I believe without a doubt we are on the brink of a crisis that will make the crisis of 2008 look like no big deal. There’s plenty of time for me to lay out the case, and I’ll do that in future posts. Today, I wanted to focus on the topic of becoming a successful investor.
In the past, I’ve touched upon my views on how to become a great investor. Admittedly, I penned that piece when I was more raw (I was 27 at the time). The last 3 years out in the real world of money management have afforded me a more nuanced perspective. I am more convinced than ever that you must be a voracious reader to have any chance against the big boys in investing. If you are not front-running clients (which is more a product of technical savvy than investment savvy) you must read to make outsized returns.
I’d like to think my readers appreciate my transparency. When I buy gold, I say so publicly. When I think silver is a huge bubble, I say so publicly. Also, when I go against the crowd and call the bottom in real estate, I do so publicly. I nearly tripled my initial investment in real estate in 3 years. I’m actually investing in size whenever I recommend something; I’m not an armchair investor. This is called real world vs theoretical investment skill.
Anyway, I would go as far as to say that it is impossible to become a great investor without a significant breadth and depth in reading. Warren Buffett’s more outspoken partner Charlie Munger once said: “I’m not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I’ve reached that state.”
And quite frankly, there’s no way to state the opposing viewpoint intelligently without having a broad base of knowledge. A preponderance of knowledge, really. I know from life experience that no normal person studies the opposing position with more rigor than their own position. But that’s precisely why great investors and great thinkers are rare. You must be fervent about uncovering the truth; after all, what’s investing besides truth discovery?
Fill Your Holes In Knowledge
Maybe I’ll take a picture of the books in my library one day. But for someone known as an investor, you’d be surprised how many books I have about history, philosophy, technology, marketing, science, health, psychology, religion, and any number of other topics. I’m on pace to read about 200 books this year…while managing a growing fund. So reading is not something I try to find time to do; reading is absolutely, 100% fundamental to my investment success.
To me, everything is connected. If I learn about Petrarch and the Renaissance, it helps me make connections. Knowing Roman history helps. Knowing the history of technology helps. In order to formulate a strong narrative about the future, you must have a semblance of a coherent narrative about the past.
Anyway, people ask me for reading recommendations all the time. First of all, I would peruse Buffett’s annual letters circa 1980. They will help you navigate the current environment if you understand what he’s trying to say. One of the better books I’ve read this year is Average is Over by Tyler Cowen, which I feel is a very, very important book to understand the future. The book was recommended to me by Ryan Holiday, who is a fellow reading addict and best-selling author. I’ve read his books The Obstacle is the Way and Trust Me I’m Lying: Confessions of a Media Manipulator, and I swear, they have given me new insights that have helped my investing tremendously. I’ll try to put up more reading recommendations with a short synopsis, but if you want books to read right now with a brief description, you should check out his site and read the books he recommends (I’ve read about 10 of his recommendations myself).
The reason I wrote an entire post about reading is that quite honestly a lot of what I say will make absolutely no sense if you don’t have a solid foundation in various topics (yes I know this is a pompous comment to make, but it’s true: you need to have a rudimentary awareness of your blindspots). And if it makes no sense, you might not act on recommendations I make that are logical and rational. And this time around, it will be pure financial suicide to ignore the crisis that is going to rock the entire world. Trust me on this.Follow