You Can Be Wrong 50% of the Time and Still Get Rich (Here is How)

"You can be wrong half the time and still make a fortune." — George Soros

We grow up believing that to be successful, we must be "perfect." If you fail a math test, you are bad. If you lose money in a stock, you are a "failed" investor.

But in Chapter 6 of The Psychology of Money, Morgan Housel teaches us a weird rule of finance that defies standard logic: You can be wrong 50% of the time and still make a fortune.

This is called the "Long Tail" effect. It is the secret behind how Venture Capitalists, Movie Studios, and Super Investors really make money.

1. The Disney Miracle

In the mid-1930s, Walt Disney was struggling. His studio had produced more than 400 cartoons. Most of them were short, beloved by fans, but they lost money or barely broke even.

Disney was technically "failing" hundreds of times. He was on the verge of bankruptcy.

Then, in 1938, he released Snow White and the Seven Dwarfs.

It earned $8 million in the first six months. In today's money, that is hundreds of millions. The profit from that one movie was enough to wipe out the losses of the previous 400 failures.

One "Tail Event" paid for everything. He was wrong 400 times, right once, and still won.

2. The "Titan" of Indian Markets

Let's bring this to Dalal Street. We all know the late Rakesh Jhunjhunwala (The Big Bull of India). We think he was a genius who picked every stock correctly.

Wrong.

If you look at his portfolio history, he invested in hundreds of companies. Many of them went nowhere. Some even went to zero (like DHFL or other small caps). But he is a billionaire. Why?

Because of Titan.

He bought Titan at an average price of ₹3 (adjusted). Today, it trades in thousands. That single investment grew so massive that it overshadowed every single mistake he ever made. He didn't need to be right 100 times. He just needed to be right about Titan once and hold it tight.

3. The Startup Mathematics

Look at Shark Tank India or any Venture Capital firm. Their business model is built on "Tails."

• They invest in 50 startups.
• 30 will fail (Value goes to 0).
• 15 will survive (Return the money back).
• 5 will become Unicorns (Like Zomato, Swiggy, Paytm).

Those 5 winners return 100x or 1000x the money, paying for all the 30 failures. This is Asset Allocation in action.

4. How You Can Use This Strategy

You don't need to pick stocks to use this rule. If you invest in an Index Fund (Nifty 50), you are already using it.

In the Nifty 50, companies like Reliance, HDFC Bank, and TCS are the "Tails." They drive the index up. Companies like Yes Bank or Jet Airways fall out of the index. The winners automatically compensate for the losers.

The Lesson: Don't panic if a few of your stocks are in red. As long as you have a few winners in your portfolio, you will be fine.

Key Takeaways

• Accept Failure: Failure is not the opposite of success; it is part of success. Even Warren Buffett is wrong 40% of the time.
• Let Winners Run: The biggest mistake investors make is selling their winning stocks too early ("Booking Profit") and holding onto losing stocks. Do the opposite.
• Diversify: Buy a basket of stocks (or a Mutual Fund) to increase your chances of finding that one "Tail" event.

Frequently Asked Questions (FAQ)

Q1: What is the Pareto Principle in Investing?
A: It's the 80/20 rule. 80% of your profits will come from 20% of your investments. Focus on finding those 20% winners.

Q2: Should I sell my losing stocks?
A: If the fundamental reason you bought the stock has changed, yes. Don't hold a loser just hoping it will come back to your buying price.

Q3: How do I find the next Titan?
A: It's hard. That's why Index Funds are recommended for most people. They guarantee that you will own the winners without having to find them yourself.

Up next: Chapter 7 – Freedom (The highest form of wealth).

📚 Credit & Disclaimer:

This post is a summary based on the bestseller "The Psychology of Money" by Morgan Housel.