Insight and Foresight: See the World with the Eyes of an Investor

As a result of my stint and interest over many years in the world of finance, I frequently try to make others aware of the value in seeing the world with the eyes of an investor. In defining investing, I stress looking at the long term and reaping the rewards of your efforts to gain insight and foresight.

Economic, political and natural factors all play a key role in driving events in our world, and they must be seen together as one multi-relational unit, in order to fully understand how different elements globally impact one another. This is an area where specialists in particular often assign far too much importance to their own area of expertise, and fail to see the "big picture" and the wider correlations that drive events. In our increasingly integrated world, what happens in one area can usually affect a seemingly unrelated area.

With this in mind, investing is also an excellent way to learn the value in building probability, risk and relational models. Every investment decision ultimately comes down to balancing risk and reward, with psychology playing an especially influential role at both the individual and macro levels.

Put Your Macro Glasses On

For all the frequent talk of open disclosure, for many years now the problem with (micro) investing in businesses has been that investors looking in from the outside rarely get a clear glimpse of a company's insides. Sophisticated public relations management ensures that bad news seldom makes its way to outside investors, and company accounts are obfuscated to such an extent that they are rendered near meaningless.

On the other hand, macro investing creates a more equal playing field, where we can identify larger and more powerful trends that are far more likely to influence outcomes over the long-term (3+ years).

What Historians Can Teach Us

Visiting the past is something like visiting a foreign country: they do some things the same and some things differently, but above all else, they make us more aware of what we call 'home'.

~ John Arnold

When a historian looks at past media, what can often stand out is the inability of people to see the larger trends that they are all a part of. Even factoring in the benefit of hindsight, so immersed is everyone in the minutiae of ongoing daily events that they are unable to see the larger trend wave.

Today, daily news media and our thirst for a constant stream of information has continued to aggravate this problem. Who hasn't come across a 24 hour news source repeating points ad nauseam, or churning out news stories that artificially play up the importance of certain developments? In the rush to sell us information, that all important element of context has been lost beneath a myopic world view.

In order to look beyond the short-term, we must step away from this barrage of information and formulate independent analyses that reveal larger trends. In a future presentation which I hope to share here, I will be going over a key commercial intelligence tool that empowers both businesses and individuals to gain strategic foresight. In the meantime, I leave you with this quote from financial writer Adam Smith (1976) which emphasises the value in seeing the bigger picture:

If you really know what's going on, you don't even have to know what's going on to know what's going on...You can ignore the headlines, because you anticipated them months ago.

Photo: Vestman

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