Bad Experiences

Morgan Housel wrote another terrific post on how personal experiences shape our risk preferences. Experiencing market bubbles and crashes can can influence our view of investments for years or even decades.

Bad Experiences

People who live through highly adverse markets become more conservative:

Living through a crash, or high inflation, or a deep recession, when you were young made you far more conservative later in life compared to those who didn’t, and vice versa.

Marc Andreessen argued that in the wage of the 2000 tech bust, successful tech stocks were undervalued for a long time.

I wasn’t an investor in 2000. So people like Tren are better at spotting bubbles than I am. On the other hand, Andreessen says tech stocks have been consistently undervalued since 2003, because investors who lived through the crash continued to see everything through the lens of excess and folly, leading them to shun legitimate opportunities. When is stuck in your head, Facebook and Netflix run right past you.