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Investing Is About Risk And Time
- Investing is fundamentally about taking risk to move money into the future.
- Higher expected returns come from accepting the possibility of smaller outcomes or losses.
Penelope The Cow Experiment
- Planet Money repeated Galton's ox experiment by asking thousands to guess Penelope the cow's weight.
- The crowd average was within about 5% of the true weight, demonstrating the wisdom of crowds.
Prices Emerge From Many Individual Beliefs
- Stock prices form when many investors bid based on their beliefs about a company's future profits.
- Individual mistakes cancel out and aggregate beliefs help converge on a market price.