Pick Up A Book & Make Friends With The Eminent Dead

"I think you learn economics better if you make Adam Smith your friend."

Happy Monday and welcome to our new subscribers!

The great Lex Fridman said something a few months ago that really struck me.

“Some of my best friends don’t even know I exist,” he admitted. “Actually, most of my friends are dead.”

The thirty-something podcast rockstar (and genius-level artificial intelligence researcher) wasn’t bemoaning his limited social circle, but instead referencing the one-way friendships that we build with favorite authors and influential thinkers.

Even if — as Lex says — they have no idea that we exist.

Or happened to die a long time ago.

Asymmetric relationships blossom between author and reader with every turn of the page. Relationships that exist outside of time and are no less real and rewarding than those made in “real life”.

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This may shock you, but Lex’s comment reminds me of something that Charlie Munger once said.

From Poor Charlie’s Almanack:

In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero. You’d be amazed at how much Warren [Buffett] reads — and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.

I am a biography nut myself. And I think when you’re trying to teach the great concepts that work, it helps to tie them into the lives and personalities of the people who developed them. I think you learn economics better if you make Adam Smith your friend. That sounds funny, making friends among the eminent dead, but if you go through life making friends with the eminent dead who had the right ideas, I think it will work better in life and work better in education. It’s way better than just being given the basic concepts.

Of all Munger’s many mental models for becoming a better investor — and more rational person — this one is my favorite.

And developing a predilection for biographies is a great place to start.

Reading a biography might not be exactly the same as firsthand experience, but where else do you get the opportunity to live (and learn) vicariously from the most accomplished men and women in history?

Readers receive a front-row seat to witness how these luminaries solved problems, dealt with crises, overcame obstacles, and handled success.

We can learn from the good and the bad. One page might offer up an act of heroism to emulate and another a cautionary tale to avoid. It’s important to learn from our own mistakes, but if we can take a cue from someone else’s life without having to go through the pain and embarrassment (or whatever) ourselves — then all the better.

When searching out an intellectual friend or mentor, you needn’t limit yourself to just those who happen to be alive at the same time as you. So much life-changing wisdom and insight have been preserved from generations past that is just waiting out there to be rediscovered by someone cracking open the spine of an old book.

Most of my favorite investing books were written decades ago. Books by Benjamin Graham, Philip Carret, George Goodman (under the pen name Adam Smith, but not the same one that Charlie Munger was talking about), John Train, Fred Schwed, Geraldine Weiss, Peter Lynch, and others.

Too many modern readers probably feel a temptation to toss these works aside. They view them as outdated or no longer applicable to today’s market — as if the money game has really changed all that much over the years.

The wisdom in these classics has nothing to do with current trends or what to buy RIGHT NOW, but rather internalizing timeless principles and building the mindset of an intelligent investor. That never goes out of style.

When Mr. Market lurches out of his house in a particularly foul mood and Wall Street descends into panic, it’s the words of Goodman and Graham that echo in my head.

I will probably never meet Warren Buffett, but his many witticisms and truisms are usually the first things I think about when contemplating a new investment.

The more voices that you add to your own “team” of the eminent dead — or not so dead — can only make you a better investor (and a more well-rounded person).

Don’t be afraid to fill your shelves with dusty old books that others ignore. That’s where the real treasure can be found.

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And, while we’re on the subject of the importance of reading, the best investors tend to curate a reading list that runs the gamut from the practical to the downright weird.

Before this year’s Berkshire Hathaway annual meeting, Ted Weschler spoke with Nebraska Furniture Mart’s “i am home” podcast about his rather idiosyncratic reading process.

Like his boss, Weschler loves to read. However, he believes that one of the biggest mistakes that investors make is reading the exact same stuff as everyone else.

Variant perception — or seeing things differently than the masses — is the key to success in the stock market.

“I want to be able to look myself in the mirror and say that I’m reading enough weird stuff that nobody else is reading the same stuff that I am,” he says. “If you’re just reading the New York Times and the Wall Street Journal, there’s no way you’re going to beat other people.”

Even so, Weschler makes a point to read as many newspapers and trade journals as possible. Newspapers, in particular, present readers with a random set of stories, curated by editors, that make for a well-rounded reader.

It’s all about building up a critical mass of information and data that will help you connect the dots when examining a potential investment idea.

“I read Furniture Today and Uranium Weekly,” Weschler laughs. “I’m not sure there’s a lot of people who subscribe to both of those, but you’re looking at one of them.”

In 2011, Mario Gabelli expressed much the same sentiment about connecting the dots between seemingly unrelated pieces of information:

For the last forty years, I’ve been reading Variety and Billboard and Automotive News and Farm Income Journal and all sorts of other things that give you an idea of what’s going on around the world.

The hard part is to connect all the dots.

In World War II, how did the Allies find out where the German V-1 bomb base was? An intelligence analyst was reading the social papers and he was wondering why all these German generals were going to this location in the middle of nowhere? And he figured out that’s where they were making the bombs and sending them to England.

So gather the data, array the data, and then figure out the valuation techniques.

Flipping through the pages of Variety or Billboard may not sound like serious investor reading — it’s certainly lighter fare than a pile of 10-Ks — but both Weschler and Gabelli consider these “diversions” an essential part of any library.

And who am I to argue with those two?

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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.