I guess I didn't make the point clearer. Let's say for example it is possible to select a basket of companies in which a Gorilla is likely to emerge.
Okay...
And let's assume that the theory of "outsized returns" from this basket is possible merely by investing in all of 'em and winnowing out the Gorilla.
Okay...
Now, if I was the only person on the planet who had read the best seller describing this strategy, then I might be willing to believe that the market would fail to price this basket in anticipation of a gorilla emerging. But that wouldn't have made it a best-seller.
You don't have to be the only one doing it. You only have to do it better than the other people in the market, i.e. process the available information faster/better than others. Whether they admit it or not, every (non-criminal) investor in the market has the fundamental belief that they can do this.
assuming the opportunity exists, then in order to win I have to be more adept at recognizing the opportunity than the market (which is the part of the strategy that appeals to the ego). Either on a macro basis (the basket in which a gorilla might emerge), or on a micro basis (the gorilla itself).
Appeal to ego is not a part of it, not for me anyway. No matter what strategy you employ, it will not work unless you do it well. Doing it well is inevitably very hard work and requires ingenuity.
In this case, the hard work and ingenuity goes into finding markets with the right characteristics before too many people notice. Then, as the rest of the market starts to notice the same characteristics (the more lazy people looking the better), the price of the entire group rises. If you can do this well, you are likely to EARN above average returns.
These markets are not found by watching CNBC and they are not on a Gorilla Game message board. You have to find them yourself and that requires (you guessed it) working harder and processing information better and/or faster than the next guy. Few investors are willing to work hard enough at the gorilla game to be successful (or be smart enough to do it right). Rather, they monitor message boards looking for a guru to lead them to the current/next gorilla. Or, they buy gorillas way too late (and therefore at prices that ensure mediocre performance).
This is not unique to the GG strategy, but is a fundamental property of most human beings. This is not new and will not change.
“The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others...”
- Edwin Lefevre, Reminiscences of a Stock Operator
It is the root cause of the failure of the vast majority of traders/investors regardless of strategy.
Would you (JS) ever buy a stock just because you heard on CNBC or SI that it was undervalued? No way, from what I have seen. That's why you at least have the potential to be successful. The rest depends on your ability to calculate valuation better than the rest of us, which means you must be "smarter than the market".
Which leads us to the conclusion that the ability to win at the Gorilla Game requires us to be able to identify Gorillas before they are gorillas.
I suppose so, but not exactly the way that you meant it (at least, not the way I think you meant it).
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