In economic game theory, the “first-mover advantage” is a controversial topic. Last month over at Forbes.com, there was an interesting article by Tim Worstall about the issue, quoting another piece in the Financial Times.
Here is an excerpt (Click Here for the full piece)
An interesting piece in the FT about first mover advantage. The essential point of the piece being that being the first mover just ain’t that much of an advantage. A disadvantage even:
In Will and Vision: How Latecomers Grow to Dominate Markets, they showed that many companies believed to be pioneers in categories that they led (at least for a time) were in fact late arrivals: Kodak in cameras, Xerox in photocopiers, Apple in personal computers. “Market pioneering is neither necessary nor sufficient for long-term success,” they wrote.
Instead, so-called “fast followers” have the advantage of being able to use pioneers’ experiences to learn about consumer tastes, new designs and manufacturing techniques, and the potential size of a market. They can also learn from their mistakes.
Applied to trading, consider the tempting “first-mover advantage” to which bottom and top-callers alike are drawn. To be sure, there are many different styles that can and have success over time in the stock market. The key is defining your style and adhering to that given discipline, avoiding commingling styles such as turning a losing trade into “an investment.” If you have defined yourself as a contrarian trader, looking to pick bottoms and tops as often as possible, although I disagree with it by and large you can most certainly enjoy success. I consider myself a “fast-follower,” as per the quote above, looking to get involved after the first-mover may have been on the right track, but got swarmed anyway for being too early.
To put that into a visual context, consider the video below and what happens to the first-moving hornet as it seeks the honey.
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http://www.youtube.com/watch?feature=player_embedded&v=0EZtXNIT5QQ
Great post! Love the video.
this is how your day can go!http://36ohk6dgmcd1n-c.c.yom.mail.yahoo.net/om/api/1.0/openmail.app.invoke/36ohk6dgmcd1n/11/1.0.35/us/en-US/view.html/0#
sorry bad link
I’m a buy and hold(ish) for my 401k and just recently (as you know) started “swinging” (hey! not that way!) It’s hard to switch between them and to make my brain follow the above for trading but I am trying!! Thanks you guys 🙂 (also must de-couple from a couple “investments” at some point…meh)