My school, located in upscale Barcelona where the likes of Pique (& Shakira), Neymar, etc. live, is really small in every way possible – the classrooms, cafeteria, hallways, etc. There are good and bad things about being in a small campus – small class size, which implies that you’re all in each others’ faces and somehow get to know every single person in your batch either by face, name, scooter, etc making us a lot closer and our network way more tight knit than you’d expect in a class size of 900. On the other hand, you have staggered lunch breaks and you also have really tiny restrooms (only one on a floor) with just two cubicles, which force you to overthink routine things.
Susie and I always bumped into each other in the restroom on the same floor as our classroom and shared cribs about how we are always in queue. Soon enough, both of us started to hedge and use the restroom one floor below. Initially, we ended up drawing the wrong conclusions that all restrooms are crowded during lunch but the matter of fact was that we were all hedging on the same position simultaneously, which I realised on an odd day that the one on our floor was empty. Once I pointed this out to Susie, no surprises, we bumped into each other once again in the restroom on tour floor.
Similarly, the summer before I started my MBA, I travelled all the way from Rajajinagar to Indiranagar for my internship and everyday, I tried to optimise my journey only to find that everyone on road was optimising the exact same way as me. I always ended up spending an hour at least on road only to terribly miss comfortably sleeping in my bus on the way to Toyota (For those of you who know me, this is probably one of the reasons I would want to work in one of the two companies located in WTC in Bangalore). There were probably one or two days when I had a windfall, but then again, I cannot be completely sure that the reason was me betting against the market. It could have been a variety of things given that my internship coinciding with school holidays and the beginning of a financial year in India.
Assuming that I had indeed bet against the market and been successful, could I have benefited from either no queues in restrooms or zero traffic jams indefinitely? No, not unless you can predict human behaviour (which I believe I reasonably can, although people would rather die than accept their transparency. Although, this expertise is limited to the area of restroom queues, mind you). It’s only a matter of time before the markets align themselves. It’s this tiny window of mispricing that allows for people such as Naseem Taleb or John Paulson make windfalls. How does one identify this window and take the right position is the eternal question, right!