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The Most Important Thing: Uncommon Sense for the Thoughtful Investor resources

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S E C O N D - L E V E L T H I N K I N G 5 stand the complexity of the subject. A guest commentator on my drive- time radio station says, “If you have had good experience with a product, buy the stock.” Th ere’s so much more than that to being a successful investor. First- level thinkers think the same way other fi rst- level thinkers do about the same things, and they generally reach the same conclusions. By defi nition, this can’t be the route to superior results. All investors can’t beat the market since, collectively, they are the market. Before trying to compete in the zero- sum world of investing, you must ask yourself whether you have good reason to expect to be in the top half. To outperform the average investor, you have to be able to outthink the consensus. Are you capable of doing so? What makes you think so? Th e problem is that extraordinary per for mance comes only from correct nonconsensus forecasts, but nonconsensus forecasts are hard to make, hard to make correctly and hard to act on. Over the years, many people have told me that the matrix shown below had an impact on them: You can’t do the same things others do and expect to outperform. . . . Unconventionality shouldn’t be a goal in itself, but rather a way of thinking. In order to distinguish yourself from others, it helps to have ideas that are diff erently. erent and to pro cess those ideas diff I conceptualize the situation as a simple 2- by- 2 matrix: Conventional Unconventional Behavior Behavior Favorable Outcomes Average good results Above- average results Unfavorable Average bad results Below- average results Outcomes Of course it’s not that easy and clear- cut, but I think that’s the general situation. If your behavior is conventional, you’re likely to get conventional results— either good or bad. Only if your behavior is unconventional is your per for mance likely to be unconventional,

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