Dead Duck, Walking Duck, or Flying Duck

While commiserating with a retired business colleague, he shared this hilarious and vivid analogy of how he categorizes investment opportunities into one of three categories: as a “dead duck, a walking duck, or a flying duck” (B. Vyas, personal communication, March 11, 2024).

A dead duck is a poor investment opportunity. For whatever reason, there are people who ignore wise counsel and will pursue a dead duck even to their own financial detriment. It is obvious to an experienced business mentor if a business proposition does not work no matter how much capital and effort are utilized. Yet, some folks disregard warnings at their own peril.

Our emotional responses are controlled by the limbic system. This can influence people into making foolish decisions. Seasoned investors take the emotion out of the decision-making process and let the numbers do the convincing. The prefrontal cortex controls higher executive functions and provides logical reasoning.

A walking duck is an okay investment opportunity. If you are content with just squeaking by, it will take continuous effort to maintain. A great example of this is a well diversified mutual fund that returns a consistent 1% yield. A neighbor recently shared his frustrations about his broker’s poor performance. Reminder that diversification is the worst thing in a mutual fund because the excellent performers are canceled out by the underperforming ones. According to Billionaire investor mogul Warren Buffet, diversification is “protection against ignorance.”

A flying duck is a winner. This is a turn-key investment opportunity that runs itself and has a track record of success. The confidence resides in the team that put the systems in place. It’s pretty much hands-off with only minimal effort required to maintain it.

The next time you’re looking at an opportunity, which duck is it?