Both Howard and Fred posted on this topic and I wanted to add my two cents to the discussion. Go ahead and read both Fred's initial post and then Howard's take. Basically, what I take away from these two posts is that you end up making a lot of your decisions based on your gut. Sure, you have experience and the hard work put into diligence to back up your gut feel but one way or another, it comes down to a gut decision. I've heard this often and it's been spoken highly of as well as completely bashed. Well think about it this way. It's inevitable that a certain number of people will get lucky, some more than others.
If you look at the venture industry, there is a top-tier of funds which completely outperforms the rest of the industry. These guys tend to have lots of industry experience, great networks and access to the best deals. Yet not every one of them continues to generate stellar returns. There are always new entrants into the top tier as well as funds disappearing. Hence, those who've generated strong returns seem like smart money and those who haven't, dumb money. It doesn't necessarily mean though that one guy worked harder than the other. A bit of luck always plays into the equation and I believe both Fred and Howard left this little bit out. Fred basically still touches upon this though by defining it as a leap of faith, where I believe it's implied that luck plays a bit of a role. Howard writes about this more in relation to the stock markets, which he labels a "giant ponzi scheme" anyway. Yet both of them say it takes leaps of faith and getting it right more often than not.
What do I think one can learn from this? Well, it's about focus and going that extra mile in relation to the next guy. The more you know, the better your network, the more likely you are to make the right leaps of faith and really look like the smart money instead of the dumb money. Looking forward though don't ever tell anyone you're "the smart money". When you screw things up, you'll look even dumber.