Morons and Oxymorons
Finding balance in the contrarian middle
Spending too much time on Twitter taught me a valuable lesson: You can either be a moron or an oxymoron.
Morons are insufferable skeptics and irrational optimists. Oxymorons are skeptical optimists and optimistic skeptics. Morons are blind partisans. Oxymorons are admittedly biased truth seekers.
The difference is the ability to rationally consider conflicting ideas. Morons suffer from imbalance whereas oxymorons enjoy balance. F. Scott Fitzgerald described it best: “The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.”
The best investors and the best thinkers are oxymorons even though morons often get more attention. Sometimes morons even get lucky and appear right from time to time like the super bulls of the past few years and perhaps the super bears of more recent history.
Fintwit — the hedge fund/investor community on Twitter — is a good proxy for investors in general. It’s roughly divided by insufferable skeptics and irrational optimists. The insufferable skeptics think every tech company not named Microsoft/Apple/Amazon/Google is a “shitco” (a worthless company), all crypto is a scam, and VCs are dolts that can’t do a DCF. The irrational optimists think that every unprofitable company they own (their entire portfolio) will be the next Microsoft/Apple/Amazon/Google, every new technology will reshape the world almost immediately, and dog coins are the future of commerce.
Logic shows us that neither insufferable skeptic nor the irrational optimist is the optimal investor mindset.
It doesn’t pay to be insufferably skeptical of everything because you miss out on the 100-1,000x thing that seems dumb but is actually great. This is the core of venture and growth investing. Things that look like bad ideas but turn out to be great ideas offer extraordinary returns because of lack of competition both against the business and to provide capital.
Markets are wide open and prices are low for apparently bad ideas. Markets are crowded and prices are high for apparently good ideas.
However, it’s also destructive to be blindly optimistic as we’re witnessing in the current market. It’s hard to come back from being down 70-90% on a bunch of bad to good ideas that were priced as if they were already great to extraordinary.
Some companies are shitcos, and some beaten down companies will be much bigger in the future. Some crypto is a scam, and some crypto will be much bigger in the future. Most VCs probably don’t know how to do a DCF (sorry VC friends), and in many cases, they shouldn’t.
Balance lets the oxymoron take a reasoned stand compared to the moron’s emotional stand.
A Time for Choosing
“There are two sides to every issue: one side is right and the other is wrong, but the middle is always evil.”
--- Ayn Rand
That Rand quote has haunted me for years because I believe balance is the uncomfortable, independent path to truth. Extremity only leads to untruth encouraged by the comfort of a like-minded herd.
Rand’s middle implies indecision, which is evil, but balance doesn’t mean you stay in the middle. The oxymoron chooses a side where truth appears with no allegiance to the herd. You’re both part of the herd and an outsider. You’re not afraid to go against the herd when the truth is elsewhere, even if the herd would attack you for the betrayal.
I don’t know who said it first, but I first heard Marc Andreesen use the phrase “strong views weakly held.” It’s another way of describing Richard Feynman’s axiom that we can never be sure we are right; we can only be sure that we are wrong. Both ideas represent the embrace of reason with a willingness to change one’s mind.
All good thinking is reason driven by facts and logic open to change.
Good investing is reason expressed by numbers. Qualitative factors create probabilities of quantifiable outcomes. Value discipline gives investors the best chance of taking advantage of optimism when it’s warranted and applying skepticism when it’s better to be defensive. When the oxymoron sees drastic imbalance in the markets, he chooses a side, and the markets tell him whether he’s right or wrong.
Playing the Attention Game
I’m having some fun here using the extreme of calling some people morons, but I’m a moron sometimes, too. Sometimes we all are.
There’s a clear attraction to being a moron: Morons have a clearer path to rapid success in the attention game than oxymorons. Attention is the currency of the Internet, and extremity garners the most attention. In the age of extremity, the oxymoronic middle is the most contrarian view.
As we all spend more time online, we no longer have a choice as to whether to play the attention game. Our choice is if we want to play it as a moron or an oxymoron.