Hank “Ace” Greenberg, former chairman of insurance giant AIG, once said “All I want in life is a small unfair advantage.” As it turns out, he had one – and it was a whopper.
Do you have one? Yes, you do. But you may not be aware of it.
“Having the time, willingness, and ability to do original research is a true unfair advantage.
Unfortunately, very few individual investors are able to pull it off.” Jesse Livermore
For investors, an unfair advantage can come from a number of sources, including inside information (not the illegal kind). The way to gain access to this kind of information is by networking with people who specialize in the area that you’re interested in.
The last time I bought Starbucks stock was right after I heard my barista talking about how the company was going to make a special contribution to the employee retirement plan. Why would they do that unless they knew they were going to have a very profitable year?
Key sources of objective and unbiased, and timely information are essential for creating an unfair advantage. By the time a news story hits the mainstream media, it’s too late to profit from that information. But a well-connected blogger who specializes in junior gold mining shares, for example, often has access to people inside that industry who are more likely to speak the unvarnished truth instead of repeating the talking points that were prepared by the Investor Relations Department.
In-depth knowledge or skills that are critical to the investment decision-making process are another example of an unfair advantage. Basically, this means being well positioned to understand a problem, list the possible solutions, and choose the one that advances your goal in the most cost-effective and impactful way.
A single-minded, uncompromising commitment to following through on your strategic plan is an unfair advantage in and of itself. All institutional investors, and most wealthy individual investors, have a strategic plan in place. But following through on it is another matter. If your plan is well-written, it can save you from making costly mistakes that can ruin an otherwise great year.
Your Dream Team is another source of unfair advantage. This is the network of advisers and partners who make up your Brain Trust. Highly successful investors hire advisers who are specialists in their fields. They understand the value of paying for specialized advice because they recognize that they will never have enough time and energy to learn more than the expert does about that one particular thing.
Critical Thinking is an unfair advantage, because so few people practice it. This is the process of detaching yourself from the emotions of the moment, and examining the facts about the decision at hand. It takes patience and discipline, but it’s not rocket science. It’s simply a clearly defined and well-executed procedure.
When you put all these things together, you can see that the common thread is independent thinking. Don’t settle for the conventional wisdom when it comes to making investment choices. Look for unbiased expert opinion, even if that means paying someone to advise you about a specific issue.
The essence of your unfair advantage is that nobody can copy, steal, or buy your investment ideas if you think for yourself.
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