Why You Need People to Insult You

by Chris on April 11, 2016

If you’re going to invest in stocks AND expect to get big results then you absolutely must be attacked by insults. Here’s an article I published for the Globe and Mail a little over two years ago. The message is evergreen. It will never become old. Read this and learn this.


When you invest in exciting long term growth ideas, one way to gauge the upside potential is by how many people think you’re stupid or crazy. If people aren’t willing to argue with you about a call, there probably isn’t much upside. On the other hand, if you want to buy stocks that have huge upside potential I think it’s an absolute requirement that you’ll be called every name possible.

Look no further than the comments section in the online version of any article I write about stocks such as Netflix, Facebook, or Tesla Motors. I’ve seen people call me all kinds of names, or even suggest that publishing my opinions the way I do should be illegal. But guess what? If all of the comments were sunshine and roses it would be a sign that the upside I think exists doesn’t really exist at all.

Stocks go up when people think that business prospects have improved compared to their prior expectations. It’s that simple. Sure, you can get a lot more complex by looking at short term trading psychology where traders are trying to predict what other traders will do in the near future. But once we move past the short term noise a stock will move up or down based on how investors feel about its future. If people feel better about a stock because of an actual improvement in the business, the stock goes higher and stays higher. If people get fooled into believing a business has stronger prospects when it really doesn’t, then the gains are short lived since the truth is eventually understood by the market.

When it comes to long term investing I look for stocks that are making big differences in how an industry operates. And if you’re planning on doing the same with a portion of your investing dollars I suggest you get used to the idea of being called stupid or crazy.

Assuming that I’m right on any particular call, it is the folks who currently think I’m crazy who are responsible for my future upside in a stock. I can only make oversized returns if I end up being right against a lot of people who don’t buy into my way of thinking about future earnings potential of a business. The more names I’m called the more I see it as a sign that the payoff will be quite large.

In the late 2000s I published a sell recommendation on a small Canadian company manufacturer of fibre optic components for the telecom industry. In my opinion, investors had been sold a story that could never pan out. Since I knew the industry better than most of the investors, and I had a strong network of professionals to help me with my due diligence. I was very confident. That didn’t stop one client of our firm, who was a big shareholder, from calling me up and yelling at me. He’d done his own digging too, and his PhD contacts were smarter than mine, so he thought. He was wrong, and the stock soon came crashing down – and stayed down. If I hadn’t understood that I needed people to disagree with me to have a worthwhile call on a stock, I might have been bothered by what happened.

Today I’m invested in Facebook despite crowds of people who feel that it’s bound to fail as teens abandon the social network. But we know people are social creatures, and there is no meaningful competition for Facebook today. I’m invested in Netflix because I believe online delivery of video will be the primary way people watch TV in the future. Yet there are scores of people who think cable TV will never die. Most of the growth-oriented technology stocks I invest in are ripe with controversy. Without controversy, there is no opportunity. In a theoretical world where everyone shared my opinion these stocks would already trade much higher.
I’m certainly not always right. I’ve made plenty of incorrect investing decisions over the years. Each time, whether I was right or wrong, there were crowds of people who disagreed with me, and it used to bother me. But as soon as I truly realized the market is built on conflicting opinions I stopped worrying about what anyone else said.

If you’re going to invest in stocks, not only do I recommend you adopt a long term focus, but start to expect people to strongly disagree with you and look forward to it. You can safely ignore the amateurs who hurl insults and instead focus on the business rationale behind an argument. By expecting people to disagree with you and sidestepping emotion to only focus on the merits of an argument, you’ll become a better investor.

valuetradeblog May 12, 2016 at 3:34 am

“I’m invested in Netflix because I believe online delivery of video will be the primary way people watch TV in the future”

I think this is right but its not clear which company will be the “final” winner of that market. Switching costs are not high for customers and a brand in this feeld is not worth much. Remindes me of Buffett’s speech about the Auto-industry in the beginnig.

I wish you best luck

kind regards,

Chris July 7, 2016 at 9:42 am

Switching costs are low, but barriers to entry are incredibly high. It’s going to be incredibly tough for more than a small number of companies to compete globally with Netflix (reach, licensing, originals). That’s why I’m betting on NFLX.

Dividendenkalender August 2, 2016 at 4:18 am

Very interesting read. There are a couple of other stocks beneath netflix, facebook etc.
A good diversification is necessary to participate from these future stories.
Tesla is the only stock, I don’t trust any more. The car and electronic industry realized the benefits of mobile electricity and start to attack piece by piece of the cake, that Tesla just created. Tesla is too big to be eaten by a car company. Maybe the electronic / service industry, e.g. Apple or Alphabet are about to conquer the market segment.
For Apple this might be an interesting market field, as the growth rates of the iphone seem to have reached their natural limit.

James February 16, 2017 at 5:40 am

Beautiful post , this couldn’t have come at a better time, for a while I have just been feeling miserable about life, very angry at everyone for no reason really, just in a huge depressing state, I finally got myself to look in the mirror and self-reflect, boy was I bashing myself, I have been telling myself all types of hurtful things about myself and the funny thing is they weren’t even true , I was very angry with myself, very displeased with myself , thank you for this post.

Savannah McNeil April 4, 2017 at 12:18 am

Hi. I’m Savannah. Just wanted to share the link – http://www.newbroker.info/. I’m satisfied with the service and individual approach to each client. I wanted to start up my own brokerage, that I’ve been planning for some time, but I didn’t have enough money to start. Different providers were so tricky with me. They lured me with ‘absolutely for free’ startups. Practically it was very expensive, because I had to pay for each service and monthly fee was soo enormous. So, I barely could pay the fees for the maintenance and stayed up. With New Broker you don’t pay any percent from your profit on the BO and % of turnover in the Forex market, that is ALL Your profits in the trading period, remain with YOU! By choosing New Broker and their UTIP trading platform I got money’s worth! They clearly defined what is the price I can start with and explained every detail to me. Smooth, loyal and honest!

Comments on this entry are closed.

Previous post:

Next post: