Pattern Matching

Judging a new opportunity by its resemblance to earlier ones that succeeded or failed.

Example

Favouring a founder because they resemble the founder of a past winner.

Important

It is fast and sometimes useful, and it quietly rewards surface similarity. Check that the pattern is about the mechanism, not the appearance.

Related terms

  • Screening Funnel — The stages an opportunity passes through from arrival to investment, usually intake, first look, diligence and decision, each with its own time cost.
  • Survivorship bias — Drawing conclusions from the examples that lasted long enough to be visible, while the ones that failed have quietly left the sample.

Lessons that explain it

  • A process you actually run beats a better one you do not — Screening only compounds if it is written down, identical every time, and produces a record - which is what turns a year of declined opportunities into knowledge about a category. (11 min)

All 578 terms in the Investing glossary