Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Of Backup Systems, Buffettspeak, and More... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  
The Equitymaster Research Digest

Of Backup Systems, Buffettspeak, and More...
Nov 27, 2015

What better way to start off today's digest than with a Thanksgiving story...

There's a Thanksgiving turkey whose owner feeds it great food every day. Every single feeding firms up its belief that this is how life is supposed to be. It starts taking it as a rule that turkeys are born to be fed by humans and to be greatly looked after. And then lo and behold Thanksgiving Day arrives and the Turkey's head is chopped off!

This little story, courtesy of Nassim Taleb, if thought through carefully, contains one of the most important investing lessons you will ever learn.

The Sting of the Tail

The point Taleb wants to highlight is the futility of predicting future events.

We all take help from the past to make future forecasts. However, as the turkey tale shows, this can lead to disastrous results.

The turkey's confidence about the future was at a peak the day before Thanksgiving. Unfortunately for the turkey, that was the point of maximum risk.

Does this misguided confidence about the future apply to us humans? Absolutely. And one need not go back more than a few years to see the disastrous consequences false confidence can lead to.

Just before the sub-prime crisis broke out, experts believed they had the risks fully covered and that there was perhaps a one-in-a-million chance of catastrophic failure.

To Read the Full Story, Subscribe or Sign In

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms