Right idea, wrong timing
November 14, 2018
Knowing what's next is easy; knowing when is much harder.
The video above, from the Big Short, shows Dr. Burry closing Scion Capital. He was 100% right about what (huge increase in residential mortgage defaults), but almost ruined by the when (it came later than he expected).
For all the talk about "how fast the world is moving" and how "technology speeds things up", I'm shocked by how slowly things seem to change in real life. It's glacial.
I wrote yesterday that remote work will dominate. The Basecamp/37signals guys wrote that book five years ago, after another 5-10 on their soapbox before they wrote the book. We're at least 10-15 years into that, and it still feels early.
Everybody in tech has known things were moving to the cloud for 10 years. Maybe 15. And yet, the old guard of IT is still fighting it. Microsoft is doing a great business with their "hybrid" story, letting you move to Azure without the burden of fully committing to a cloud environment.
US healthcare is falling apart. We can't afford the system we have, but it's going to take decades to reform. Meanwhile, the man who has everything will make tens of millions performing overpriced surgeries.
There are three revolutions happening in mobility currently. We're changing from combustion to electric power, driven to autonomous, and personal vehicles to fleets. It will take decades.
When you spend your life thinking about trends a lot, as I do, you sometimes convince yourself they'll matter in your lifetime even when they won't. If I'm fortunate, I might work another 50 years; that feels about right for when we'll reach full autonomy for anyone who wants it, in cars (assuming it's not legally required by then).
I think the lesson here is twofold. First, be honest about how glacially things really change. It's not that change is fast; people who say that just weren't paying attention, and noticed it too late. Too much golfing, not enough hanging out in research labs.
And second, make bets that aren't time-sensitive—small-magnitude theta. That's one of the reasons I don't short stocks: unless things really are falling apart, you're going to get eaten alive in carry. Dr. Burry almost did, and his cost of capital is a lot lower than yours.