[GE]: change your mind
by Eddie Dalton, Investor at $50bn+ Hedge Fund, Investor at $30bn+ Private Equity Firm, and Exited Startup Founder
Welcome to another Free Friday! Today’s post is a guest essay by Eddie Dalton, the author of One More Thing. Previously, Eddie was an investor at hedge fund with $50bn+ in AUM, an investor at a private equity firm with $30bn+ in AUM, and the cofounder of an exited startup.
Eddie actually reached out to me after I published my piece Anthology #3: Tiger Management: 50 Lessons from 50 Tigers to share some of his experiences working with a number of the Tigers and Cubs.
PS/ Still working on a longer Tiger essay (“Handbook”), so if you worked at Tiger (or at a Cub/with someone who worked at Tiger) and are willing to share your experience, please reach out! I’d love to chat (more than happy for it to be on background or off the record).
Eddie is one of the most thoughtful young investors I’ve spoken with recently, and I encouraged him to write more. Surprisingly, he obliged. But while he’s not writing specifically about investing, he’s sharing an equally thoughtful approach to life.
In the essay I’m sharing today, he happens to be writing about an investing concept: conviction. It’s something that is particularly relevant in today’s turbulent markets, and something he is particularly suited to write about given his experience starting and investing in companies across multiple different industries and asset classes.
change your mind
"In investing, what is comfortable is rarely profitable."
- Rupal Bhansali
Vanishing losers
The market worships conviction — until it doesn’t. Investors glorify holding steady against short-term thinking, but there is massive survivorship bias here. And the ones who do this for too long are forgotten in history.
Resilience without adaptation is just another name for ruin. Every failed investor was once praised for their conviction, too. Knowing when to change your mind keeps investors alive.
Survivorship bias is a cognitive error where we focus only on the winners or survivors of a process while ignoring the failures, leading to a distorted understanding of reality
In investing, this means analyzing just the success stories without accounting for countless missing data points: failed investments that never made it.
How does this warp investment thinking?
Success stories are cherry-picked: Investors idolize companies like Apple, Amazon, or Tesla without acknowledging thousands of similar startups that crashed and burned
Time solves everything: Common investment advice is that simply holding onto stocks long enough guarantees success, but this ignores countless companies that go to zero. This isn’t unique to venture capital. “More time, less risk” makes sense for index investing, which captures long-tail winners because it captures everything
Fund performance distortion: Mutual funds that underperform get shut down, and surviving funds issue performance reports. This makes historical returns across the board seem better than they are. On a related note, don’t pay fees to people who care less about your money than you do
Wrong takeaways from crashes: People assume that because markets have always bounced back, this will always be the case everywhere. But some economies (like Japan since the 1990s) can be lost to long-term stagnation for decades. On a related note, is the U.S. special?
Non-investing crashes: During WWII, engineers studied bullet holes in returning planes to reinforce them. Statistician Abraham Wald pointed out that these were the planes that survived. The real issues were in the planes that never made it back. Reinforcing the areas without bullet holes that caused fatal crashes was the right takeaway.
Back to investing: Analyzing only the strategies, companies, or investors that survived is highly dangerous. Survivorship bias tricks people into overestimating success, underestimating risk, and correlating past performance with forward returns.
"Being unwilling to change your mind is the death of investing returns."
- Josh Wolfe
Prove it in numbers
Let’s take a closer look at the missing data points. Certain asset classes are more obvious than others.
Take venture capital. You make 100 seed-stage investments and expect 95 of them to lose money. Of the 5 remaining, you hope 1-2 investments can 200x and make up for the losers, and then some. The magic is in the long tail, in life as it is in investing.
This makes sense in riskier asset classes. Would it surprise you that public companies are no different?
Consider the chart below of public U.S. companies that experienced “catastrophic loss” and never recovered.
Catastrophic loss is defined as a stock that experienced a 70% or more decline from its peak and never recovered back to the 60% level from its peak
Between 1980-2014, 40% of all stocks suffered catastrophic losses. In info tech, almost 2 out of every 3 public companies.
Now consider that since 1980, the Russell 3000 (which represents 98% of investable U.S. stocks), is up almost 75x. That includes all of these names that declined over 70% in value in that same period.
How is that possible? The 5% of long-tail winners like Amazon, Microsoft, NVIDIA, United Healthcare, and Walmart make up for the losers, and then some. Again, the magic is in the long tail, in life as it is in investing.
“You can be wrong half the time and still make a fortune”
- Morgan Housel
Change your mind
Markets overreact and change. To stay in the game, accept the inherent variability and evolve with it. Reserve the right to change your mind.
Adaptation and managing risk are far more important than predicting every move correctly (which is impossible). Trends don’t last forever, and trees don’t grow to the sky. Investing isn’t predicting the future, but preparing for it.
Flexibility is not the absence of conviction, but the wisdom to know that conviction must evolve with new information. Acumen lies not in clinging to what we know, but in the ability to grow when confronted with unknowns.
In The Black Swan, Nassim Nicholas Taleb argues that rare, disruptive events are not outliers but fundamental to markets. Black Swan events — 2008, Lehman Brothers, COVID — are not aberrations, but inevitabilities.
To invest is to know structural impermanence — the ability to change your mind when the world demands it. Be “antifragile,” seek opportunities in chaos and uncertainty, rather than recoil in fear. Be open to revision, and navigate with humility.
One more thing
In better words, from the hall of fame:
"The investor's chief problem—and even his worst enemy—is likely to be himself."
- Benjamin Graham
“The most important thing to do if you find yourself in a hole is to stop digging.”
- Warren Buffett
“You don’t need to be a genius. You need to be willing to change your mind when the facts change.”
- Howard Marks
“If you’re not a little bit scared, you’re probably not doing something right.”
- Ray Dalio
"Markets can remain irrational longer than you can remain solvent."
- John Maynard Keynes
“I would argue that the people who are most successful in investing are the ones who are most able to rethink their positions when necessary.”
- Michael Burry
"It’s not whether you're right or wrong that’s important, but how much money you make when you're right and how much you lose when you're wrong."
- George Soros
“The greatest risk in investing is not the volatility of the markets, but the complacency of the investor."
- Sir John Templeton
“Investing is not about being right all the time. It’s about managing risk and adapting.”
- Paul Tudor Jones
“The key to success in investing is not in predicting the future, but in being prepared to act when it presents itself.”
- Charlie Munger
If you’d like to read more of Eddie’s writing, you can do so here: