” A learned block head is a greater block head than an ignorant one” – Benjamin Franklin
These words of Ben Franklin echoes with greater force when it comes to making people understand the investing ‘process’ (emphasis is needed on the word). People are trained all through their schools that everything can be reduced to the extent that it can be applied by everyone and that’s the wrong way to think. You cannot reduce everything to some formula. I have been trying to make people understand (I gave few classes to students) that there is no standardized ‘process’ to investing. Its an art that needs perfection every time and the way to do it is to realize in the first place that there is no formula for success in investing. Then the most plausible question that they ask is “How can not understand something it you haven’t done it?” The way I explain it to them is that you don’t have to do operation in a lab to know that you cant do it. Here is a comic strip which best tells more incisively the mindset of today’s educational system be it any field:
Prediction Begets Prediction:
Investors try to emulate the big investors of all time trying to predict or making speculations about what they are buying or selling. They try to know the exact procedure of how they go about making investment. The banality of the situation is that the very same celebrated investors in their investing carriers have denounced predictive value of such future prediction and yet people go on predicting what they are doing. Chris Davis of Davis Funds explains in this video in a very intelligible way about why the prediction business goes on and on: Davis Funds.
What people don’t get to understand is that no one can become the person that they are following. Thinking like Einstein you won’t become Einstein, you become only the best of who you are. We can read anyone’s investment philosophy about how they did this and that, but that wouldn’t be our own. The key to understanding the markets is to have your own philosophy of investment and that will come from what we have learned through our parents and teachers and what our experiences teach us about what we have been taught by our parents and teachers. The bottom line is that there can be only one Warren Buffet, only one Howard Marks and one Peter Lynch and only one Ray Dalio and they have already walked the earth. There is not going to be another of anyone of them. Also all of them were unique in their own way. The world will continue to produce someone with great record like them but they wouldn’t be the same as these people. What we cannot do what they did nor can anyone else, on the contrary what we can do is to learn from them these great people is how to be successful at what we do, not them and that’s what they have been teaching all their life.
Only when we understand this, that we will stop asking all the pointless questions and start discussing meaningful questions that not everyone asks every time. This will finding stocks where no valuable investment is made.
The following is a modified version of one of the best books by Peter Thiel “Zero to One” that best describes the point of this blog:
The next Warren Buffet won’t be running another Berkshire Hathaway. The next Peter Lynch won’t be picking stocks in Magellan Fund. If you are copying these guys, you aren’t learning from them.