> I didn't (and don't) have a bubble. In fact, I frankly despise the Bay Area and SV because it constantly tries to put you in a liberal / wealthy bubble.

Almost everyone lives in a bubble. Unless you're a nomad traveling constantly, you mostly just see what's in the vicinity of your house or apartment. Your local area with the successful Chipotle is a bubble. Tech support is just one tiny slice of the uses for a search engine- a bubble.

> Apparently not, though. They doubled on IPO but most people were still VERY skeptical of them. I could see that they had 100% solved the problem of "fast casual" service.

Usually when people say this, there was some element that they didn't identify which made the investment riskier than they realized. It seems in retrospect that it was inevitable that the stock would go up, but if you could go back in time and get inside the minds of other investors you might be appalled to learn of the complicating factors that you didn't even take into account.

Just think about it for a moment. Think about how much human effort and capital is poured into price discovery in the markets. Billions of dollars. Teeming trading floors, millions of lines of code, people all around the world running models and analyzing filings and biting their fingernails watching the ticker. Do you think you know better than they do what the price of Chipotle stock should be?

The answer to that question may well be "yes" if you have expertise in the domain and you're experienced with investing and financial modeling. But it's probably not.

> That should make you want to invest in the #1 company that manufactures satellite components.

Which is what everyone else is thinking too. The trick is determining whether the price that the market has agreed on is too high or too low.

You're just assuming that no one can see trends more effectively than you. The reality is that you have no idea how other people see the world, people could be way ahead of you and you'll never know it.

For big companies thousands and possibly tens of thousands of professionals around the world are putting in long hours thinking about what the correct stock price is. They are meeting with management, buying proprietary research, and hiring PhDs to analyze quantitative data. Despite all that the market makes mistakes a lot, and sometimes a perceptive amateur might even be able to pick up on those mistakes. Still, I really doubt that many people are good enough at spotting trends to generate market-beating returns. If they could do it reliably they'd be billionaires.

What a waste, isn't it? Or maybe better put, how presumptuous to think that years of statistical modeling and formal economic theory somehow endow someone with effectively better intuition than the next person. Maybe if those years of training actually lead to better investments there would be something to consider, but you can't argue that professional gamblers are better than casual intuitive ones if the pros don't actually yield better results.

They do. The median active investment fund underperforms the market, but the median active retail investor way underperforms the market.

And the median active investment fund underperforms the market for a reason. If a fund plowed 100% of its investment into the S&P 500 they'd be exposing themselves to laughably high volatility.

With all that human effort and market efficiency, why isn't Amazon getting shorted like crazy, based on ratio trends like this...?

https://market-ticker.org/akcs-www?post=232505

My understanding is that Amazon's management believes that they can "flip a switch" and stop expansion and R&D, making them suddenly ludicrously profitable. Investors are fine with that because the longer management holds off on flipping the switch, the higher the eventual eps will be.

Thank you, interesting take on it. Do you believe them? Is that precedented at all?

> That should make you want to invest in the #1 company that manufactures satellite components.

I understand the idea, and I might agree. I just wanted to point out that in the book "The Intelligent Investor", there was the idea that you could think about investing into the second best player in a certain space.

I think the reasoning was that there is more opportunity for growth for a second-grade company than a first grade company. Maybe the first-grade company is not looking at the problem in an innovative way. I think it probably depends on the case.

I tried to look into "second-grade" in my copy but that's a term relating to stocks, and not the leaders of an industry.

Maybe I'm misinterpreting that book or misremembering it

Edit: By the way, good job on the successful investments! I wish I was as confident about my observations of different businesses.

I'm not sure I'd want to invest in the second-place search engine or second-place social network.

Well, they’re just ad providers, and plenty of people invest in nth tier ad providers.

>I'm sure you're correct, all stock picking is dangerous though. I'd assert that my style is the least dangerous.

Why? Seems to me that all stock picking has the exact same level of risk.

If the stock market were truly random, then yes, all stock picking would be equally risky. But the stock market is a voting machine voting on the future of companies, and is definitely not random. So you could look at two stock picking strategies: 1) throw darts at the Wall Street Journal and buy whatever it hits, 2) buy new companies that are being used by lots of people in your area (the parent's strategy). #1 should give random results centered around the performance of the entire market. #2 will probably give better results, because it incorporates some information relevant to the voting, namely that customers like the product. Which company would you rather have: some random company or a company that people are willing to stand in a visible line for? If there are lines, either people need the product or they love the product, and either way that tends to correlate with profits.

But #2 historically does not give better returns. Since the information is already public it has already been included in the price of the stock. The vast majority of investors are not smarter than Wall Street.

As someone who has done some gambling in the stock market using this kind of thinking it has not been a good strategy compared to just buying and holding index funds. Sometimes I get lucky and sometimes I get unlucky buying individual stocks but my most best returns have been buying broad index funds and holding them.

Exactly.