It's admittedly easy to look backward and point out someone else's mistake. There's no risk, and hindsight is 20/20. And if the exercise makes for a good teaching moment, it's worth doing.

In this instance, the lesson to be learned is offered up by last quarter's big loss from Japan's SoftBank (OTC:SFTBF), a fund of funds made up of private and publicly traded companies and managed by Japan's second-richest (for now, anyway) individual, Masayoshi Son. Softbank lost $6.5 billion in the three-month stretch ending in September, bearing the brunt of its so-called Vision Fund's $8.9 billion loss.

It was Softbank's first quarterly loss in 14 years.

The majority of the loss was a huge write-down on its sizable investment in the now-imploding office space rental venture WeWork, and a sizable write-down of its stake in ride-hailing company Uber Technologies (NYSE:UBER).

They're paper/accounting losses, to be clear, although the write-downs still translate into an actual financial loss suffered by shareholders; there's no restorative "write-up" on the horizon.

Graphic of businessman looking down at a falling chart

Image source: Getty Images.

What happened? Misguided megabets are the big-picture explanation. But don't think for a minute that Son's ultimate misstep is one limited to the ranks of billionaires who need not worry about money. Investors of all sorts and sizes can just as easily make the same mistake if they don't maintain a certain level of awareness at all times.

A misjudgment on representativeness

There's no particular psychological term that definitively describes the phenomenon that led to Softbank's reported $6.5 billion loss. But, more than any other psychological phenomenon, Son's ultimate misstep may have been rooted in representativeness.

Representativeness is, put most simply, the mind's way of taking mental shortcuts to assumptions by comparing what little we may know about one matter to seemingly similar scenarios, and then filling in the blanks with reasonable conclusions. We assume every adult is capable of driving a car because most of them are. We assume the mailwoman won't show up after 4 p.m., because she never has before. We assume a veteran in a wheelchair was wounded in combat.

Except that none of those conclusions have to be true. The veteran could have been in a car accident after a war. The mailwoman's delivery truck may have broken down and left her waiting for a replacement.

WeWork is more premise than opportunity

For Masayoshi Son, the erroneous assumption -- based in representativeness -- may have been that hypercasual, high-tech, entrepreneurial working environments will be where work is done in the future.

It wouldn't be tough to reach that conclusion. Alphabet's Google has become a monster of a company, and its fun-facilitating, amenity-filled offices have become one of the company's most endearing features. Facebook is another name that's blurred the line between personal and professional lives, and become a smashing success. Ergo, WeWork took aim at that market.

It's not necessarily the office environment that makes Google or Facebook tick, though. The world was looking for a simpler, less promotional search engine than Yahoo! in the early 2000s. Google met the need. The world wanted a way to group individuals online a decade ago. Facebook met the need. The office environment may have actually had little to do with either company's success.

Completely lost in the if-then reasoning is the fact that for every Google there were several would-be rival search engines like AltaVista and Infoseek that flopped. Facebook won its race, but let's not forget that MySpace was the big name when social media was just getting started. Not even Google could do enough with its social media answer to keep Facebook in check. Landlords need tenants with staying power, and start-up ventures often don't have it.

That didn't prevent WeWork from making long-term lease commitments to office real estate owners, however, perhaps overcommitting itself and its future cash flows -- a prospect that wasn't fully appreciated until investors were able to review the company's pre-IPO documents in August. As it turns out, the suggested math didn't quite add up.

The business model sure sounded savvy in its infancy, though.

An easy trap to fall into

But is WeWork a rare representativeness exception? Not so fast.

Representativeness also burned early Nio investors. It certainly looked as if it could be the next Tesla at one point a while back, but Nio is now fighting for its life. Hedge fund manager Bill Ackman for a time looked like the next Warren Buffett, assembling a collection of publicly traded companies and then extracting more value from them. He was promptly removed from that pedestal in 2017, though, when Bausch Holdings -- then Valeant Pharmaceuticals -- imploded. As it turns out, simply buying a drug company to raise prices isn't a Buffett-like move after all. He'd sure seemed like a Buffett-caliber genius a couple of years earlier, though, when investors weren't looking too closely.

It feels good to be in on the ground floor of a new technology or new business model. Not all models and ventures are destined to bear fruit, though, and concepts alone don't pay the bills. Your job as an investor is to assess each business idea separately, on its own merits, in its own environment, and on its proven potential rather than a pitchman's promise that "this is the future." Not everything is what it seems to be just because it looks similar to something else. Forgetting that just cost Masayoshi Son a few billion bucks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.