Honing the Investing Craft
How can we significantly improve as investors?
Investors ought never stop improving. Our learning curve should remain steep. And yet, we all go through learning lulls. We sometimes lack vision and meander. In this piece, I propose five categories I find helpful in structuring my learning pipeline.
1. Academic
Academic learning is in textbooks. It most often has a right and wrong answer. It can be described as ‘dry’ but is essential. It’s accounting, statistics, probability, discounting, tax regimes, or corporate governance. It’s how things work. This is necessary but not sufficient knowledge. It helps us avoid stupid mistakes.
2. Mental models
Mental models are simple rules, heuristics, or tools derived from experience. Mental models are not axiomatically true like academic learning. They’ve simply been repeatedly shown to work and appeal to intuitive logic. A mental model distills learnings from several case studies into simple concepts like Porter’s Five Forces, S Curves, the Growth Mindset, Reflexivity, or the Innovator’s Dilemma. We use mental models to make sense of the world.
3. Case studies
Case studies are stories. Whereas mental models aggregate, case studies let each narrative shine. Think of it as becoming a corporate historian. This includes autobiographies, biographies, corporate or industry histories, etc. Case studies enrich mental models with examples and let us learn vicariously. Stories sometimes indirectly reveal insights better than mental models ever could. It’s why Jesus taught in parables. By learning deep history, not just the past decade, we also notice patterns. We see rhymes. It’s the only way we can learn from events that happen only once in a lifetime. By studying the rise and fall of industries, fewer things surprise us.
4. First-hand
First-hand learning is whatever we’ve been through in our careers. First-hand learning probably sinks in deeper than anything we read, and so we must cherish it. For me, going through the 2021 valuation bubble felt more visceral than reading about the 2001 dot-com bubble. Unfortunately, investing has long and diffuse feedback loops. We should therefore extract as much as possible from our first-hand experience by, for example, reviewing old research, writing post-mortems, and keeping an investment diary. Documentation and evaluation are valuable policies.
5. Serendipitous
Serendipitous learning is the ‘other’ category. It’s recognizing that often the most valuable connections are the least straightforward. Science fiction, music, sports, parenting, or whatever people are exposed to has the potential to inform the craft of investing. Remain open to uncommon insights.
Plan the work, then work the plan
We can bring these five categories to life and to spot them in our research by completing the following sentences:
- Academic → This stacks up because…
- Mental models → The way to think about this is…
- Case studies → The parallels in history are…
- First-hand → I’ve seen this before with…
- Serendipitous → This reminds me of…
Perhaps you’ve got a different taxonomy. This is the one that works for me. And by work, I mean that I can use it to structure work. When I visualize a complete investor, I see someone with thorough academic knowledge equipped with a big toolbox of mental models to make sense of the world. They’re as familiar with 19th century Robber Barons as today’s tech billionaires. They’ve been through ups and downs, taking important lessons from their career. And finally, they are curious and enrich their investing with worldly knowledge.
With that vision in mind, and those categories spelled out, I can create to-do lists. My goal is to always have something on each platter, and to reflect on areas I should dedicate more incremental time to.
Below are examples from my reading. Happy learning.
Sacha Meyers
Academic
- Engineering Mathematics by K.A. Stroud and Dexter J. Booth
- Corporate Governance by Bob Tricker
- Economist Guide to Analysing Companies by Bob Vause
Mental models
- The Nature of Technology by W. Brian Arthur
- The Culture Code by Daniel Coyle
- Thinking in Systems by Donella Meadows and Diana Wright
Case studies
- My Life & Work by Henry Ford
- The Wright Brothers by David McCullough
- Titan: The Life of John D. Rockefeller by Ron Chernow
