The Education of a Value Investor: Part 1
The Education of a Value Investor: The Good, the “Bad,” and the “Ugly.”
Editor: In full disclosure I received this book from the publicist, and I actually read the book.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
The title of this review has the words bad and ugly in quotes because I will define those words in part II and III of this review.
Part I: The Good
Here is a story of a young hedge fund manager on a Hero’s Journey (Joseph Campbell) to become a more integrated human being—to become, as the author says, authentic. Though managing money is the author’s profession there isn’t much in the way of investing strategy or techniques. The author writes with honesty and humility about his journey through life starting as a young investment banker. The author provides an example for investors and non-investors alike by taking responsibility for his failures and setbacks, understanding his weaknesses and then designing workarounds to improve his investing and life. A person must develop self-understanding and go where his or her strengths can benefit.
Perhaps Nassim Taleb, author of Fooled by Randomness describes the main investing lesson I took away from the book, “We are faulty and there is no need to bother trying to correct our flaws. We are so defective and so mismatched to our environment that we can just work around these flaws. I am convinced of that after spending almost all my adult and professional years in a fierce fight between my brain (not Fooled by Randomness) and my emotions (completely Fooled by Randomness) in which the only success I’ve had is going around my emotions rather than rationalizing them. Perhaps ridding ourselves of our humanity is not in the works; we need wily tricks, not some grandiose moralizing help. As an empiricist I despise the moralizers beyond anything on this planet: I wonder why they blindly believe in ineffectual methods. Delivering advice assumes that our cognitive apparatus rather than our emotional machinery exerts some meaningful control over our actions. We will see how modern behavioral science shows this to be completely untrue.
For example, the only way for a chocaholic like me to avoid temptation is not to stop loving chocolate but to be kept here in a padded cell: http://youtu.be/pjProtBm4Dc.
Along the way, Mr. Spier shares life lessons such as:
- The real goal, perhaps, is not acceptance by others, but acceptance of oneself.
- Avoid groupthink—get out of the New York hedge fund vortex.
- Environment trumps intellect—move to Switzerland
- Turn off Bloomberg and check prices infrequently on Nestle, Berkshire and other global franchises.
- Write thank you notes.
- Surround yourself with people better than yourself.
- It helps to know thyself—and to adapt thy setting accordingly.
- If you don’t know your inner reality, you are likely to be mugged by reality.
- Become more aware, strip away your facades, and listen to the interior.
- Take a sincere interest in people. Value people as an end in themselves, not as a means to our own ends.
- Try Tony Robbins fire walk—put your mind to it and unleash the power. https://www.youtube.com/watch?v=a2c8PMmQxJs (disturbing content, so children should not watch).
- Play bridge because it is a game based on insufficient information like investing.
- Try for a state of quiet contentment.
- Think about your own investment processes in a structured, systematic way. For example, gather investment research in the right order. Hint: start with the 10-Ks. Less biased.
- And finally, the greatest lesson Buffett taught Mr. Spier: “ The more you give love away, the more you get.”
Certainly, the above are excellent lessons, but information is not knowledge and wisdom may not translate into action. How to go from here to there? The author suggests the Nike commercial, “Just Do It!” If only action were so easy. But remember the author battles his own flaws and vulnerabilities not the readers’. You may be better off reading Dante’s pilgrimage in the The Devine Comedy. Perhaps Plato’s Dialogues or Nicomachean Ethics by Aristotle. My favorite: Watch Groundhog Day over and over. See: http://youtu.be/6VF5P7qLaEQ (I’m serious).
There are flashes of good writing: “In hindsight, I can see with clarity that the real value to the firm of my Oxford degree and my Harvard MBA was to adorn its (D.H. Blair, an investment bank bucket shop) deals and documents with my pristine credentials. I thereby provided a kind of Ivy League fig leaf.”
But there are spots of overwrought description: “This book is about my journey from that dark place toward the Nirvana where I now live.” Nirvana? A tad over the top.
This is Mr. Spier’s particular journey and a beginning investor or those who need inspiration may learn how honesty and self-knowledge helped transform a hedgie into a better human being. Mr. Spier continues on that journey. Part II and III will describe a few of this reviewer’s disappointments.
More on Mr. Spier here: