Feedback Loops: Why You will never Be a Great Investor

Men's tennis picks up three wins at home - The PaisanoHow do you learn to be an investor? At the most basic level, you start by buying a share or some other asset, and then you see how that asset performs over time. In the longer term, you buy other assets in different situations and gradually learn how to pick assets that are likely to go tennis predictions up in value. At least, that is the theory.

Let’s compare that with how you learn to play tennis. That involves someone hitting the ball to you and then you hit the ball back and see where it goes. You do this time after time, in lots of different situations and gradually you learn how to hit the ball to get it to go where you want it to.

In a way, the two look similar, but the difference between them is the frequency and reliability of the feedback you are getting. You can hit a tennis ball hundreds of times in an hour and you can see where it has gone in a second or two. When it comes to investing, though, it can take years to find out whether you were right to purchase a particular share. You will never have as many practice investments as you could have practice tennis shots.

On top of this, when it comes to tennis, there are lots of ways that the environment is controlled. The court, the balls, the surface you play on, the rackets, these are all regulated and standardized. If you are able to play tennis well in one place, you should be able to play tennis well anywhere.

Now that doesn’t sound like how things work in finance, does it? Since the American housing market started heading downwards in 2007, the financial markets and the economy have been behaving in a way that is incomparable with anything since the Great Depression. Even the most experienced of fund managers and analysts have been facing a situation they simply haven’t been through before. To stretch the tennis analogy, it is like asking the world’s best tennis players to go back to using wooden rackets or a solid ball and still play to the same standard.

All this means that the feedback that you are getting from your investing is fundamentally unreliable. If you did somehow manage to make an investment which turned out exactly as you expected, you could be faced by an apparently identical situation at another time and see a totally different result. Any lessons you learn from your investing have to be non-specific and treated with a degree of uncertainty because you simply don’t know how much you can apply more generally from a particular set of events.

Unfortunately, Colombia has one of the worst tragedies in Latin America. Colombia faces more internal troubles than many war-torn countries in sub-Saharan Africa and Southeast Asia. In the Post-Cold War era, it is one of the two countries, together with Peru, in the Western Hemisphere to continue its long-standing war against rebel groups. In the 1960s, a civil conflict broke out between the government and the rebel groups, led by the Revolutionary Armed forces of Colombia (FARC). Since that decade, Colombia’s armed conflict has claimed 200, 000 lives and caused more than $15, 000 million in damage inflicted. During the past half-century, Colombia was home to at least five rebel groups, most of them with close ties to drug traffickers. Over a period of seven years, between 1984 and 1990, four major politicians were killed.

Incredibly, it is one of the most mine-ridden countries on earth, along with the Kingdom of Cambodia and the Portuguese-speaking country of Angola (Southern Africa). In the meantime, most of the country’s rich ecology has been devastated by narco-traffickers. But that isn’t all. Indigenous tribes have been killed or enslaved by rebel groups in the Amazonian region. On the other side, there are over three million internal refugees, which is described by the United nations as the “worst humanitarian crisis in the Americas”. But contrary to what you may think, these hurdles don’t have destroyed Colombia in the last decades.

Apart from their hard working people, Colombia is well-known around the globe for its performers such as Shakira, Juanes and Carlos Vives -as well as their beauty queens like Luz Marina Zuluaga or Aura Maria Mojica (“the most beautiful girl of Colombia”). But it has other notable achievements on the global stage, of course. Colombia’s reputation as a warn-torn country has been overshadowed by a successful tourism industry with the marketing slogan “Colombia is Passion”. Bogota, its modern and friendly capital, and other cities have more foreign visitors than Peru, Bolivia, and many peaceful republics from Latin America.

Certainly, Colombia is not an oil-rich country — as Venezuela and Ecuador— but it has Latin America’s finest intelligentsia. As a result of this, the country is a major democracy -has not had coups and countercoups for more than half-century– on the continent since the 1950s and has won praise from Washington for its war against cocaine cartels.

But now Colombia has gained praise for its Olympic revolution. Although suffering a brutal civil conflict since the 1960s, the South American republic is producing top athletes in the 21st Century. Because of its troubles, Colombia should be one of the lowest-ranked Olympic teams in the Third world, but therea are other results. In practice, incredibly, the conflict has not been an impediment to produce Pan American champs and Olympic medalists. Probably, there is no other Olympic squad on the planet who would be fighting with big passion and dedication. Other notable chapter in the modern history of Colombia, of course.

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