A few days ago I had another chat with my unofficial mentor. They are just another person on the internet, never assumed any such role, and I don’t talk to them regularly. I just watch what they say closely to learn from them and very occasionally reach out with questions (my thoughts on a prior discussion here).
I’m writing this to remind myself of the conversation and to be able to refer back to it from time to time. The topic of conversation was politics, not investing, but the lines blurred. They outlined that within any assertion, there’s signal and then there’s noise. That’s obvious. But the practice of separating signal from noise is not an easy one both psychologically and tangibly. People are lazy. At times (perhaps too often) I am lazy. It’s incrementally more work to read an article and then follow up with the source content to validate whether the claim is true or not or whether it has been presented in a way that skews the actual data. Politics, they outlined, has more noise than almost anything else out there.
The more poignant part of the conversation was when they outlined that they often ask people “tell me why” with respect to politics related frustrations. What often follows, they outlined, is hate related buzzwords followed by frustration that they were put in that position to have to explain themselves.
To be clear, I myself struggle with this as in my past I was mostly concerned with fitting in by repeating things other people I admired (at least at the time) said. It’s newer to me within the context of my lifespan to think about what my own brain knows about something, what it doesn’t, and what I believe after trying to figure out the truth myself. Covid has ironically helped me with this, as I was deeply interested in what core truths existed amidst massive amounts of noise and derangement across the intelligence spectrum.
We went on to talk about investing in this same vein and they outlined that good investing is simple as “tell me why something will go up or down?” It’s smart because it isolates a rambling explanation of fundamentals at the exclusion of why something may go up or down. There was a nice podcast at Capital Allocators where a former Viking Global manager outlined how people overweight fundamental analysis and often don’t give thought to why that will actually change the price people pay in the medium term. It runs in similar vein to the above.
For me, I don’t plan to be much of a single name stock picker. I know myself, and I’m really just a huge fan of finance. Great investors to me are like great baseball players to baseball fans. My goal is durable income so I can spend time with my wife and kids. I don’t much care to get rich beyond the independence we have today. So I’m happy to outsource to others in a diversified manner. But that isn’t a free pass on knowing core truths based on data. Without asking why and understanding core truths, my actions inside and outside the investment world are less meaningful, and less satisfying. So, to that end, here’s to “tell me why.”