Variant perception
This week I spend an hour discussing the idea of variant perception which in simple term means seeking an edge on the subject beyond consensus. Interestingly there is not much written about the idea. I first read this idea in an investment book- I can’t recall the title, but I will update as soon as I find the title. But currently be best content about variant perception I have read is the discussion between Tren Griffin and Josh Wolfe in the blog 25q. If you haven’t heard of both of them, you are missing out. Look them up and do read his writing here https://25iq.com/2018/07/07/lessons-from-josh-wolfe-lux-capital/
Anyway back to the concept of variant perception. Josh argue that as a venture capitalist one can acquire an edge by looking for variant perception in three ways .First, you can informational edge- by being able to find information which are not consensus, this require one to read voraciously and in different field beyond common prescription of media and school. Often having information edge allow you to make decision about what to spend you time on. Jeff Bezos had information edge about the internet growth and decided to quit his job at D.E. Show hedge fund and went to start Amazon. Second one can have an edge in having analytic rigor beyond. This one is hard, first you ether spend time learning how to analyze business and or you become luck(remember luck is an atheistic word for God!). Anyway, Josh argue that one can only become a good businessman by being a good capital allocator, and being a good capital allocator requires one being able to analyze businesses. Tren advice that one can only become good at this by analyzing as many business as possible in various sectors as possible. This take time. But remember, the long term is your best friend- Jeff Bezos said long term is his arbitrage.
The last way one can attain an edge is behavioral. Understanding human behavior is just as important. Actually human behavior is stable with time and is hard to change. First human like to act in herds and also follow fads- understanding these behaviors and others such as cognitive psychology , supporting bias theory and prospect theory can be give one an edge in building a variant perception about different topics- be in business or life. So in short spend time reading interesting books in the mentioned area above and over time see the improvement in decision making.
Lastly I will leave you as always with a quote of the week.
“Besides capital compounding, one can also compound knowledge over time, so compound knowledge and use it as leverage to compound more capital of different forms. Always remember financial capital is a limiting reagent of progress among other things.”
see Lux capital writing also if you want to read more about Josh Wolfe here:https://luxcapital.com/
