Walking, Thinking and Productive Investing by John Huber, Base Hit Investing
I just came across an article I just read that I thought was interesting, and thought certain readers might enjoy. Although the article has nothing directly to do with investing, I think there are some takeaways for those of us in the investment world. Certainly the article has relevance to anyone whose chosen endeavor requires the occasional deep thinking.
The article* is called “Why Walking Helps Us Think”. The article—as you probably guessed from the self-explanatory title—describes the benefit of going for a walk. I’m not sure about all of the studies that it references, but I can say for sure that it is an activity that I believe helps my investment process.
Walking and Productive Thinking
I enjoyed reading the article because I walk just about every day, sometimes for a couple hours at a time. This activity is something that I’ve begun doing more in recent years. My personal exercise routine has evolved since my days as a competitive runner. I still run occasionally, but I find it’s more enjoyable, and—at a more relevant level to this discussion—easier to get what I would call “quality thinking” accomplished. So I do occasionally exercise vigorously, but I think of walking more as an investing activity than I do an exercise activity.
After hours of reading annual reports, making calculations, and spending time thinking in my office, I sometimes find that walking helps me crystallize the work and the thinking that I put in earlier.
Basically, I’ve always felt that investing is a discipline that is most successfully implemented in a quiet environment that promotes thoughts, ruminations, and observations much more than it promotes hustle and activity. I’m a big fan of hard work, and a big fan of those that hustle. But investment is a field where one must diligently work, think, and act, and must resolve oneself that results come later—often years after—that groundwork has been laid.
Buffett, Munger, and Archimedes
Investment results—the fruits of one’s labor—cannot always be pinpointed to a specific episode of work. In other words, a successful investment cannot be credited to one specific activity that you completed earlier. I think it’s much easier for most people to say: “If I do X, then I’ll get Y as a result”. To succeed as an investor takes lots of hard work, yes… but it also takes equal parts patience, discipline, and more specifically, the willingness to work hard now with the expectation that eventually you’ll reap a reward down the road—sometimes years down the road.
Buffett and Munger talk about this frequently. Buffett read the annual report for IBM for 50 years until one day while sitting (and thinking) in his office, he gained an insight on IBM that he hadn’t had previously—and this insight subsequently led to an $11 billion investment by Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) in International Business Machines Corp. (NYSE:IBM) stock. Buffett also said that he came up with the idea to invest in Bank of America using the preferred stock and warrants while sitting in his bathtub.
(Interesting side note: Archimedes didn’t figure out which Greek banks were undervalued while in the tub, but it was the bathtub where he first realized that the volume of his body that was submerged underwater while getting into the bathtub displaced exactly the same volume of water.)
Back to Buffett… Again, Buffett read annual reports for Bank of America and its predecessors for 50 years before finally being able to reap what he sowed all those decades. The work has to get done without a tangible handle on where the reward eventually comes from. And the foundation of that work is often solidified by spending significant amounts of time thinking.
Although I’m not sure if Buffett, Munger, or Archimedes ever spent significant time walking, I think they spent significant time just sitting quietly and thinking—either in the bathtub or elsewhere.
The Importance of Quiet Thinking
Thinking in a quiet atmosphere is virtually unheard of in this day and age. The problem that we have as investors is that this type of behavior is not the typical behavior that’s required for success in virtually every other field. In most fields, urgency, hustle, and activity is often rewarded—and usually rewarded very quickly. Not so in investing. Hard work is absolutely necessary, make no mistake. But you have to be willing to work hard and also accept that the specific result of that work will come at an unknown time and in an unexpected form. That can be too difficult for most people to handle, and I suspect it’s why so many perform poorly in an activity that at its core, is quite simple.
As I’ve said before, I think there are numerous advantages for individuals and smaller investment managers to do very well—much better than the average—if they capitalize on the structural advantages that they have over the larger funds and the majority of the other stock market participants.
Of course, there are the principles of value investing that matter most. And there are certain other requirements such as hard work, skill, and to a much lesser extent, a certain intelligence level—but I think that just as important as hard work (and more important than intelligence) is the ability to do two things: 1) maintain a long term time horizon along with maintaining the discipline and patience required for long term success, and 2) have the ability to slow things down… to spend time thinking.
Have a great weekend. Hopefully you can find time for a walk.