Johann Sebastian Bach (1685-1750) taught me something about picking stocks.
I studied music in college. I was a classical guitarist. When I first started studying, I was familiar with Bach’s work, but I thought it was terribly boring. For me, the music of Bach was like an infallible sleeping pill. When they played Bach in my music classes, I would begin to nod off in a few short minutes, almost without fail.
But one day – I remember it vividly – I was in the hallway of the music building. That day in the hall, I decided that, if all these experts and music teachers thought Bach was great, I’d just keep listening to the music, and try to stay awake. I’d try to hear what they heard. I consciously decided to expand my horizons.
And it worked.
Today, I am a huge fan of Bach’s music. When I hear it, it doesn’t put me to sleep. On the contrary, it actually energizes me. I have recommended Bach’s works as energizing background music to several people.
It’s hard to say what caused me to go from bored student to passionate advocate on the subject of Bach. All I know for sure is that I willingly suspended judgment and immersed myself in the music. I just played it day after day after day. One day, I realized that I loved it. I was bored at first. But then I just couldn’t get enough of it. The music did all the work. It got me.
I’ve done something similar with investing.
There is possibly no piece of writing more sleep-inducing than a form 10-K, the financial report that every public company must file with the SEC once a year. There are no stories. No pictures (except the odd graph here and there). Nothing visually stimulating in the least… and everything reads like it was written by lawyers and accountants.
When I started reading these documents about ten years ago, I couldn’t make it through them. I’d literally fall dead asleep, with my head on my desk. But I decided that there must be something to reading them, since that’s how investors with real money spent their time. So I’d wake up and keep reading. Sometimes, I’d fall asleep again. Then I’d wake up again and keep reading. No kidding. That really happened. Every once in awhile, you can still find me nodding off in my chair at around 3 or 4 in the afternoon, with some boring piece of SEC filing in front of me.
Part of the reason I persisted is because I had read somewhere that people who are going through something emotionally frustrating or difficult will often say, "I’m tired," as a kind of defense mechanism, an excuse for not being up to the task at hand. I took my boredom with SEC filings as a sign of my ignorance. I didn’t want to be ignorant, so I pressed on.
With Bach, I submitted to the apparent wisdom of my teachers, and I learned to love that which I had previously disliked. With investing, I have submitted to the proven wisdom of the great investors, especially Warren Buffett.
As usual, I’d suggest you don’t take it from me, but from someone with more money and brains than I may ever have. On page 217 of J. Pardoe’s collection of quotations titled, "Warren Buffett Has Spoken," Buffett says, "I spend an inordinate amount of time reading. I probably read at least six hours a day, maybe more."
Next time anyone criticizes you for having your nose stuck in a book, just tell him you’ll never get rich if he doesn’t stop talking.
Plenty of time spent reading is all well and good, but surely the chairman and CEO of a company that produces $100 million a week (no typo) in free cash flow doesn’t just read all day. He must spend plenty of time in meetings. All corporations have lots of meetings…right? Yes, they do, but not Buffett’s corporation, Berkshire Hathaway. None of his time is spent that way. Buffett says, "We have no meetings at Berkshire. I hate meetings."
So…what does he do besides read? The quote from the Pardoe book continues, "I spend an hour or two on the telephone…"
If Buffett were talking to Elvis, perhaps you could broadcast the conversation over TV, radio and Internet, and most people would be interested in listening in. But it’s probably just the CEOs of the companies he owns, maybe his partner Charlie Munger, and a bunch of folks in the financial world. I doubt most people would understand as much as half the conversation, given that Buffett’s largest money-making venture is the somewhat esoteric world of insurance, with a focus on the even more esoteric world of reinsurance. Again, nothing to watch. Just one side of a boring conversation about statistics and money.
After reading and talking on the phone, then the activity level really kicks into overdrive. "…and then the rest of the time," says Buffett, "I think."
Reading, conversing with people who know what you’d like to know, and thinking. Those are the three things rich people do all day.
If you think there’s a secret out there, one that’s going to help you hit the jackpot, I wish you luck finding it. As for me, I’m just going to get back to reading, conversing with people who know more than I do, and thinking.
