Think Big to beat the market – Joel Greenblatt

Joel Greenblatt is an author of a famous book “The Little Book That Beats the Market”. The book demonstrate a formula for value investing. He is a professor of Columbia’s business school and also has created a website for value investing club. He often talk about how average he was at valuation. He had an edge on others though which helped him to put a lot of information into context. He was good at looking the big picture and extracting information what met.

Joel suggest that it has nothing to do with your ability to do the spreadsheet. It has more to do with the focusing on big picture. Think of the logic behind, not just format. It is so important to focus on what’s important to me. Investors usually get lost in the details that don’t even matter much.

The perfect analogy would be like if you focus on trees, and miss the forest and there is a lot of different ways this happens with market enthusiasts. Old style value investing isn’t working anymore. If you haven’t seen new investors, they are the one mostly obsessed with tiny details. They keep updating their spreadsheets with numbers and they are so excited when it spits something out or just Fritchey calculations. They will debate every single detail of the investment thesis despite that it may not even effect the overall results.

Technology is always changing so there is always going to be new markets and new strategies. To focus on the big picture markets in general you need to investigate the principles of markets that don’t change. Markets are created by human interactions. Basic human interactions doesn’t change. So it is better to focus on how human psychology works and try to understand their needs and necessities. Instead of being stuck in details at spreadsheets and starring at numbers, focus on human’s interaction – the basic of how market flourish.

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