Who are the Fools and who are the Suckers

I've managed to build a decent portfolio over the years and I pretty much have zero understanding of fancy academic economic theory.

I did it by learning about market cycles, basic growth drivers, risk mitigation, strategy, thorough due diligence, adding value, art of negotiating and then networking. I have completely ignored all the economists over the years and I haven't done too badly. Interestingly, some of the people I know who got caught up with all the economic predictions etc have still gotten nowhere in the last 10 or so years.

 

Why Luck Matters—Much More Than You Think

Extract from the above link (R.H. Frank author of Success and Luck) essentially says how easy and natural (hindsight bias, cognitive heuristics, halo effect, attribution bias) it is to confuse meritocracy with fortune, which then leads to sense of entitlement and hoarding of public resources.

Petty narcissism and lack of empathy exhibited by a (few) lucky but ungrateful sydney-siders to the extent of public derision of education, refusal to acknowledge or understand the environmental factors, preferentially claim meritocracy (e.g. growth mindset) over luck, or refusal to contribute to the society's resources which were the initial drivers of success, is exactly the behavior discussed by R.H. Frank and amply demonstrated by quite a few posters here.

Some more details on opposite of Fools and Suckers here:

What Drives Success, Hard Work or Luck?

 

"Petty narcissism and lack of empathy exhibited by a (few) lucky but ungrateful sydney-siders"

Most clueless, sour grapes type person I have ever seen.

 

Luck plays it's part no doubt but sitting on the sidelines, complaining about the sysytem and watching others take action guarantees one will have none.

 

Yep.
It is a reality check though... I am lucky to have a few in Sydney. But I could have easily decided to sell an IP that was doing nothing pre boom.

But I have a neighbour at my Brisbane rental, they have at least 5 properties in Brisbane and between 2007-2015 they were still at the same value level. I would say that's unlucky. Even difficult to sell. I think its definitely picking up over there though.
I'm lucky to have so much in Sydney. I think its also worth understanding the reasons (the drivers) why properties in some cities cost way more than others, and why others are less and seemingly never go anywhere. If you get that, then you can still think whether you want to participate in that market or stay on the sidelines.

 

"I'd rather be lucky than good"

Seeing everyone else as "just lucky" will get you nowhere.

Those who think they're unlucky should change their outlook and discover how to generate good fortune, says Richard Wiseman in the article below - well worth a read.

Be lucky - it's an easy skill to learn

The key taking from it is :

My research revealed that lucky people generate good fortune via four basic principles :
- They are skilled at creating and noticing chance opportunities,
- make lucky decisions by listening to their intuition,
- create self-fulfilling prophesies via positive expectations,
- and adopt a resilient attitude that transforms bad luck into good

 

Got to be in it to have a chance. Some luck is involved but without action only whinging.. was where I was coming from.

The reality is if they had bought 4-5 years earlier they would have been playing in the strongest market in the country other than Perth and would have seen their properties double and more.
Not sure what you mean about properties in some cities going nowhere though.
It's not borne out by any long term data.

 

luck is definitely involved because no matter how good you research a market.... unforeseen events can happen that can cause your investments to skyrocket.

but luck without any research to fallback on is just pure speculation vs investing.

 

Put the actual investing part of it aside for a moment, for the majority of people who want to invest in Australia (of course not all), it doesn't take luck to:

1. Have a budget
2. Work hard
3. Save well
4. Network with other successful people
5. Buy books to learn, learn from internet, forums etc
6. Take action

Is there luck involved when negotiating, buying etc? Absolutely, no one is saying there is no luck involved. But when you develop your skills and knowledge, you will be able to identify opportunities that will give you a better chance of doing well long term and help you to achieve your personal investment goals.


The actual issue is not about luck or no luck, you need to look at what exacly is being said by some posters and you will realise that some here simply do not share the same philosophical and value systems as many successful investors share. At the heart of it, that's the major difference.

 

Other than a few active investors, most of the buy and hold investors as well as OO in Sydney and Melbourne were just sitting on sidelines. Cheap credit and foreign investments did all the work. Luck perhaps ?

Recognizing luck as a determinant in success does not necessarily preclude active action and such assumptions are actually a part of cognitive limitations in claiming meritocracy when it is actually luck, so your assumption was not unexpected. R.H. Frank " In particular, many of us seem uncomfortable with the possibility that personal success might depend to any significant extent on chance." If I can provide two contrasting examples:

• There is a medical doctor on this forum who has taken firm action without complaining but still his investments have relatively under performed.
• Contrast the above with a vocal investor from Sydney who can barely string a sentence together without emoticons, but somehow takes credit for increase in the value of Sydney assets due to personal qualities (ignoring and ridiculing academics being one of the proud ones).

Definitely a doctor is hardly guilty of inaction or lacking in merit. However financial gain has been reaped by the barely literate investor who has read as many books in whole life as the doctor in one semester. Is it merit or luck ?

