The following is the third in a seven part series on investor pyschology and how to avoid falling into traps that negatively affect your outcomes
Sloth is often mistaken for laziness. Historically, it meant something more dangerous. It was the refusal to undertake the difficult work required of you. Not because the work was impossible, but because it was demanding. Sloth is the temptation to settle for easy answers instead of difficult truths.
In investing, sloth rarely looks like doing nothing. More often it looks like activity without effort. Investors consume podcasts, scroll social media, read broker summaries and absorb consensus views, creating the comforting illusion of research. Yet genuine understanding cannot be outsourced. At some point, every investor must wrestle with the evidence for themselves. The slothful investor never does.
This is where mistakes begin. Conviction built on borrowed opinions feels just as strong as conviction earned through hard work, at least while markets are rising. Investors tell themselves that “everyone knows” the thesis, mistaking consensus for verification. They stop asking awkward questions, neglect the footnotes and accept management narratives at face value. When conditions change, they discover too late that they never truly understood what they owned.
Wirecard’s collapse in 2020 revealed just how dangerous intellectual sloth can become. For years, the German payments company was celebrated as one of Europe’s great technology success stories. Investors, banks, regulators and analysts largely accepted management’s extraordinary claims, assuming someone else had already done the difficult work of verification. Few examined the underlying evidence with sufficient scepticism. Those who did were often dismissed as troublemakers.
One of those troublemakers was Financial Times journalist Dan McCrum. Rather than accepting the consensus, he spent years scrutinising original documents, interviewing whistleblowers and testing Wirecard’s claims against reality. His reporting triggered lawsuits, regulatory investigations and accusations of market manipulation, yet he persisted because the evidence pointed in only one direction. In 2020 the truth finally emerged. Around €1.9 billion of cash that Wirecard claimed to hold simply did not exist. The company collapsed into insolvency within days. McCrum’s edge was not superior intelligence. It was diligence. He understood that truth is never discovered by assuming someone else has already done the work.
The virtue that counters sloth is diligence. Not frantic activity or endless trading, but the discipline of independent verification. Diligent investors distrust easy answers. They recognise that every investment deserves to be challenged before it is believed. Rather than inheriting conviction from the crowd, they build it themselves, one piece of evidence at a time.
The slothful investor takes comfort in consensus. The diligent investor seeks proof. One assumes someone else has done the work. The other knows that, in investing, the responsibility is always personal.
Some advice. Before buying a company, identify one important conclusion that almost everyone accepts, then try to prove it wrong using the primary evidence. Even if you fail, the exercise will leave you with something far more valuable than borrowed conviction: genuine understanding.
