Thursday, May 21, 2015

The success of some types of advice is dependent on everyone not following that advice

Counterintuitive as it may sound, it seems to me that what is implied by the title of this post is actually true [in at least some cases]. Some examples will make this clear:
  1. Brokerage recommendation to hold a stock: Many times stock brokerages dish out a recommendation to hold a stock, and to wait for it to rise, and to sell it when it reaches a certain, higher level compared to the current price. This recommendation will work only if not everyone follows it. If everyone follows, and hence holds, the stock price will not change at all, and hence will not rise ever, thus defeating the recommendation to sell it when it rises.
  2. Avoid traveling on an all-new aircraft for a few years until its software matures: The idea here is to avoid, for its first few years, an airliner which is a clean-sheet design, and to let a few years of commercial flights pass before you travel on it, so that any bugs in its hardware and/or software are ironed out, thus increasing your safety. However, if everyone follows this advice, the baking/maturing of its hardware/software will come to a halt, defeating the advice.
  3. Update [Feb'16]: Look at only the sections listing the Most Read/Most Viewed/Most Shared/Most Emailed news stories on websites, instead of wasting your time sifting through all of the articles, many of which are expected to be lame or shitty [this way you can supposedly increase the return on/utilization of your time - instead of having to check out all articles on just one website, you can check the Most Popular articles on top ten websites and thus consume content of better importance/popularity/quality in the same amount of time]. But if everyone follows this, the Most Popular lists will stop changing/refreshing/updating.
Update [17-May-16]: The following thought seems related to the above idea. If in an area every house is pledged to a bank as a collateral [for a credit line], then if one of these borrowers goes bust and the bank wants to sell the house pledged by this borrower to recover the money lent to him, then who will buy this house [since everyone has already pledged their own houses to banks and consequentially cannot afford to buy someone else's house]?

Update [Dec'18]: As of Dec'18, Donald Trump has suggested that the stock market dip is a great buying opportunity for investors. But there obviously have to be many people who don't follow his advice for others to be able to benefit from his advice. If everyone becomes a buyer, nobody can benefit.

No comments:

Post a Comment