I haven't, and won't, read Hagstrom due to time constraints. However, as a formally trained intelligence analyst I've always found it mildly amusing that the investing community so often hold themselves in such high regard as bastions of intellect. Basic principles and techniques of analysis would serve any investor well, and these concepts have been around for decades (or centuries). I don't understand the allure of Buffett and Munger, I understand that they are/were fabulously wealthy, but their advice is utterly generic and I don't really see anybody turning it into an edge for themselves.
Look outside the the usual places: teach yourself to do a study of competing hypotheses, learn how to assess the validity of a source of information, understand how, when, and why people are lying to you, learn good investigative practices. Some reading available on Amazon, it isn't cheap but good learning isn't free :)
- https://amzn.asia/d/0cn43aOw
- https://amzn.asia/d/0bIhuwBu
Have you ever wondered what Munger referred to when kept mentioning using “Mental Models”? This book has a go at explaining many of these. Given the difficulty of this task, it’s a reasonable effort and worth the read.
As an aside, there is an SM-related story that I found interesting. The book covers why the group view is superior to the individual view, regardless of the underlying ability of the group. Many would say that SM should deliver better returns as a group compared to the vast bulk of individuals. I recall some stating that belief on the site in the past. The book mentions that this rule holds as long as the group is diverse and independent. SM is certainly diverse from what I can tell, it’s not full of, for example, finance boffins. Is it independent? In other words, is the group overly influenced by the stock selection of gurus, such as SM or Wini? The theory states if the group is so influenced it would be detrimental to portfolio performance. Interesting, I'll leave that assessment to others.
A reason I am interested and refer to the impact of biases on investment returns, and the importance of having a strong philosophy and process, is that I can see clear issues in my decision-making process that have room for improvement. As the book says markets evolve, what worked for you in the 1990’s for example, will likely work much less well now. The best investors evolve.
An investing approach, among some, relies on turning over as many new stock ideas as possible with the hope that you will find a huge winner. This assumes that you will recognise the stock and importantly, hold it to fruition. The errors I am looking to fix are a bit different to that approach. I have closely researched and even held stocks that went on to be very successful, but I have either passed over these great ideas or given up, I believe, because of biases. The ideas have been there in plain sight. It has not been a discovery process but a lack of recognition ability in my existing universe. (quality growth)
A possible way to fix this error is to have a flexible thought process to properly integrate new information and not be stuck in the original scenario to the detriment of other possibilities as they evolve. Laziness is much of the root cause as this approach uses intense thought and effort.
The book is not an easy read, and Hagstrom says as much, it was hard to write. The ideas here are complex and application takes much effort and discipline. There are many useful tools here. I will attempt to write up the book in detail, before results season and put it in my journal.
as an afterthought, the guys on TIP "we study billionaires" did a couple of hours on the book, if reading isn't your thing