You’ve been told a lie about the stock market.
It’s a subtle one, woven into the very fabric of how we talk about investing. We say things like, “It’s a coin flip,” or “You win some, you lose some.” We imagine a perfectly balanced scale, where for every loser, there’s a winner. We picture ourselves as savvy gunslingers, trying to outdraw the market average in a duel of wits.
I’m here to tell you that the entire premise is wrong. The stock market isn’t a balanced scale. It’s not a coin flip—in fact, data shows that Picking a market-beating stock is far from a coin flip 🪙. It’s a hunt for dragons in a world filled with lizards, and almost no one ever finds a dragon.
The data, when you really look at it, is just staggering. S&P Dow Jones Indices ran the numbers, and they are brutal. From 2001 to September 2025, only 19% of the stocks in the S&P 500 actually managed to outperform the average. In the first half of 2025, it was 44%. In 13 of the last 24 years, most stocks failed to beat the index itself.
Think about that. The odds of you, me, or even a professional fund manager picking a single stock that beats the market are historically worse than calling heads or tails. So why do we even play? Because of a beautiful, counterintuitive quirk of mathematics that changes everything.
The secret lies in something called “positive skew.” That’s the technical term—in simpler terms, it means that while your losses are capped, your gains are not. When you buy a stock, the absolute worst thing that can happen is it goes to zero. You lose 100%. That’s the floor. But the ceiling? There is no ceiling. A stock can go up 1,000%, 10,000%, or even more. This is what the pros call asymmetric upside.
This is the kind of breakthrough in understanding that reminds me why I got into this field in the first place. When I first saw the chart showing the average stock return versus the median return, I just sat back in my chair, speechless. The median return—the performance of the stock smack-dab in the middle of the pack—was a respectable 59% since 2001. But the average return was a mind-bending 452%.
What does that tell us? It tells us that a tiny handful of stocks—the Teslas, the Nvidias, the Amazons of the world—generated such astronomical returns that they single-handedly dragged the entire average up with them. The stock market isn’t a placid lake; it’s a quiet ocean with a few massive, world-altering tsunamis of value creation. It’s a system where the exceptional doesn’t just beat the average, it completely rewrites the definition of what "average" even is.
It’s like looking at a galaxy. You can spend your whole life studying the billions of stable, predictable stars that burn for eons without doing much. But the entire story of the galaxy's evolution—the creation of new elements, the formation of new worlds—is driven by the infinitesimally small number of stars that go supernova. Those explosive, universe-shaping events are the only thing that really matters in the long run. Investing is the same. You aren’t looking for a slightly brighter star; you are looking for a supernova.
This isn’t some obscure academic theory. It’s the foundational secret of the greatest investor of our time. Warren Buffett, in his plain-spoken Nebraska wisdom, put it perfectly: “Over time, it takes just a few winners to work wonders. The weeds wither away in significance as the flowers bloom.”
He admits that most of his decisions have been unremarkable. His legendary success comes from about a dozen truly good decisions over half a century. One every five years. That’s it. He wasn’t trying to be right every time; he was trying to be massively right a few times. He was planting a garden, knowing most would be weeds, but waiting patiently for the rare flowers that would eventually grow to dominate the entire landscape.
The academic proof for this is even more extreme. An Arizona State University professor named Hendrik Bessembinder published research that should be required reading for every single person with a brokerage account. He found that from 1990 to 2020, the top-performing 2.4% of firms accounted for all of the net global stock market wealth creation.
Let that sink in. Not most of it. All of it. The other 97.6% of companies, in aggregate, were just noise. They were the weeds. This is a staggering realization—it means the entire capitalist engine of progress, the one that has lifted billions out of poverty and funded every major technological leap of our era, is powered by a vanishingly small number of hyper-performers.
So what does this mean for us? Does it mean we should all just give up? Absolutely not. It means we need to change the question. The question isn't, "Can I pick a stock that will beat the market?" The real question is, "How do I ensure I have exposure to the handful of supernova companies that will inevitably emerge and reshape our world?"
For many, the answer is the humble S&P 500 index fund, a vehicle Buffett himself recommends. It’s a simple, elegant solution: own the whole galaxy. By doing so, you guarantee that when a star inevitably goes supernova, you’ll be there to catch its light. You’re admitting you can’t predict the future, so you’re buying the future itself. But if you are going to hunt for those individual flowers, you must do so with the profound understanding that you are searching for something incredibly rare, and you must have the patience to let the weeds die and the flowers grow.
This isn't a flaw in the system; it's the system's most elegant feature. The stock market, in its purest form, is an engine for funding innovation. It's designed to place thousands of bets on the future, knowing full well that most will fail. But it also knows that the few that succeed—the ones that cure a disease, invent a new form of energy, or connect the entire planet—will pay for all the failures and then some. That lopsided, positively skewed return profile isn't a bug. It's the beautiful, brutal math that drives human progress forward. Our job isn't to fight it, but to understand it, respect it, and align ourselves with its awesome power.
