Tag Archives: seeking-alpha

New business ventures often face the challenge of how to be truly innovative and use that in a way that gives them an advantage in the marketplace. For investors, an unfair advantage can come from a number of sources, including inside information (the legal kind, not the kind that will land you in jail). Don’t settle for the conventional wisdom when it comes to making investment choices. Hank “Ace” Greenberg, former chairman of insurance giant AIG (NYSE: AIG ), once said “All I want in life is a small unfair advantage.” As it turns out, he had one – and it was a whopper. Do you have one? Yes, you do. But you may not be aware of it. “Having the time, willingness, and ability to do original research is a true unfair advantage. Unfortunately, very few individual investors are able to pull it off.” – Jesse Livermore New business ventures often face the challenge of how to be truly innovative and use that in a way that gives them an advantage in the marketplace. In his book Running Lean, Ash Maurya offers a new take on the idea by introducing the concept of a small unfair advantage. A true unfair advantage is one that cannot easily be copied, stolen or bought. Anything that is worth copying will be copied, so how do you establish an advantage? By building something that is difficult or impossible to be copied. For investors, an unfair advantage can come from a number of sources, including inside information (the legal kind, not the kind that will land you in jail). The way to gain access to this kind of information is by networking with people who are experts in the area that you’re interested in. Here’s an example of what I mean. The last time I bought Starbucks’ (NASDAQ: SBUX ) stock was right after I heard my barista talking about how the company was going to make a special contribution to the employee retirement plan. Hmmm… Why would they do that unless they knew they were going to have a very profitable year? That was legal inside information, and my small unfair advantage was that I was able to recognize the significance of what that barista had told me. Comments like this, and other sources of objective, unbiased, and timely information are threads that weave your unfair advantage as an investor. By the time a news story hits the media, it’s too late to profit from that information. The price of the stock has already moved, thanks to the action of other investors who may not be smarter than you, but they are much quicker to act. Here’s another example. A well-connected blogger who specializes in junior gold mining shares often has access to people inside that industry who are more likely to speak the unvarnished truth, instead of repeating the talking points that were prepared for them by the Investor Relations Department. There are other skills you can learn, that are part of your unfair advantage. Take problem solving, for example. If you take the time to write down your thoughts regarding an investment idea, and list the possible solutions, you’re more likely to choose the one that advances your goal in the most cost-effective and meaningful way. A single-minded, uncompromising commitment to following through on your strategic plan is an unfair advantage in and of itself. All institutional investors, and most wealthy individual investors, have a strategic plan in place. But following through on it is another matter. If your plan is well-written, it can save you from making costly mistakes that can ruin an otherwise great year. Your Dream Team is another source of unfair advantage. This is your “inner circle,” your private network of contacts and experts who make up your Brain Trust. Highly successful investors have a small group of advisers who are all specialists in their fields. They understand the value of paying for expert advice because they recognize that they will never have enough time and energy to learn more than an expert about that one particular thing. Critical Thinking is an unfair advantage, because so few people practice it. This is the process of detaching yourself from the emotions of the moment, and examining the facts about the decision at hand. It takes patience and discipline, but it’s not rocket science. It’s simply a clearly defined and well-executed procedure. When you put all these things together, you can see that the common thread is independent thinking. Don’t settle for the conventional wisdom when it comes to making investment choices. Look for unbiased expert opinion, even if that means paying someone to advise you about a specific issue. The essence of your small unfair advantage is that nobody can copy, steal, or buy your investment ideas if you think for yourself.