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The Sketchbook of Wisdom: Now at a Special New Year Discount (Till Tonight Only)

Buy your copy of the book Morgan Housel calls “a masterpiece” at a special New Year discount, which is available only till end of day today, 5th January 2022. It contains 50 timeless ideas – from Lord Krishna to Charlie Munger, Socrates to Warren Buffett, and Steve Jobs to Naval Ravikant – as they apply to our lives today, and is a great gift for someone with whom you wish to share the wisdom of ages. Click here to buy now.

Here is the latest issue of The Journal of Investing Wisdom, where I share insightful stuff on investing I am reading and thinking about. Let’s get started.

A Thought

David Whyte, the noted Anglo-Irish poet, said this in a 2019 interview with Krista Tippett* –

One of the interesting qualities of being human is, by the look of it, we’re the only part of creation that can actually refuse to be ourselves. As far as I can see, there’s no other part of the world that can do that. The cloud is the cloud; the mountain is the mountain; the tree is the tree; the hawk is the hawk. The kingfisher doesn’t wake up one day and say, “You know, God, I’m absolutely fed up to the back teeth of this whole kingfisher trip. Can I have a day as a crow? You know, hang out with my mates, glide down for a bit of carrion now and again? That’s the life for — ” No, the kingfisher is just the kingfisher.

And one of the healing things about the natural world to human beings is that it’s just itself. But we, as human beings, are really quite extraordinary in that we can actually refuse to be ourselves. We can get afraid of the way we are. We can temporarily put a mask over our face and pretend to be somebody else or something else. And the interesting thing is then we can take it another step of virtuosity and forget that we were pretending to be someone else and become the person we were on the surface at least, who we were just pretending to be in the first place.

This is a great lesson to take as we dip our toes into a new year.

As in life, so in investing, we often wear masks and pretend to be someone else. We listen to others except our own selves while making investment decisions. And now with the plethora of voices all over traditional and social media that tell us what to buy and when to buy, we are always second guessing our internal voice that may suggest us to do something else.

In fact, we hammer down that internal voice so much that it ceases to guide us as time passes.

The result – we venture beyond our circle of competence to buy investments we don’t understand, we overpay for stocks because others are overpaying (and so it does not seem like overpaying), we trade in and out of stocks because others are doing it and making money at that, and we start believing that investing in stocks is an easy way to get rich quick (which it often seems).

Gradually, our conviction is someone else’s, our stocks are someone else’s, our mistakes are someone else’s, and we become investors we never wanted to be.

Noted financial writer George J.W. Goodman – who used the pen name of Adam Smith – wrote this in his wonderful book, The Money Game –

If you don’t know who you are, this is an expensive place to find out.

By “this”, Smith meant the stock market.

When it comes to investing to build wealth (not to make money fast), it’s a very personal game. The risk you can take is personal. Your financial goals for which you invest, are personal. And your time horizon is personal.

If you understand this well, and play the game you understand well, stock market can be a wealth creating machine for you over a period of time. Else, you will come to regret why you came here in the first place.

So, like David Whyte may have advised, be the investor that you are. Remove the mask that is not you. Because when you do that, you will reach the real you.

Now, when you get that mask off, you may feel vulnerable, but you will be surprised how brave you will feel when you start trusting your own vulnerability.

That – bravery in the face of vulnerability – is the secret sauce of sound investing (and, of course, a happy life).

And that’s the best advice I can offer you as we move into 2022.

* The Conversational Nature of Reality – David Whyte

A Super Text – Nassim Taleb on Hedonic Happiness

Making $1 million in one year, but nothing in the preceding nine, does not bring the same pleasure as having the total evenly distributed over the same period, that is, $100,000 every year for ten years in a row. The same applies to the inverse order – making a bundle the first year, then nothing for the remaining period. Somehow, your pleasure system will be saturated rather quickly, and it will not carry forward the hedonic balance like a sum on a tax return.

As a matter of fact, your happiness depends far more on the number of instances of positive feelings, what psychologists call “positive affect,” than on their intensity when they hit. In other words, good news is good news first; how good matters rather little. So to have a pleasant life you should spread these small “affects” across time as evenly as possible. Plenty of mildly good news is preferable to one single lump of great news…The same property in reverse applies to our unhappiness. It is better to lump all your pain into a brief period rather than have it spread out over a longer one.

~ Nassim Taleb, in The Black Swan

An Article

A (Long) Chat with Peter L. Bernstein by Jason Zweig

Jason: Over the course of your career, what are the most important things you’d say you had to unlearn?

Peter: That I knew what the future held, I guess. That you can figure this thing out. I mean, I’ve become increasingly humble about it over time — and comfortable with that, I might add. You have to understand that being wrong is part of the process. And I try to shut up, you know, at cocktail parties. You have to keep learning that you don’t know, because you find models that work, ways to make money, and then they blow sky-high. There’s always somebody around who looks very smart.

I’ve learned that the people who are the most smart aren’t going to make it. What’s great about this business is that you keep learning. In fact, I don’t know anybody who left investing to become an engineer, but I know a lot of engineers who left engineering to become investors. It’s just so infinitely challenging. You just have to be prepared to be wrong and to understand that your ego had better not depend on being proven right. Being wrong is part of the process. It’s really why the market fluctuates.

A Quote

Understand the nature of the companies you own and the specific reasons for holding the stock. (“It is really going up!” doesn’t count.)

~ Peter Lynch

That’s about it from me for today.

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Stay safe.

Regards, Vishal

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