Robert Shiller on Thinking Outside the Box and Seeing Things Others Don't

In 2000, the Dow Jones Industrial Average was at record heights, with tech companies trading at valuations that made you think the old rules of finance no longer applied. If Cisco (Nasdaq: CSCO  ) kept up with analyst growth projections, it would have eventually grown larger than the U.S. economy.

The world was different, people said. Recessions were a thing of the past. Technology would create limitless prosperity. The stock market wasn't a bubble. It was reflecting the new reality.

Yale economist Robert Shiller didn't buy it. He wrote a book, Irrational Exuberance, explaining why there was no way to justify valuations.

That was his first win.

Five years later, real estate was the new boom. Since land was a limited resource, prices could only go up, people said. And since housing was a leveraged investment, it was an easy road to huge wealth.

Again, Shiller didn't buy it. Again, he wrote a book about it, explaining why prices were way too high.

That was win No. 2.

How do you stand apart from the crowd and see things others don't? I asked Professor Shiller in an exclusive interview last month. Have a look:

What do you think? Share your thoughts below.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Cisco Systems and Oracle. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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