When asked about the slimness of his playbook, a theatrical football coach responded, “I run 6 plays, split veer. It’s like novocaine. Just give it time, it always works.” Charlie Munger explains a similar principle as such, “We try more to profit from always remembering the obvious than from grasping the esoteric.” Similarly, I feel the principle of simplicity permeates my investing style.
Patience comes in two parts in the investment world.
Part 1: Doing nothing for quite some time can provide you with the chance to do something big when the opportunity presents itself. I take no pleasure in investing for activity’s sake. Holding cash is preferable to investing unwisely. I try to always remember that there are no called strikes in investing, in fact, I hit best when they finally bring out the tee.
Part 2: Buy straw hats in the winter; or a more modern, updated version, buy Halloween candy in the first week of November.
Investing is a negative art in the sense that you are saying “no” much more often than you say “yes”. Most of the negatives stem from understanding the limits of your knowledge, or put more commonly, staying within your circle of competence. My “Too-Hard” pile towers over my “Further Research” pile. Warren Buffett describes this idea in a simple manner, “I don’t try to jump over 7-foot hurdles: I look for 1-foot hurdles that I can step over.” The principle of humility, limiting yourself to what you can understand, along with patience and simplicity are not earth shattering flashes of brilliance. Continued and daily application of these simple principles, however, serve as the foundation for my investment philosophy.
Do Your Own Research
Steve Jobs has said, in reference to a calligraphy class he “audited” after having dropped out of college, “If I had never dropped in on that single calligraphy course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts.” My “calligraphy moment” came from a C.S. Lewis class I took as an undergraduate and boils down to this one idea Lewis conveyed as follows, “…I have found as a tutor in English Literature that if the average student wants to find out something about Platonism, the very last thing he thinks of doing is to take a translation of Plato off the library shelf and read the Symposium. He would rather read some dreary modern book ten times as long, all about ‘isms’ and influences and only once in twelve pages telling him what Plato actually said…. It has always therefore been one of my main endeavors as a teacher to persuade the young that firsthand knowledge is not only more worth acquiring than secondhand knowledge, but is usually much easier and more delightful to acquire.”
Going straight to the horse’s mouth has saved me countless hours and provided a better understanding of the companies I have researched. C.S. Lewis does not appear in many investment classrooms, but I am grateful for his influence on this principle.