"It’s such a fine line between stupid and clever."
- David St. Hubbins (played by Michael McKean) in This Is Spinal Tap
The following dialogue is from the movie This Is Spinal Tap (a "rockumentary" about a fictional British band), when lead guitarist Nigel Tufnel demonstrates the band’s amplifiers for interviewer Marty DiBergi. The amplifiers are all fitted with dials that go up to 11, instead of the usual 10:
DIBERGI: Does that mean it’s louder? Is it any louder?
TUFNEL: Well, it’s one louder, isn’t it? It’s not 10. You see, most blokes, you know, will be playing at 10. You’re on 10 here, all the way up, all the way up, all the way up, you’re on 10 on your guitar. Where can you go from there? Where?
DIBERGI: I don’t know.
TUFNEL: Nowhere. Exactly. What we do is, if we need that extra push over the cliff, you know what we do?
DIBERGI: Put it up to 11.
TUFNEL: Eleven. Exactly. One louder.
DIBERGI: Why don’t you just make 10 louder and make 10 be the top number and make that a little louder?
TUFNEL: [extremely long pause] These go to 11.
Innovations are not always improvements. This is especially true in investing, in which people are always coming up with seemingly novel ways to make money in the markets. Books come out all the time touting some new way of thinking or some new system. The "newness" is more apparent than real.
Most of these new ways just die after a while. There is little that is new in finance. The same principles apply in nearly all markets.
I visited a local used bookshop the other day, looking to sell a box of books I no longer wanted. I didn’t care how much they paid me. I just wanted to get rid of them and clear some space on my shelves.
Many of the books are about investing, markets or economics. As the bookseller picked over the lot, he left many of the investing and economics books in the box and bought the other books.
"I’m always surprised at what you take and don’t take," I said to him. "For example, you took a copy of Adam Smith’s Theory of Moral Sentiments, but you wouldn’t take this brand-new book about investing."
This bookseller is a crusty fellow, with a face like a dead squirrel. "Well," he said in a very deliberate manner, "most of what’s worth reading about money and investing has already been written."
This is was a fairly wise observation, I thought. He continued: "People love to come to a used bookstore and pick up copies of the classics that have been around for a hundred years or more. The problem with the new stuff is that we don’t know what will stick. What’s popular today is forgotten tomorrow."
Yes, that’s exactly it. Most of the new stuff is simply putting the dial to 11, as Nigel did, and thinking that it makes a difference.
WTI NYMEX CRUDE
Chris Mayer is managing editor of the Capital and Crisis and Mayer's Special Situations newsletters. Graduating magna cum laude with a degree in finance and an MBA from the University of Maryland, he began his business career as a corporate banker. Mayer left the banking industry after ten years and signed on with Agora Financial. His book, Invest Like a Dealmaker, Secrets of a Former Banking Insider, documents his ability to analyze macro issues and micro investment opportunities to produce an exceptional long-term track record of winning ideas. In April 2012, Chris released his newest book World Right Side Up: Investing Across Six Continents.
Bach is boring. Chris, go with your first instinct. As to what this has to do with the title of your article is beyond me. Maybe Bach has warped your thinking? As far as what rich people do all day, they scheme of how to get richer. The End.
Are you taking a lesson from Drudge? Label an article or link with a misleading headline and people will click it?
Bach isn’t boring. Your article is.
I really find this article motivating. Sometimes you have to do things you don’t wwant to do. Things that are “boring”. Thats’s called work. Real work. You can’t have fun all day–and make money. You have to do things that start off boring and eventually–you will see the light. Warren B. may read–but trust–you dont have money and power like him, and read meaningless things. I think some of the most boring things, turn out to be the best learning experinces you can have. You can still have fun..just doing a hobby. Work is not going to be fun. It’s called work, and to make money, you will be doing lots of reading. It may turn out to be a little fun.
A lot of reading, a little talking and then thinking through the remainder of the day will make you rich? There seems to be a lot of poetic licence used here rather than fact.
Unless there is action nothing happens. Great people (rich or other wise) put their thoughts into action WHILE doing lots of reading, talking and thinking.
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