On Wall Street, information is power. Investors increase their potential to profit by knowing more than the person on the other side of each transaction. But some unscrupulous folks don't stop at simply gathering better intelligence. They aim to cash in by spreading lies that mislead and misdirect ordinary investors like you -- making themselves rich at your expense. With persistence and a little know-how, you can protect yourself, your friends and family, and your money from making these kinds of costly mistakes.
Most knowledge -- and I confess it took me some time to recognise this -- is obtained not from immediate experience or observation, but in the continuous process of sifting a learnt tradition.
-- Friedrich Hayek, economist, The Fatal Conceit.
In investing and many other areas, misinformation promises that we can skip the hard stuff and still succeed. That's not surprising; as we've said, misinformation itself works by duping us into prizing immediate emotional gratification over steady time and effort. We want to find shortcuts, loopholes, one weird trick that'll let us jump the line, avoid the hard work, and get right to the part where we're showered in money, praise, and adulation.
But investing, and life, don't work that way. Superinvestor Warren Buffett did figure out something about investing that, for a time, most of the rest of the market missed out on. But it wasn't a hot tip or a simple strategy. Buffett succeeded, as we've said, by sitting down and carefully reading through every single line of multiple companies' financial statements. He won not by figuring out how to do less, but by being willing to do more when other people weren't.
Similarly, you couldn't just show up at the Olympics and expect to win gold in a randomly chosen event. People who make success look easy or effortless have almost always spent a lot of time, and considerable trial and error, building up their knowledge and skills to reach that point.
Beware of any piece of information that promises a shortcut to success. With so much money at stake in the stock market, if such an insight existed everyone would be using it. No one would be able to keep it a secret for long. Financial companies spend massive amounts of money building sophisticated computer systems as close as possible to trading hubs, just to gain a fraction of a second's advantage when executing trades. Do you really think an industry willing to lay out that much cash for such a tiny edge would overlook any possibility to make large amounts of money very easily?
Tools, not tricks
The strategies we've discussed in this series aren't a one-time inoculation that will forever protect you from misinformation. None of us is immune to being lied to or manipulated. The fight against misinformation never stops. Think of bad facts from bad actors as the equivalent of the monster in a horror movie. No matter how many times you stab, shoot, defenestrate, incinerate, incapacitate, or otherwise banish it, it's never really dead. Not as long as there's more money to be made from bringing it back to life.
Keep the advice we've given you in the back of your mind. Practice it in everything you see and hear -- even things you're certain you can trust. Over time, these tools can help you develop a process to help you determine when and how much to believe what you're reading. Adding them to your kit will help you lower your risk, increase your odds of investing success, and help make the world a little bit better, one fact at a time.