Investors have been told to read and read a lot every day. Warren Buffett credits many of his great money decisions to his voracious reading habit. He says he starts every morning by poring over several newspapers and estimates he spends as much as 80 percent of his day reading. Reading is no doubt important but Morgan Housel points out that writing for yourself is underappreciated. Investors do all kinds of exercises to make sense of the world—modeling scenarios in spreadsheets, conducting diligence on management, or reading pitch decks. But few exercises help clarify your thoughts better than writing.
Housel points out that writing is the ultimate test of whether your thoughts make sense or are merely gut feelings. Feelings about why something is the way it is don’t need to be questioned or analyzed in your head because they feel good and you don’t want to rock the boat. Putting thoughts onto paper forces them into an unforgiving reality where you have to look at the words as the same symbols another reader will see them as, unaided by the silent crutch of gut feelings. It’s hard to overstate how important this is in an industry where distinguishing what’s true from what you want to be true determines a big part of success.
Good writers (and investors) take some vague feeling they’ve been thinking about, dig into a bunch, write down what they’ve discovered, realize half of it doesn’t make sense, delete most of it, write some more, realize the new stuff contradicts itself, panic when they realize they don’t understand the topic as well as they thought they did, talk to other smart people about why that is, learn something new that reminds them of this other thing that might tie into the second paragraph, discover that this thing they believed before they started writing isn’t actually true, realize that if that thing isn’t true then this other thing is probably really important, and so on endlessly.
Housel concludes that many of the good writers you enjoy probably aren’t much smarter than you. They’ve just forced themselves through the process of transferring vague feelings into words and the clarity that generates. He suggests that investors should write down answers for questions such as – What’s your investing philosophy? What’s your investing strategy? Why did you make that investment? How did you feel when that investment didn’t work out? What have you changed your mind about? And why? You’ll be amazed at how much you can learn by writing these things down, even if no one but you reads them.
The palest ink is better than the best memory – A Chinese Proverb
Invest in yourself
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