Here’s why: the only way to get a good price is to buy what the crowd wants to sell and sell what the crowd wants to buy. A good price implies a lopsided bet: a small downside and a big upside. The downside is small because the price already assumes the worst-case scenario. This creates a margin for error. If we’re wrong, we won’t lose much. If we’re right, we’ll make a lot. An upside bigger than the downside means we breakeven, even if we err more often than we succeed. If we manage to succeed as often as, or more often than we err, we’ll do well.
