Do Your Own Thinking

It’s one thing to ask for help, it’s another to outsource our thinking.

There’s a role for consultants and outside research, but only if it’s a supplement, not a replacement, for our own original work.

Don’t accept assertions from authority, experience, education, or credentials.

Why do we outsource our thinking? Because it’s easier. It protects our ego and gives us someone to blame when things go sideways.

Ask yourself, is it true?

To paraphrase Leo Tolstoy, there’s no worse way to go about investing than to follow the untested opinions of other people. For example…

· Don’t read a sell-side report, dive into the 10-K yourself

· Don’t accept the CEO’s conviction, only what can be verified

· Don’t rely on “research shows…” and “the science says…” Read the research firsthand.

· Don’t buy a stock because some hedge fund guru bought it, do your own research

What sounds accurate, and is accurate, are two different things. The first is untested; the second is validated.

This is the practice of Epoché, the Stoic discipline of suspending judgment until we can examine something for ourselves.

Go to the source. Don’t take things at face value.

Developing our own independent, well-researched approach is the only defense to the insanity of the modern investment world. As soon as we outsource our thinking to the latest guru or strategist, we surrender our original thinking.

Don’t give up the one thing we should ever outsource – our own independence and judgement. See it with our own eyes.

Because we operate in an information-saturated world where everything is presented a mile wide and an inch deep, we lose the ability to go deep and test an idea. We’re forced to take things at face value when we’re spread so thin.

Many recommendations are based on parroting the same repackaged, generic advice. Everyone assumes the person before them did the work. But often times no one did the work, so the only way to know the work got done is to do it ourself.

Most ideas are just following what’s been working and what’s popular, and then backfilling in the story and confirming evidence to make it appear thoroughly vetted.

It’s recycled advice with a twist to make it appear novel.

Don’t confuse confidence and conviction with truth. It’s shocking the naïveté and gullibility of investors when referring to a manager’s or CEO’s confidence level as an indicator of their ability. Of course they come off as confident. It’s by design. They’re paid to sell us!   

Relying on intuition and gut is worse than not doing any work at all.  

“Trust, but verify,” advises the Russian proverb made famous by Ronald Reagan.  

Remember, in investing, most people’s paycheck rides on convincing us of something that is partially or wholly untrue.