It always fascinates me how things most people see as “unimportant, unnecessary, pointless, stupid” turn out to be one of the best successes of history. Let’s look at the hottest thing on the web right now, cryptocurrencies. Rewind to 2016 and 2017, you will see many media outlets and business/finance analysts bashing Bitcoin and other cryptocurrencies. Big institutions like JPMorgan used to consider firing any trader in investment banks who invest in bitcoin. Back to 2021 and we see JPMorgan’s report on how bitcoin can be a better hedge against inflation than gold.
I wonder how investors used to see Amazon back in 2000, just after the dot-com bubble. Okay, maybe they were understandably wary of the tech companies but what about, let’s say 2006. Looking at the data, net income/loss wasn’t looking that good.
Rational mind vs. Belief?
Looking back in time might blind us to see some of the things that happened during that era. It is easy to say, “I would have invested 1000$ in Bitcoin or Amazon stock if I could go back in time”. However, the reality is quite different. I also had an opportunity to invest in bitcoin, cryptocurrencies, NFTs, Tesla stock, meme stocks like Gamestop but I didn’t. It was because of the same reasons most people didn’t invest. I didn’t know about them and I couldn’t imagine they would go up like this. I had read about nonfungible tokens but I had no idea about their practical uses. I knew lots of things about Elon Musk and I used to follow him on Twitter daily. However, Tesla wasn’t doing so well. They were in going through what Musk defined as “production hell”. Gamestop? I had never heard of that company in my life.
Even though we might hear some stuff from our colleagues, friends and even media outlets about some coin, stock, or “next big thing”, do we truly research on it to make sure what the potential future implications might be? Rationally, looking at the data of a company or a new technology, we can try to figure out what might happen in the future and can base our prediction on it. However making some real money on the next big thing, if that’s what we want, requires a bit more than the rational mind. It requires belief. Because even though the market is all about the numbers, people are not. As long as computer trading programs don’t take over the market, the irrationality of human beings and his/her beliefs will shape the market and therefore “the next big thing”.