Investment lessons you did not expect and will never forget
But not everything we learnt at school will stand us in good stead when it comes to investing
Afew weeks back we recounted the story told by Avram Fisher, founder of Long Cast Advisers, about Mr Leonard, his high school English teacher, who inadvertently taught him two valuable lessons when it comes to investing: that how we value things is swayed by how other people value things and that a mob is ugly.
“I learnt in high school that I’m as susceptible as everyone else to the sways of the crowd,” Fisher said. “So now I aim to avoid a mob, aspiring instead as an investor to keep my head when all about are losing theirs.”
That triggered a search for other stories of investment lessons learnt at school, and finding Maciej Dziardziel at Quora, who says one of the most important lessons he learnt came from his history teacher.
“I had a great history teacher,” says Dziardziel, “who was known for starting lessons talking about subjects unrelated to history recent events or personal matters before switching to history. One day he was talking about money. I don’t remember the details, but at some point he asked us what we would do if we were to suddenly gain a lot of money, and he listened to anyone who had an answer.
“There were those in the class who said they would get a nice house, some said they would start a business, some would spend small amounts on travel or some goods and invest the rest. One guy let’s call him Luke said he knew himself and he knew he would spend it all on alcohol, and we knew that to be very likely to be true.
“That day’s lesson was about the Great Depression in the US. The teacher explained to us what it was and what people went through when it happened. At the end he remembered the answers we had given him earlier and he went through the class and gave comments like ‘you have lost your job and you have to sell all your possessions to get some food, including your house.’‘Your business is gone, your clients have stopped paying and you are left with huge debts.’ ‘Your investments have lost all their value you have nothing.’
“That was the best and most personal lesson I’ve ever had,” explains Dziardziel. “It’s one thing listening about some crisis that happened 100 years ago, it’s another being told that your best idea for life may be crushed in no time.” That years of savings can disappear in the markets almost overnight.
Not that everything we learn at school stands us in good stead when it comes to investing. On the contrary, common-or-garden advice such as “there’s no substitute for hard work”, “get used to making fast decisions”, and “worst-case scenarios rarely play out”, can be counterproductive.
Which might explain why the likes of Ray Dalio have outperformed despite not doing especially well at school. “I hated, hated school,” says Dalio.
“I really hated school. I hated school generally, probably because I wasn’t good at it.”
John Neff admits: “I was not a very accomplished student. “I finished in the second 25% of the class, not a distinguished record by any stretch.”
“I didn’t apply myself at all. I did the absolute minimum,” confesses Ken Langone.
“I just lost interest. I took pleasure in tormenting my teachers,” says Warren Buffett, showing that academic achievement is not a prerequisite for success when it comes to investing.
“The single most important thing you need to understand is how to deal with failure,” says Bill Ackman. “The vast majority of people who got to Harvard Business School pick your favourite top business or law school have not had to deal with failure. That is the determinant, I think, of success.”
Benjamin Franklin thought
the problem could be more serious than that when he talked about those who were “so learned that they could name a horse in nine languages; so ignorant that they bought a cow to ride on”.
It’s a potential problem Charlie Munger has also touched on. “It’s a lot like Long-Term Capital Management; how can people so smart do such silly things?”
“I don’t think those people who have very special records
in the stock market are necessarily brighter or have more cerebral abilities than the next person,” says Michael Steinhardt. “I used to kiddingly say I liked to watch the moving parts and the moving parts were the stocks that went up and down.”
Which brings us to something you may not have heard at school: if you don’t enjoy the game you shouldn’t be playing it. That brings us back to Luke, the pupil in Dziardziel’s history class who said that if he suddenly acquired a lot of money he’d probably spend it all on liquor.
In case you’re wondering what his teacher had to say to him when it came to the possibility of suddenly losing everything; he didn’t know what to say. But Luke had an answer. He smiled and said “nobody can take the alcohol I’ve drunk, or my memories, away from me”.
SO NOW I AIM TO AVOID A MOB, ASPIRING INSTEAD AS AN INVESTOR TO KEEP MY HEAD WHEN ALL ABOUT ARE LOSING THEIRS
THE SINGLE MOST IMPORTANT THING YOU NEED TO UNDERSTAND IS HOW TO DEAL WITH FAILURE
The JSE eked out small gains on Monday as global markets remained mixed with investors considering the threat of rising inflation in economies starting to recover a little faster than expected from the hit they took from Covid-19.
The price of Brent crude rose above $70 a barrel for the first time since January 2020 on Monday, after an important Saudi oil site came under attack on Sunday. While such assaults rarely result in extensive damage, their frequency has created unease in the oil markets.
The oil price had already been boosted by the surprise decision by oil cartel Opec and its allies last week to keep output unchanged. “The latest attack should only have a very shortterm effect on prices,” said Axi market analyst Milan Cutkovic.
“However, with the determined action of Opec+ last week to keep output unchanged, a continuation of the rally seems likely.”
By 6pm, Brent crude had risen 2.1% to $68.52 a barrel, after going as high as $71.36. Gold retreated 1.05% to $1,681.85/oz, while platinum gained 2.61% to $1,153.89.
Massmart’s share price had its biggest one-day rise on record after the retailer said it intended to sell its stand-alone Rhino and Cambridge grocery stores as part of the turnaround strategy it embarked on in January 2020 to return the business to profitability.
Massmart, which owns Makro, Game and Builders Warehouse and is controlled by the world’s largest retailer Walmart, announced the divestment during a webinar on the company’s 2020 financial results.
Massmart rose almost 21% to R54.10 per share, bringing its 2021 gains to about 29%. It’s still a far cry from the R148 Walmart paid when it bought 51% of the group in June 2011.
The US Senate passed a $1.9-trillion (R29.4-trillion) aid package on Saturday. The bill will go back to the lower chamber of Congress this week, before going to the White House to be signed into law.
The JSE all share added 0.23% to 68,426 points and the top 40 0.19%. Gold miners rose 4.38%, platinums 1.2% and resources 1.38%. Industrials lost 0.45%, with the biggest falls coming from Naspers and Prosus, which both fell about 2.5%.