Your broker is rich, are you? #24

I had heard about this little book Where Are the Customers’ Yachts?: Or a Good Hard Look at Wall Street in Alice’s Schroeder The Snowball: Warren Buffett and the Business of Life.

It was also recommended by Warren B. himself in several of his letters and it received other elogious comments from respectable people:

“Once I picked it up I did not put it down until I finished. . . . What Schwed has done is capture fully — in deceptively clean language — the lunacy at the heart of the investment business.”
 — From the Foreword by Michael Lewis, Bestselling author of Liar’s Poker
“How great to have a reissue of a hilarious classic that proves the more things change the more they stay the same. Only the names have been changed to protect the innocent.”
 — Michael Bloomberg

It is indeed fun to think that when I read it in March 2015 it was as relevant as when it was first published back in 1940. It is a good reminder that in whatever has to do with capital, history repeats itself.

It sums up well the problems with human behavioural biases:

  1. the craziness of financial predictions
  2. the fact that speculation is almost nothing but coin flipping
  3. the desperate nature of stock brokers
  4. the psychotic tendencies of the investing public
  5. the endless troubles with humans, forever victims of their emotions

In the words of Peter Lynch, “if the only reason you can give when buying a stock is that the sucker is going up then probably you are not on the path to investing success”.

My main takeaways on investing are: avoid speculation, avoid leverage, avoid following the herd.

My purpose in life is independence, fulfilment and a better understanding of how the world works. Like Charlie Munger, I believe in the discipline of mastering the best that other people have ever figured out. And like Sir Isaac Newton, I believe in our ability to see further than any others before us by acknowledging that we are standing on the shoulders of giants. With this blog I hope to keep track of my learning about investing, business, decision making, entrepreneurship and self development while inspiring others to do the same. For the moment the format of this blog will be one post for each book that has influenced me, but I expect it to evolve over time. Join my Journey. John.
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