
The more I thought about this, the more I thought there might be
something to it. Boredom can explain a lot. It can explain all kinds of
financial behavior. And there is definitely a “boredom arbitrage” to take
advantage of in the markets.
Below, then, is a tongue-in-cheek exploration of my theory of boredom.
Let’s start at the beginning: boredom was invented in 1768—well, not
the concept, but the word “bore” first appeared in the English language in
print in that year. So says my copy of the Oxford English Dictionary. (And
yes, I have the physical copy—all 20 volumes!) The OED defines the word
“bore” in this way: “to be weary by tedious conversation or simply by the
failure to be interesting.”
Funnily enough, the first usage appeared in a letter by an Englishman
complaining about the French to a fellow Englishman: “I pity my Newmarket friends who are to be bored by these Frenchmen.”
“Boredom”—as in “the state of being bored”—came along much later.
In 1852, Dickens used it in Bleak House: “the malady of boredom.”
Author Tom Hodgkinson would agree with Dickens. In his The Freedom Manifesto, he has a whole chapter devoted to boredom. He writes,
“If contemporary science were more sophisticated and subtle, then I’m
absolutely certain that it would rank boredom as one of the central killers
in the modern world. . . . It would not surprise me one jot if boredom were
one day revealed to be a carcinogenic.”
Read in the proper, light-hearted spirit, Hodgkinson’s book is terrific.
He talks about all the ways in which modern life creates boredom—especially in the workplace.
There are many mechanical, boring jobs that “require just enough
concentration to prevent you from going off into a dream but not enough
really to occupy your mind.” As a result, we have boredom on a mass
scale. People are bored. And they do all kinds of things to alleviate the
boredom. They act like idiots. They dress like fools. Anything to kill the
boredom. They may even commit acts of sabotage.
In the financial markets, people often wind up sabotaging their own
portfolios out of sheer boredom. Why else put money into tiny 70-centshare mining companies that have virtually no chance of being anything
at all? Why bother chasing hyped-up biotech companies that trade at
absurd levels based on flimsy prospects?
Because people are bored!
It seems exciting to lose your money in this way. It’s no different from
going to a casino. (And just like a casino, these bets pay off often enough
to keep people coming back.) People crave the action.
Why do people buy and sell stocks so frequently? Why can’t they just
buy a stock and hold it for at least a couple of years? (Most don’t.) Why
can’t people follow the more time-tested ways to wealth? I’m sure you can
guess my answer by now.
People often do dumb things with their portfolio just because they’re
bored. They feel they have to do something. (Here I recall that bit of wisdom from Pascal that “all men’s miseries derive from not being able to sit
in a quiet room alone.”)
I know I get bored, but in a different way. For example, it’s incredible
to me that people spend so much time talking about the Federal Reserve.
My newsletter peers, people in the media—they all do it. It’s unbelievable.
Don’t these people get bored? Or do they do this because they’re bored?
I’m so bored with the Federal Reserve. Boring. And, thankfully, it is
largely irrelevant to you as an investor. Warren Buffett himself once said,
“If Fed Chairman Alan Greenspan were to whisper to me what his monetary policy was going to be over the next two years, it wouldn’t change
one thing I do.”
I read every day somebody, somewhere writing about QE or interest
rates or the dollar. They are mostly rehashing the same old narrative:
“When QE stops, stocks will fall.” “The dollar is going to collapse!” “When
interest rates go up, stocks will fall.” I mean, for crying out loud, how
much more can you read about this stuff? And for how many years on end?
It’s just the same old pot of beans, heated up and re-served again and
again and again.
This is part of the reason why I travel. That way I don’t have to write
about what the Fed said this week, or go over some garbled macro scenario I drew up in my head. Instead I can write about what I see—in
Greece, hopefully overlooking stunning cliffs and deep blue water. Or in
Germany, sitting at a long wooden table under oak trees drinking beer at
a thousand-year-old brewery. Not boring!
But seriously, at least it actually has something to do with the real
world. As an investment writer, I’m almost desperate to find something
new, something different, something interesting to write about. You don’t
need me to repeat what is in the newspapers. You don’t need me to add to
the cacophony of noise you already hear.
In fact, taking advantage of the noise is a simple arbitrage. Sometimes you’ll hear (smart) people talk about “time arbitrage.” The idea is
just that most investors have a hard time looking out even just a year or
two. They focus on now. And so, the idea goes, all you have to do is think
out a year and you can pick up stocks that are cheap today because others
can’t look beyond the current quarter or two or three.
The same kind of arbitrage exists with boredom. People get bored
holding the same stock for a long time—especially if it doesn’t do much.
They see other shiny stocks zipping by them, and they can’t stand it. So
they chase whatever is moving and get into trouble.
Anyway, if you can find ways to fight boredom and not take it out on
your portfolio, your returns will benefit.
Just keep your eye on the prize: hundredfold returns are not boring.
I think, Alteryx is one of the stocks where you shouldn’t get bored.