Lets extend this anecdotal rebuttal of your generalization, to Australia. Can we generalize and attribute :

• Merit to all those holding a particular asset (property) in Melbourne and Sydney ?
• Inaction to all the investors who bought property outside Melbourne and Sydney ?
• Merit or inaction to investors in mining towns before and after the bust ?

@Gockie has given a very honest assessment on the role of luck especially in Sydney and Melbourne.

The book by R.H. Frank does quote from studies which should provide academic data driven credence to the part played by luck. Some extracts below:
"According to the Pew Research Center, people in higher income brackets are much more likely than those with lower incomes to say that individuals get rich primarily because they work hard. Other surveys bear this out: Wealthy people overwhelmingly attribute their own success to hard work rather than to factors like luck or being in the right place at the right time."

Individual assessment by itself is not an issue, but it takes a turn for worse when the behavioral modifications due to false notions of merits spills into society, and this is what is manifesting in public debate. R.H. Frank "Seeing ourselves as self-made leads us to be less generous and public-spirited."

 

I agree that there are those who have been extremely luckly with little thought or planning.

For your vocal Sydney investor who can barely string a sentence together I say good luck to them.

I don't think it has to be made to appear particularly difficult, that's what's great about RE. Gain a little knowledge and nearly anyone can participate.
There are numerous markets and suburbs all around the country for any budget which might be viable potential investment locations.

A little reading, knowledge and monitoring of markets together with a strategy which matches the investor is all that is required. This will help in avoiding high risk areas along with expensive mistakes
Add in a understanding of cashflow and yields, risk mitigation by diversification, basic market understanding and purchases near the median to low end of the market at least initially.
Mix with some common sense and a little luck the result will be better than sitting on the sidelines.

 

Hey I can string a sentence together.. well only just

oops, dam emoticons, fingers just slipped. dam did it again.

 

I seem to have a lot of luck in real estate. I bought in an area of Melbourne that was undesirable but undergoing a lot of redevelopment and then I was really lucky that property prices increased


Then I bought a potential development site in Perth using very specific selectional criteria and it was just by pure chance that council rezoned the land to allow a greater density of development. Except I read the council report and the same criteria they used to justify the rezoning of the land were the same criteria I used to select the land to purchase. Was it luck, coincidence or education and research that led me to select those criteria?


I have bought and sold property through several market cycles and I always make money. I am just lucky to be so lucky. None of my success has had anything to do with the 6 to 12 months research I do prior to any property purchase

 

You must have rubbed a Buddhas head.

I think we are all lucky, lucky to live in a time and place where we can create wealth through property from a low income base. Many of the people on this forum and SS have created financial independence from low incomes. I suspect this is going to get harder and harder with APRA, BASEL, NG and CGT concessions get removed/changed. People in the future will have to be even luckier, like either being born into, marrying into or Tatts into wealth. Of course some people will be lucky with an idea like an app that strikes it rich, but gone will be the days of the lucky McDonalds worker or Janitor or Nurse that retires on a self made multi million dollar property portfolio.

 

of course. ..sydneysiders are mexicans and they speak spanish.

 

'+windowtitle+'

Roese and Vohs propose that there are three levels of hindsight bias that stack on top of each other, from basic memory processes up to higher-level inference and belief. The first level of hindsight bias, memory distortion, involves misremembering an earlier opinion or judgment (“I said it would happen”). The second level, inevitability, centers on our belief that the event was inevitable (“It had to happen”). And the third level, foreseeability, involves the belief that we personally could have foreseen the event (“I knew it would happen”).

Hindsight Bias: Why We View Events as More Predictable Than They Really Are – Reflectd

Why does the hindsight bias occur?

• When people find it easy to conclude something, they will show greater hindsight bias: “easy” is misattributed to “certainty”
  
• People have a need to see the world as predictable and find it threatening to believe that many outcomes are due to random events
  
• People strive to maintain and enhance positive views of themselves. In explaining the past, people make themselves feel better by taking credit for success and blaming others for failure (self-serving bias)

Any similarities @Perthguy ? You knew all along didn't you ?

And off course based on your meritocracy you would be able to repeat it in say Myanmar or Ethiopia just like you uniquely eliminated randomness, researched and controlled the parents, place, time, education and environment that you were born into and grew up in.

 

For the absence of doubt in fifteen years time. Let's save this as a time capsule. No hindsight here.

I am investing in property in Melbourne currently and will move to other markets as they present better opportunity because I KNOW that property WILL continue to increase in value doubling in approx10-15 years.

 

You seem to have an opinion about everything and everybody. It's getting real monotonous.

What's the theory that describes that behaviour?

 

It's not my opinion since it is based on statements by the posters themselves, I have just put voluntary disclosures into context.
On that note I think I might have been OTT wrt your casual post that I re-posted a couple of times, and I fully empathize with your statement, and take this opportunity to express regret on my conduct.

Too much time on PC.

 

This is the characteristic feature that if you stick with that plan inbetween the inconsistency and bumps in the road
then you will wake up one morning and ask yourself how did all this happen..