Chris Davis shares Berkshire Hathaway investing legend Charlie Munger's humorous wisdom on the futility of forecasts and predictions.
Charlie Munger & the Fishing Lure
One of my favorite pieces of wisdom was conveyed to me by Charlie Munger in the form of a story. When I had asked him why there is so much craziness, why so often people react to forecasts that have no predictive value? Why there's so much irrationality in their behavior?
And he said, well, once he was in Minnesota and he was buying a fishing lure. And he looked at it and he said, My god, it's pink and green and do fish really take this lure? And the old-timer behind the counter said, Well Mister, I don't sell to fish. And it's such a powerful story because often people are giving a forecast because they've been asked, not because they know.
What matters is that the people are interested in what they say, just the way they line up to read the horoscope or to visit astrologers, it's not because there's predictive value in those things, it's because people want to believe. And the astrologer or the people writing the horoscope are satisfying that market in the same way the man selling the lure was selling to people, not to fish.
Chris Davis tells Barron’s about the powerful lesson his grandfather taught him about thrift, financial independence and the miracle of compounding.
No one can consistently predict the markets over the short term, yet there are ways to invest with confidence to reach your long-term goals.
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