Nullius In Verba: Take Nobody’s Word for It

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Nullius In Verba. Translation: Take Nobody’s Word for It. Pretty good advice for life, and even better advice for investing.  

The investing world is full of people that say many things. And many get paid specifically to tell you certain things that may or may not be true, accurate, or a complete representation of reality.

CEOs, investment managers, salespeople, consultants, and regulators all tell you a story, but rarely give you the whole fact pattern.

So take no one’s word for it:

  • Do your own homework

  • Read the footnotes

  • Call references

  • Recalculate the numbers

  • Evidence, not confidence

  • Written language, not spoken promises

  • Source documents, not summaries

It’s almost always a classic appeal to authority fallacy. Trust me, because of my company/my background/my title/my school/etc.

Investing relying on others, whether you like it or not. If you own individual shares, you rely on the management team. If you own a fund, you rely on a manager.

So how do you avoid being led down the wrong path?

Minimize the reliance. Do your own work. Every time you outsource an assumption you are taking a risk, on top of the inherent risks already present in investing.

When investors cover 100+ stocks or managers, they’re forced to accept what people tell them. They can’t verify it all.

I’ve been in that position, and it’s not the path to investment success.

We can’t know it all in investing. But many people try. And when they try, the quality of the work suffers as the assumptions and blind reliance increases.

You’ll never have complete certainty. But you can get closer than you currently are. But it takes time, effort, and above all, an insatiable curiosity to figure out how things really work.

Many investing aphorisms and pieces of wisdom get repeated without fact checking, because everyone assumes someone along the way did the source work.

Do the work to have an opinion. It’s hard enough to invest as it is. Don’t compound your problems with laziness.

After all, it’s not the outright scammers that I’m worried about. Instead, it’s the good-natured people, who recite well-worn cliches, convinced they got everything figured out, without ever doing the work. They are the real threat.