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October 26, 2022 at 01:35 PM
What You Need to Know
- Investors would be wise to stay humble and avoid those who claim to know for sure what will happen next, Ritholtz cautions.
- Looking back at the rise and fall of Nokia's smartphone can offer perspective for investors today.
The future is unknowable, and investors would be wise to stay humble and avoid those who claim to know for sure what will happen next, says expert investor Barry Ritholtz.
“Recognizing how little you actually know is a superpower. If we were less certain of ourselves and possessed more humility, we could all become better investors,” the Ritholtz Wealth Management founder and chief investment officer wrote in his The Big Picture blog today.
He cited a Forbes magazine headline from exactly 15 years ago about Nokia’s then-CEO that asked: “Can anyone catch the cell phone king?”
But “ Nokia was unwilling to cannibalize its already very successful handset business,” perhaps failing to recognize the shift toward more powerful smartphones, or maybe “unable to make the turn,” Ritholtz wrote.
Apple introduced the iPhone that year, Nokia’s mobile phone business soon started its decline, and in 2013, Nokia sold all of its phone operations to Microsoft, Ritholtz noted.
Nokia’s fate is “yet another reminder of what we tend to overlook,” he wrote, highlighting five key truths that investors need to come to terms with:
“The future is unknown and unknowable,” and investors should “ignore anyone who pretends they know with certainty what is coming next — they don’t, because they can’t.” It’s better to think about what’s more or less likely to happen, which will lead to smaller mistakes and allow more flexible thinking, Ritholtz said.
