Page 75 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

converge upon the return of the best elements in the portfolio. That’s all that
happens.”
COBACOBA

The great art dealers operated like index funds. They bought everything they
could. And they bought it in portfolios, not individual pieces they happened
to like. Then they sat and waited for a few winners to emerge.

That’s all that happens.

Perhaps 99% of the works someone like Berggruen acquired in his life

turned out to be of little value. But that doesn’t particularly matter if the
other 1% turn out to be the work of someone like Picasso. Berggruen could
be wrong most of the time and still end up stupendously right.

A lot of things in business and investing work this way. Long tails—the
farthest ends of a distribution of outcomes—have tremendous influence in
finance, where a small number of events can account for the majority of
outcomes.

That can be hard to deal with, even if you understand the math. It is not
intuitive that an investor can be wrong half the time and still make a fortune.
It means we underestimate how normal it is for a lot of things to fail. Which
causes us to overreact when they do.

Steamboat Willie put Walt Disney on the map as an animator. Business

success was another story. Disney’s first studio went bankrupt. His films
were monstrously expensive to produce, and financed at outrageous terms.
By the mid-1930s Disney had produced more than 400 cartoons. Most of
them were short, most of them were beloved by viewers, and most of them
lost a fortune.

Snow White and the Seven Dwarfs changed everything.

The $8 million it earned in the first six months of 1938 was an order of
magnitude higher than anything the company earned previously. It
transformed Disney Studios. All company debts were paid off. Key