Conventional Wisdom Will Be Wrong

As I read through all of these third quarter letters from various fund and asset managers I am getting, I keep reading the same things. It's time to cut exposures, leave equities for now, expect 2009 earnings estimates to get cut a lot more, you can't buy this market right now, etc, etc.

It's amazing to see how everyone is saying the same thing. I even see it in the 50 Comments to my post on this topic yesterday.

It's the same thing with VCs and entrepreneurs giving advice (me included). We are all saying the same things. And we are doing that because of the lessons we've learned in prior downturns. Nothing wrong with that.

But I am reminding myself this morning that conventional wisdom will be wrong. It will not play out exactly the way the best fund managers, VCs, and entrepreneurs think it will. I like what Max Levchin said at the venturebeat downturn event:

Don’t listen to anybody. Nobody knows what’s going to happen next … Better to be contrarian in times like these than not.

I'd alter that a bit. Listen to everyone. Read everything you can. And then come to your own conclusions. It is better to be contrarian in times like these. But do it wisely and don't bet the farm.

Comments

[investor88:]

Wise conclusion not to bet the farm because there is still considerable uncertainty out there. Fair enough to be contrarian generally but not always.

2008 Oct 31 08:28 AM

[mykie:]

Let's see...be contrarian in a contrarian market...seems like a double contrarian and thus........full cirlce back to conventional.

I say pick your favorite bouncing sector, (mine are the banks), pick a few ETF's, one up one down and then just watch those and nothing else. Learn where the bottom might be and how high a bounce might be and then sit by the comp and don't move...... You just have to eventually make money. (famous last words)

2008 Oct 31 10:55 AM

[rdr4:]

Nice article, since we cannot believe statistics (see Mark Twain), cannot predict the actions of government agencies, cannot predict the future actions of the international community, and cannot expect our government to respond in anything but a self serving fashion, perhaps you can understand why I got out of the market in 1967.

2008 Oct 31 01:19 PM

[carey_jim:]

Conventional wisdom is always wrong, by definition.

"A bird in the hand is better than two in the bush."

"Nothing ventured, nothing gained."

Every proverb (conventional wisdom) has a proverb that contradicts it.

Proverbial wisdom cancels itself out as conventional wisdom does.

2008 Oct 31 01:33 PM

[rdr4:]

and common sense is a fallacy of logic...

2008 Oct 31 01:45 PM