Read widely to invest wisely

Well-read, well rounded individuals tend to make more successful investors.

About a decade ago, I read Investing: The Last Liberal Art by Robert Hagstrom, who argues that well-read, well rounded individuals tend to make more successful investors.

That gave me all the excuses I needed – for a few years, I binged on books that had very little to do with investing. Now, years later, I’m convinced those experiences – Zola, Dawkins, Nabokov, Hitchens made me a better investor.

There’s a widespread belief that to be good at anything, you have to specialise. Society is over-ridden with people that know a lot about very little. There aren’t many that relish knowing a little about a lot and fewer still that can make a living from what the academics call a cross-disciplinary approach.

Successful investors are, in my view, an exception. You don’t need to be a qualified accountant to be a high-performing investor. Nor is the position necessarily aided by a specialisation in behavioural economics or group psychology. Even maths geniuses – the so-called quants are only really useful to high frequency traders and other short term market players. I’m living proof that elementary maths is enough to get by.

Hagstrom makes the argument that a basic understanding of economics, physics, biology, sociology, psychology, philosophy and literature can make you a better investor, which is why he calls investing the last liberal art.

Which made me wonder: What about our analytical team? Are they geeks with their heads always jammed between the pages of a value investing tome or annual report? Or, to use the lingua franca of the profession, do they read beyond their circle of competence?

Well, dear reader, judge for yourself. Here are their top books of 2015.

Top books of 2015

Graham Witcomb opted for Misbehaving - The making of behavioural economics by Richard Thaler, a psychologist who also wrote Nudge – a book I’ve read and can recommend. Incidentally, Thaler also has a lovely cameo alongside Selena Gomez in the recent film, The Big Short, where they brilliantly explain synthetic collateralised debt obligations on the floor of a casino. Margot Robbie, sipping champagne in a bathtub, does the same for mortgage backed securities.

Anyway, back to the book. With a witty style, Thaler recounts how despite significant opposition from the efficient market hypothesis crowd, a behavioural view of economics has slowly gained popularity. Loaded with examples of why humans make irrational financial decisions, it promotes the use of behavioural economics in politics and other areas of life, including investing.

James Greenhlagh took the liberty of making two recommendations, Seeking Wisdom: From Darwin to Munger by Peter Bevelin, what James called ‘a fantastic collection of stories and anecdotes about thinking, psychology and business’ and Girt: The unauthorised history of Australia by David Hunt, an account of the early days of (white) Australia and its convict past, which James describes as ‘hilarious’ assuming you weren’t on the other end of the shot gun, presumably.

Andrew Legget nominated Status Anxiety by Alain De Botton, which I’ve also read and can recommend. De Botton investigates why people feel upset, uncomfortable or even angry when someone who they consider their equal possesses something they don't. I’m sure we’re all familiar with the feeling. In many ways, capitalism depends on it.

Unfortunately, this discomfort can push many to acquire things they cannot afford. De Botton also investigates why such anxiety exists more in wealthy countries rather than poorer ones, before going on to propose a range of solutions to help people deal with status anxiety.

In a hint as to how reading a book like this can assist in developing our investing skills, Andrew notes how status anxiety ‘assists the growth of consumer brands and delivers economic growth’ despite the personal costs. For those that can’t be bothered with the book, the 2-hour YouTube documentary covers the same ground and has the added bonus of freeing up more shopping time.

Finally, Gaurav Sodhi named Daytripper his top book of the year, a graphic novel where each chapter follows a separate period in a man’s life, with the final day always ending in the same fashion – with his death. Gaurav calls it ‘great storytelling’ and follows up by saying that he ‘didn’t read business books this year’, finding that ‘a diverse mind stays sharper’. Robert Hagstrom might concur.

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