Booth Laird newsletter for the second quarter dated, July 11, 2015.
“All men’s miseries derive from not being able to sit in a quiet room alone.” – Blaise Pascal
This quarter’s newsletter is a departure from what we have typically written. There is no individual stock analysis or update, no thoughts on the expensiveness of the market as a whole, and very little discussion on the major current events. Instead, I decided to write about a topic I have thought a great deal about over the past year and which seems timely given the fears over the uncertainty surrounding Greek debt or the federal funds rate. In this newsletter, I will discuss the proper mindset I believe is necessary for successful long-term investing and why most investors have trouble attaining it (including us from time to time). The above quote was sent to me recently by my uncle, who began teaching me about investing when I was only 11. He knew the quote did not apply to me (most of the time). It seemed fitting for the topics discussed in this newsletter.
Booth Laird – Sit in a Quiet Room Alone
Little did my dad know he was preparing me for a future career as an investor. Beginning in high school, I was not allowed to watch TV after 6 pm on school nights. The idea was to force me to focus on my schoolwork without rushing through it to watch TV or play video games. Unfortunately, I usually finished my schoolwork fairly quickly even without rushing, but there was no bending this rule except on rare occasions. It took me about a month of re-reading the same two or three Garfield comic strip books out of boredom to decide to embrace this new lifestyle. This was the late 90’s. We had one computer, which was actually kept in the room above the garage, detached from the main house. That computer did not even have Windows 95. As far as I ever knew, it only had a dos version of Word Perfect that I used to complete essays for school. I think my parents finally got the internet about a decade later, well after I was gone.
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My options for entertainment were limited, so I became an avid reader. Being the future researcher I was destined to be, I kept track of every single book I read one year, how long it took me to read it, and how many pages it was. My junior year of high school I read 62 books, each an average of 300 pages – over 18,000 pages over the course of the year not including the textbook chapters, study notes, math problems, etc.
I had a very comfortable arm chair in my room and a reading light that curved over my shoulder. I would sit in that chair and read for hours on end, night after night. That chair was my security blanket. I looked forward to closing the door to my room, turning on the reading light, and sitting down to read a great book. I have had a version of that set-up in every bedroom since then.
In July of last year the same uncle mentioned previously sent me an article discussing the merits of a quiet room. The idea struck a chord with me instantly, as my uncle knew it would. So I finally decided to give that chair its own room. I converted one of my bedrooms into a study where no TV was allowed. The room has a reading chair, a reading light over the shoulder, a bookshelf I built with my dad, a small couch, and various decorations on the wall – mostly of the great general Napoleon Bonaparte, first in war and in administration but defeated by his own hubris (a great lesson to be reminded of constantly). Because of the Napoleon decorations, I have dubbed the room the Napoleon Room.
Instead of books, I most often have my iPad in hand, reading annual reports, articles, interviews, studies, etc. I only bring my laptop in that room for one purpose – to write these quarterly newsletters and our annual letter.
I sit in a room alone, and it is my happiest time of the day. I get the vast majority of my stock analysis done sitting in this room. While in this room, I don’t peruse the internet, I don’t check financial headlines, and I certainly don’t watch CNBC. I focus on those few items I bring into the room. I escape the noise that seems to drive the market minute by minute.
Most importantly, I often simply sit and think. Alone with my thoughts, I try to understand my biases, put things into proper perspective, work through the dynamics of a company’s strategy and competition, work out different filters through which to view a company, etc. I do not always come to the right answer, and sometimes my mental biases get the best of me despite my best efforts. Regardless, the benefits of being content to sit in a quiet room alone are clear.
Booth Laird – Think Week
Similar to a quiet room is the concept of a think week. Here is an excerpt from the book Bill Gates Speaks: Insight from the World’s Greatest Entrepreneur:
Gates knows that time pressures prevent him from contemplating matters in depth and putting them in perspective. That’s why he schedules time away from his office.
“A couple of times a year I go away for a think week, during which I read books and other materials my colleagues believe I should see to stay up-to-date. These materials often include Ph.D. theses exploring the frontiers of computer science.”
A think week is an exceptional idea. Get away for a week, read everything you’ve been putting aside because you did not have time and it was not pressing, and think about broader topics. Most people spend every day amidst the trees. A think week is taking a step back to view the entire forest.
I recently did my own version of a think week, though I did not go anywhere. Near the end of May, I spent ten days catching up on articles, papers, newsletters, annual reports, and interviews that I had been putting aside. For roughly twelve hours a day for ten straight days, I did nothing but sit in the Napoleon Room and read. It was wonderful.
My think week allowed me to take a refresher course on the basic tenets of value investing while also taking a Ph.D. class on new ways of thinking about value, portfolio construction, business strategies, and various industries. It was a great experience I plan to repeat at least annually. I have already begun saving up papers, articles, and letters for my next think week.
See full PDF below.