Mindless Money 2/5: Don’t oversimplify

24th July 2012

Simplifying things is what we do, habitually.  The world is too complex, too multi-faceted for us to do anything else.  We develop a specific, individual mindset which we use to frame the world we operate in.  Sometimes this is a political viewpoint, sometimes it's a tribal one, mostly it's just the way we think about things.

Unfortunately oversimplifying stuff is a dangerous, mindless, trait for an investor.  You may think that the automobile or the internet is going to revolutionise business and you may even be right.  But that doesn't mean that every company with "motors" or ".com" on the end is going to be a winner.

As each of us lives in a bubble of our own existence, with our own beliefs and preconceptions, and it's very difficult for us to step outside of this and recognise the simplifications inherent in our mindsets.  We are, quite literally, framed by our brains.

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