I am a “retired” but active independent investment professional of 73 years. I manage my own portfolio of investments in a few mature companies, half a dozen start-ups and some real estate. I have written several books here in Finland on investment as well as hundreds of articles on the topic for magazines and newspapers.
It was somewhat of a surprise to learn about this new book, “Rational Thinking and Investing” by Jaret Wilson, a book that a colleague recommended to me the other week. Mr. Wilson appears to be a successful American hedge fund investment professional and this is his first book.
I have just finished reading it – it took me a little over two weeks to read, during the periods when I had time and made time. Yes, I made time because it was rather addictive… It was refreshingly original in its approach that presented interesting viewpoints about the way we should and should not invest. My take is that the book is as important for students as it is for experienced professionals.
Some parts at the beginning were a little heavy because the author wanted to explain the pure (or purist) meaning of the “scientific approach to investing” with several short chapters on the history of evolution, scientific discovery, evolutionary psychology, behavioural economics, heuristics and cognitive biases…
These are important chapters because they reveal to readers why it is important to understand that investing is hard to handle objectively like many other things in life. Learning the hard way can be very expensive, especially when the media and snake-oil salesmen rule the waves with noisy approaches to churn your investments for their profit.
Readers must read through the first 11 chapters (only 20% of the book) to be rewarded with a clear understanding of how our brains are wired and there are plenty of illustrations with interesting narratives that keep you glued to the story line. The story line flows like a river from rapids to waterfalls and it is a good strategy that each chapter short and focused.
The following 13 chapters (chapters 12 to 24, and 34% of the book) are devoted to the markets and how they can affect investment decisions and how you should adjust your own strategy. When you think you are right about something, you can make grave errors by being over-confident and that, in turn, can lead to grave risks.
The author points out: “When I face a risk, it is important that I do it in a calculated way so that my exposure is proportional to my potential benefit, and so that I mitigate the risk efficiently.”
The remaining 10 chapters (the last 38% of the book) are devoted to what you might expect from a book about investing. They deal with how you should invest and in a way that the previous two-thirds of the book has discussed at length.
Investing is something that needs to be done rationally and calmly. You need to balance the risks with the benefits in a manner where you ignore your possible prejudices and feelings. It requires slow thoughtful actions that can only be learnt with experience. In fact the lessons learned here in this book equally apply to every facet of life and work…
… and that makes this an excellent book because it covers much more than just investments – it is also a book about life, work, politics, management, and finally investment.
It also deals with important topics that affect investment results that are crucial for all of us – like sustainability, climate change, good governance, and transparency. The description of how we think to survive based on the evolution of our bodies and brain were strikingly original. It was a quite a refreshing way of thinking about decision making…
I am an investment professional and have seen it all in 50 years. It is probable that most people (read “investment novices”) would find the book long and hard to follow. But what Jaret has written should be seen as “tough love” for the investment community and their media friends. They will hate what you have written… and will try to suppress you! I can see Goldman Sachs and BlackRock charging after you with rocks and swords!
The illustrations with Tesla, Nokia, Microsoft, Micron, Facebook, Instagram, Mobileye, Intel, Yahoo, Altavista, Bitcoin, Gold, etc., were great! He wrote the about them before their share prices fell this side of Putin’s war.
Perhaps he could have had a paragraph on Nassim Nicholas Taleb who wrote the “Black Swan” and “Skin in the Game” – I have always enjoyed his approach as well, but that is no criticism of this fine book, in fact it is a super book!
By Nicholas Anderson, Writer, Journalist, Investor, Professional Board Member and Editor-in-Chief www.FinnishNews.fi
The book “Rational Thinking and Investing” by Jaret Wilson, is available on Amazon as a Kindle Edition 2022.