The Best Investment Writing. Meb Faber
“the curse of knowledge,” which is the inability to realize that other people with less experience than you have don’t see the world through the same lens you do. I saw this firsthand when a financial advisor told an utter novice grandmother that a higher bond allocation (which she wanted) didn’t make sense “because of the slope of the yield curve.” She had no idea what this meant, and told me experiences like this eroded trust since she couldn’t distinguish her confusion from his obfuscation.
The willingness to fail more than your competition
Having no appetite for being wrong means you’ll only attempt things with high odds of working. And those things tend to be only slight variations on what you’re already doing, which themselves are things that, in a changing world, may soon be obsolete.
Here’s Bezos again: “If you double the number of experiments you do per year, you’re going to double your inventiveness.”
The key is creating a culture that allows you to fail often without ruin. This means not docking employees for trying things that don’t work, and not betting so much on a single idea that its failure could cripple the company.
Amazon and Google, I’m convinced, are successful because they’re better and more willing to fail than any other company. Accepting lots of small failures is the only way they’re able to eventually find a few things that take off.
The willingness to wait longer than your competition
Rewards sit on a spectrum: Small, unpredictable ones in the short run, big, higher-odd ones if you wait longer.
It’s amazing how much of a competitive advantage can be found by simply having the disposition to wait longer than your competitors.
Waiting longer gives you time to learn from, and correct, early mistakes. It reduces randomness and pushes you closer to measurable outcomes. It lets you focus on the parts of a problem that matter, rather than the chaos and nonsense that comes in the short run from people’s unpredictable emotions.
If you can wait five years when your competitors are only willing to wait two, you have an advantage that is both powerful and uncorrelated to intelligence or skill.
Which is about as close to a free lunch as it gets in business.
About Morgan Housel
Morgan Housel is a partner at The Collaborative Fund.
He is a two-time winner of the Best in Business award from the Society of American Business Editors and Writers and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He was selected by the Columbia Journalism Review for the Best Business Writing 2012 anthology. In 2013 he was a finalist for the Scripps Howard Award.
‘Who’s Being Naïve, Kay?’ by Ben Hunt
All great literature is one of two stories: a man goes on a journey or a stranger comes to town.
— Leo Tolstoy (1826–1910)
Satan: Dream other dreams, and better!
— Mark Twain, The Mysterious Stranger (c. 1900)
Twain spent 11 years writing his final novel, The Mysterious Stranger, but never finished it. The book exists in three large fragments and is Twain’s darkest and least funny work. It’s also my personal favorite.
Harold Hill: Ladies and gentlemen, either you are closing your eyes to a situation you do not wish to acknowledge, or you are not aware of the caliber of disaster indicated by the presence of a pool table in your community!
— The Music Man (1962)
The Pied Piper legend, originally a horrific tale of murder, finds its source in the earliest written records of the German town of Hamelin (1384), reading simply “it is 100 years since our children left.”
Stanley Moon: I thought you were called Lucifer.
George Spiggott: I know. “The Bringer of the Light” it used to be. Sounded a bit poofy to me.
George Spiggott: Everything I’ve ever told you has been a lie. Including that.
Stanley Moon: Including what?
George Spiggott: That everything I’ve ever told has been a lie. That’s not true.
Stanley Moon: I don’t know WHAT to believe.
George Spiggott: Not me, Stanley, believe me!
— Bedazzled (1967)
A must-see movie, and I don’t mean the 2000 abomination with Brendan Fraser, but the genius 1967 version by Peter Cook and Dudley Moore. Plus Raquel Welch as Lust. Yes, please.
Wade Wilson: I had another Liam Neeson nightmare. I kidnapped his daughter and he just wasn’t having it. They made three of those movies. At some point you have to wonder if he’s just a bad parent.
— Deadpool (2016)
Shape clay into a vessel;
It is the space within that makes it useful.
Cut doors and windows for a room;
It is the holes which make it useful.
Therefore benefit comes from what is there;
Usefulness from what is not there.
— Lao Tzu (c. 530 BC)
It’s like trying to find gold in a silver mine
It’s like trying to drink whiskey from a bottle of wine
– Elton John and Bernie Taupin, ‘Honky Cat’ (1972)
Michael: My father is no different than any powerful man, any man with power, like a president or senator.
Kay Adams: Do you know how naïve you sound, Michael? Presidents and senators don’t have men killed.
Michael: Oh. Who’s being naïve, Kay?
— The Godfather (1972)
As Tolstoy famously said, there are only two stories in all of literature: either a man goes on a journey, or a stranger comes to town. Of the two, we are far more familiar and comfortable with the first in the world of markets and investing, because it’s the subjectively perceived narrative of our individual lives. We learn. We experience. We overcome adversity. We get better. Or so we tell ourselves.
But when the story of our investment age is told many years from now, it won’t be remembered as a Hero’s Journey, but as a classic tale of a Mysterious Stranger. It’s a story as old as humanity itself, and it always ends with the same realization by the Stranger’s foil: what was I thinking when I signed that contract or fell for that line? Why was I so naïve?
The Mysterious Stranger today, of course, is not a single person but is the central banking Mafia apparatus in the US, Europe, Japan, and China. The leaders of these central banks may not be as charismatic as Robert Preston in The Music Man, but they hold us investors in equal rapture. The Music Man uses communication policy and forward guidance to get the good folks of River City to buy bond instruments. Central bankers use communication policy and forward guidance to get investors large and small to buy financial assets. It’s a difference in degree and scale, not in kind.
The Mysterious Stranger is NOT a simple or single-dimensional fraud. No, the Mysterious Stranger is a liar, to be sure, but he’s a proper villain, as the Brits would say, and typically he’s quite upfront about his goals and his use of clever words to accomplish those goals. I mean, it’s not like Kay doesn’t know what she’s getting herself into when she marries into the Corleone family. Michael is crystal clear with her, right from the start. But she wants to believe so badly in what Michael is telling her when he suddenly reappears in her life, that she suspends her disbelief in his words and embraces the Narrative of legitimacy he presents. I think Michael actually believed his own words, too, that he would in fact be able to move the Family out of organized crime entirely, just as