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Play where it's boring and complex
How the matrix works
Investor Charlie Songhurst places companies on a two-by-two matrix. Coolness runs from boring to sexy along the horizontal axis, and complexity runs from simple to complex up the vertical axis. How attractive a market looks draws competition, so competition rises as you move right. How complex the problem is sets the reward, so rewards rise as you move up.
The four quadrants
The top right is sexy and complex, where elite competition meets high rewards and the best talent flocks for the excitement and the challenge. The bottom right is sexy and simple. It has the densest competition, almost no barrier to entry, and very low rewards, so everyone floods there. That is the traffic jam.
The bottom left is boring and simple, with little competition and low rewards, something of a dead zone. The top left is boring and complex, with low competition and high reward.
Beyond investing
The matrix was built for investing, and it stretches to careers, networking, and relationships. AI creates an enormous amount of gravity toward the bottom right, the simple and sexy thing, so staying in the top left improves the odds of standing out and winning.
Why does complexity protect rewards from competition?
Hard problems carry barriers to entry: years of expertise, specialized relationships, or knowledge that takes a long time to build. Each barrier thins the field of people who can compete, and fewer competitors means each survivor keeps more of the profit. Michael Porter's five forces framework, published in 1979, lists barriers to entry as one of the main determinants of how profitable an industry stays. Simple tasks have no such barrier, so rivals arrive quickly and push prices toward zero.
Why do people crowd toward the exciting option?
Attention is limited, and eye-catching choices win it. A 2008 study by economists Brad Barber and Terrance Odean found that individual investors were net buyers of stocks that had grabbed attention through news, unusual trading volume, or extreme returns. Professional investors were far less swayed, because they screen thousands of options rather than reacting to the ones they happen to notice. The crowd therefore piles into the same visible choices.
Has anyone argued that boring businesses win?
Peter Lynch, who ran Fidelity's Magellan Fund from 1977 to 1990, argued in his 1989 book One Up on Wall Street that dull companies with dull names and unglamorous products can be bargains. His reasoning was that Wall Street analysts ignore them, so their prices stay low relative to their earnings. He gave examples of ordinary firms in industries such as waste disposal and funeral services. During his tenure Magellan returned an average of about 29 percent a year.
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