Zoom out

Bill Gates said we often overestimate what we can accomplish in the next year, but underestimate what we can accomplish in the next ten.

Changes in media and the speed of communication often make the most minute detail seem the most important. Sometimes it’s the most recent news that seems the most vital. Over thousands of years of prehistory, our brains have been hard-wired to get caught up in the moment. That immediate thinking causes us to extrapolate more recent history into the future, and forget that things move in cycles. Some cycles are faster, like stocks, and some are slower, like real estate. But the cycle always remains.

To see the bigger and most important changes Gates is talking about, we need to zoom out, not zoom in. Only by zooming out can we appreciate the context and make better informed decisions.

Here’s an example of a company that has didn’t do too much for about a year and a half. If you were zooming in, it would be pretty easy to write it off as nothing special. 

Now zoom out. Zooming out gives us the context to understand the real story, the big change. That 1.5yr period above fits in to the blue box below. Even phenomenal companies go through cycles.

We can find countless other examples of the power of zooming out. Good things take time.

 

What I’ve been reading this week:

Inside the investment process of Seth Klarman: http://acquirersmultiple.com/2016/10/how-to-invest-like-seth-klarman-mark-yusko/

You’re probably making these mistakes when performance: http://blog.cordantwealth.com/how-not-to-evaluate-investment-performance

Generally speaking, you want to buy when people are worried: http://www.bloomberg.com/news/articles/2016-10-12/docile-vix-masks-surging-prices-for-stock-hedges-before-election

Tips to make thinking more robust: http://www.collaborativefund.com/blog/the-most-complicated-simple-problems/

Stop paying attention to the news: http://sethgodin.typepad.com/seths_blog/2016/10/cable-news.html

Why is everyone in Canada so obsessed with leverage?: http://business.financialpost.com/news/fp-street/inside-the-risky-strategy-that-made-canadas-biggest-pension-plans-the-new-masters-of-the-universe

You don’t get above average returns holding the index: https://www.youtube.com/watch?v=N-azmBU0yII


Ben Kizemchuk is a Portfolio Manager & Investment Advisor with Altus Securities Inc offering investment management and planning for high net worth Canadians. Ben focuses on the Growth and Income Portfolios and reducing tax.