The Timeless Parable of Mr. Market

I think it&#x27;s imprudent for the average retail investor to take on and action Buffets advice in most contexts, except for his &quot;just put your money in an index&quot; advice.<p>Buffet could lose 99% of his net worth, and still be one of the top 5,000 or so wealthiest people in history. He could then lose 99% of that wealth, and still be comfortably inside of the top 1% of wealth holders. He could invest that 1% of 1% of his money in a broad index, and comfortably live off the hundreds of thousands of dollars in annual returns.<p>The mental model he has of the market is completely different to someone who is putting 1&#x2F;5th of their $50k life-savings into investments. His appetite for risk and loss are entirely detached from most investors, and even many investment firms. Similarly, the range of opportunities open to Berkshire Hathaway is considerably different to the range of options available to a typical investor.

I like this bit:<p><i>If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game.</i><p>Makes me think of all the CEOs who are firing and slowing down market acquisition atm just because of &quot;market conditions&quot;, even though they should presumably know their company better than the market does. Either they all think their companies are scams or they don&#x27;t know their companies enough to say and convince their investors otherwise.

&gt; What witch doctor has ever achieved fame and fortune by simply advising “Take two aspirins”?<p>Great line, it explains so much about humanity, from politicians constantly wanting shiny policies that are the exact opposite of their predecessor, to tech people rolling out Kubernetes to serve very simple workloads.

&gt; ... techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising “Take two aspirins”?<p>Off topic, but Buffett could also have been writing about the computer security industry here. <i>&quot;Minimise your attack surface, implement good password policies, patch often and practice defence in depth? Sounds boring, let&#x27;s buy this AI-enhanced threat intel product, it found the North Koreans!&quot;</i>

&gt; Warren Buffett, who has used to to make billions of dollars<p>The assertion is that markets are about voting first but then weighing later. There is a similar clash of metrics going on in the article. Focus on identifying and following the rich and successful up front, then worry about proofreading and getting the metrics right later if at all. Don&#x27;t bother with the details of getting the weight metric right, just worry about reacting to market volatility with the right attitude.<p>Lots of investors have tried to follow value without generating the same success as Mr. Buffet. This article is shameful starry eyed slop that will make no one rich.

This is very good advice, and makes sense considering the best investors are dead ones.<p>In every market crash I am surrounded by people losing their minds about all the money they&#x27;ve lost, but that is just what Mr. Market is offering that day. So they sell, the market recovers, they see it going up, they buy. Buy high, sell low, buy high again. People won&#x27;t admit what they have done, but do this all the time. <a href="https:&#x2F;&#x2F;www.businessinsider.com&#x2F;forgetful-investors-performed-best-2014-9" rel="nofollow">https:&#x2F;&#x2F;www.businessinsider.com&#x2F;forgetful-investors-performe...</a>

It works outside of investing too: Almost all of us will constantly be confronted with offers to buy things, take out loans, join clubs or companies, etc etc etc. Some of these offers will be worth it and some won&#x27;t be. But it&#x27;s still your right to take up or refuse such offers at any moment (unless you are literally dealing with the mafia I guess).<p>Both accepting all offers <i>and</i> rejecting all offers is a mental error, and deciding what is worth it is part of being an adult in society.

Except some firms have made extraordinary profits by statistical analysis of Mr Market, eg Renaissance

the parable also has a &quot;separating perception from reality&quot; flavor for the science types.<p>that is, the market is perception of what is out there, reinforced by the herd mentality. the reality is what actually exists.<p>eventually perception and reality tend to converge.

There is a typo on the third line