The paradox of financial risk perception
The guest argued that the more risk investors feel they are taking, the safer their behavior becomes, whereas feeling safe leads to complacency and heightened actual risk.
The argument
Using the analogy of the Ford Explorer versus the Mazda Miata, the guest explained that drivers of seemingly less safe cars adjust their behavior to be more cautious, while SUV drivers become reckless because they feel protected. In markets, the current euphoria around 'sure things' like the Magnificent Seven creates a highly risky setup because investors feel there is no risk.
Hear it yourself
"don't want the first rodeo cowboys, as we go into, some unexpected, an unexpected fragile world. How do you think about durability in in a world of, like, crazy technological change like we are now? Like, many people thought the software businesses were very, very durable businesses, but then, like, it feels like, you know, at the flip of the hat, they're they're no longer durable businesses. So, like, how do you think about that balance between durability and something that's changing that might be like a life changing technology? Well, they may be durable, but at a smaller level."