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April 14, 2011

Investing Lessons from Indiana Jones

In his latest blog post, "Super LP" Chris Douvos extracts lessons for investors from Indiana Jones quest for the Holy Grail (in the movie, The Last Crusade).
This challenge is a warning that bad things can befall overconfident people. A mentor of mine once told me that a great analyst has no ego; one must be wary of confirmation bias and remember that big ideas often come from unexpected places. With each passing day, he concluded, you’ll realize that you know less and less, for there is no business as constantly humbling as investments.

...Indeed, sometimes investors just need to take a breath and step into the abyss, knowing that their preparation was sound. After all, risk isn't a dirty word; investing is about optimizing discomfort, and we spend our lives seeking appropriate compensation for the risks that we do take (at least those that can’t be mitigated). If you never take the leap, the Grail will forever be out of your reach.

...It's true that the courageous investor must follow an adventuresome path in search of outsized returns. After all, the benefit of being right and alone with some frequency can generate outsized overall returns, but blazing a pioneering trail comes at the risk of being wrong and alone, as well. And for those of us who focus on long-dated asset classes, we, unfortunately, don't get the benefit of a knight that nods approvingly as we write investment memos. Only in the fullness of time will we know whether we chose wisely . . .
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in