Yesterday's Financial Times had an amusing little reference to the "apocryphal economics professor who left a $100 bill lying on a busy street, figuring that it would have been picked up already if it were real"!
Even before you think of starting a company and consider whether you are well placed to do it, you have to predict how long the sectoral opportunity will last before others pick it up. It is a very challenging question.When Indian companies got into IT services in a big way, they were pilloried for providing a commodity service and not being in products and were widely expected to plateau in a few years. That hasn't happened yet!
Then came the turn of the BPOs - everyone was highly enthusiastic. But the golden opportunity lasted only a few years before famine set in and took out the weaker players. Still, some companies did exceedingly well and on hindsight, it was silly for people like me to sit on the sidelines arguing theoretically that BPO services were a pure commodity.
When we started SupplyChainge, I would go to bed each night sick with worry that someone else would "discover" our key insight and blow us out of the water. I was as wrong as I could have been - it has taken a decade for the "lead time optimization" or "flexible supply planning" ideas we espoused to start to become mainstream.
So perhaps the final analysis is this: In the long run, everything is a commodity and we are all dead, but in the short run, there is money to be made off sectoral opportunities. When the tide comes in, even the dead fish rise, said Hemingway.
When the tide goes out, you find out who is not wearing any clothes, said Warren Buffett, but if you are comfortable in your state of (un)dress you should perhaps not be too nervous about taking the tide at the flood.
For as Brutus say in Julius Caesar:
There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.
***
Yet as regards macro-economic trends, I feel attracted to the mindset of that professor. I seldom believe anyone can be wiser than the broad market, especially when it is going up. I feel that all positive information must already be factored in. (Yeah, I'm an optimist.) And when I see a sustained broad surge in share prices or property values that seems to prove my caution wrong, I become even more skeptical.
Luckily I have never been energetic enough to try to (legally) short the rising market, else I might have lost a lot of money! Because as we have seen over the last several years, bubbles can become VERY big before they burst.
The only time I have felt confident about predicting a big surge in the broad market was in the early 2000s. Each time I returned to India from the US I saw such dramatic and fundamental changes that I took a small bet on the broad market that proved prescient or lucky, although true to form my enthusiasm turned to skepticism as the markets continued to rise.
Very small events and very big happenings appear to be difficult to predict. There seems better predictability somewhere in between for some reason
