market folly

Organizational psychologist Adam Grant gave a TED Talk on the surprising habits of original thinkers.  He's also recently written a new book, Originals: How Non-Conformists Move the World.

While this has a wide variety of applications, it can be applied to investing as well.  When evaluating securities, investors typically have to distinguish between the consensus view and their variant perception.  The difference between perception and reality is where opportunities lie.

While some investors are more comfortable in the herd, others will stray from the herd with their investments.

As Adam Grant notes, "The greatest originals are the ones who fail the most, because they're the ones who try the most ... you need a lot of bad ideas in order to get a few good ones."

And in investing, often times all it takes is a few really good ideas to generate the bulk of the returns.  You just have to sift through all the bad ideas first. 

Grant also touches on the notion of procrastination and how some people's most creative ideas come from that. 

He also dives into the concept of first mover advantage and how 'improvers' (companies that come into the market later) had a lower failure rate than first movers.  He says, "To be original, you don't have to be first.  You just have to be different and better."

While this TED talk doesn't frame original thinking in the context of financial markets, it's a useful exercise of thought.

"If we want to be original, we have to generate more ideas."  This principle was basically applied to investing in a post we've previously linked to:  the concept of idea velocity. 

Embedded below is the video of Adam Grant's TED talk on the surprising habits of original thinkers:



Be sure to also check out both of Adam Grant's books: Give and Take: Why Helping Others Drives Our Success as well as his other title, Originals: How Non-Conformists Move the World.