The Difference Between Knowing and Daring

Knowing you're right isn't enough. You have to wait for the market to agree.

Michael Burry saw it in 2005. Houses were overpriced. Mortgages were poison. This would crash. He did the only logical thing: he shorted. He paid money to be right.

Then came the illogical: he was right, and the market went the opposite direction. Two years. Two years being right while losing money. His investors wanted out. His partners wanted to quit. The market said: you're insane.

In 2008 he was right. Completely right. Houses crashed. Mortgages were indeed poison. And Burry made billions.

But here's what's interesting: this wasn't genius. It was the only thing that made sense. The data was clear. The math was right. He read the facts. Everyone could read these facts. Everyone could understand. But no one dared.

This is the difference between an investor and a capitalist. An investor looks at what everyone knows and wins slightly ahead. A capitalist looks at what no one dares say and places money there.

With Florian I see this constantly. Owners ask: why would houses ever drop? This has always been. I see what they see: it hasn't always been. Price per square meter has quintupled since the nineties. Wages haven't.

This ends badly. Not tomorrow. But ends. So owners who buy now, they're making Burry's bet in reverse. They're buying because everyone buys.

Those who see this and don't buy, or buy and prepare for ten percent decline, they're playing Burry's game. They dare.

This is the mindset difference. Burry had no more information than anyone else. He read the same things. He just dared to conclude what others walked past.

So for you: what do you know that you don't dare say?

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Sources: Lewis, Michael, The Big Short (W.W. Norton, 2010)