Only in America could you find a way to earn a healthy buck; And still keep your attitude on self-destruct.
Only in America could you find a way to earn a healthy buck; And still keep your attitude on self-destruct.
The ancients who wished to illustrate illustrious virtue throughout the Kingdom, first ordered well their own states. Wishing to order well their states, they first regulated their families. Wishing to regulate their families, they first cultivated their persons. Wishing to cultivate their persons, they first rectified their hearts. Wishing to rectify their hearts, they first sought to be sincere in their thoughts. Wishing to be sincere in their thoughts, they first extended to the utmost their knowledge. Such extension of knowledge lay in the investigation of things.
Things being investigated, knowledge became complete. Their knowledge being complete, their thoughts were sincere. Their thoughts being sincere, their hearts were then rectified. Their hearts being rectified, their persons were cultivated. Their persons being cultivated, their families were regulated. Their families being regulated, their states were rightly governed. Their states being rightly governed, the whole kingdom was made tranquil and happy.
From the Son of Heaven down to the mass of the people, all must consider the cultivation of the person the root of everything besides.
by Alice Miller, published 1979, 1997
Recently I was discussing economic and social philosophy with some friends and the question came up about why certain philosophical ideas aren’t more popular or well-known if they seem to be more logically correct than the alternatives. We entertained a number of reasons why this might be but the one that stuck out to me as particularly weighty is the idea that the truth is deep, long and heavily nuanced and doesn’t make for quick, emotional soundbites. I made the quip, “Why is the economy the way it is? Do you have 5 years to study what you’d need to know to understand it?” followed by, “Why does the political system look as it does today? Do you have an entire lifetime to devote to studying all of human history?”
The other weighty suggestion that was offered is that there are many philosophies that cater to telling people what they want to hear (ie, an easy to accept reality) and only one that emphasizes telling it like it is (ie, a hard truth about reality).
I see echoes of these two notions in the opening of Alice Miller’s “Gifted Child”:
The damage done to us during our childhood cannot be undone, since we cannot change anything in our past. We can, however, change ourselves. We can repair ourselves and gain our lost integrity by choosing to look more closely at the knowledge that is stored inside our bodies and bringing this knowledge closer to our awareness. This path, although certainly not easy, is the only route by which we can at last leave behind the cruel, invisible prison of our childhood. We become free by transforming ourselves from unaware victims of the past into responsible individuals in the present, who are aware of our past and are thus able to live with it.
Most people do exactly the opposite. Without realizing that the past is constantly determining their present actions, they avoid learning anything about their history. They continue to live in their repressed childhood situation, ignoring the fact that it no longer exists. They are continuing to fear and avoid dangers that, although once real, have not been real for a long time. They are driven by unconscious memories and by repressed feelings and needs that determine nearly everything they do or fail to do.
This book asks the reader to consider two troubling ideas. The first is that they are likely to be carrying some emotional baggage from their childhood that originates with the way they were cared for by parents and other important adults in their lives. The second is that they are likely to transmit this baggage to their own children (if they have any) and other important, intimate relationships if they don’t find a way to come to terms with it beforehand.
Like the consideration made about the popularity or penetration of certain economic and social philosophies, these ideas are troubling for most people to accept because it forces them to revise their current understanding of the relationships they have with important people in their lives, it forces them to take responsibility for the course of their lives and their choices and give up the perverse safety and security of seeing life through the eyes of the helpless victim and it forces them to concede that the present is not a unique or isolated moment pregnant with infinite possibilities, but rather one moment at the end of a string of moments stretching back into the earliest reaches of human history in which possibilities exist but are limited by certain choices and events which took place in the uncontrollable past.
There is of course great freedom in choosing to explore these troubling ideas but they come at the cost of a grave responsibility that few, based on my practical experience, seem willing to bear.
To find this freedom, one must seek out “the lost world of feelings.” Human infants are entirely dependent upon their adult caretakers for their survival, unlike most other animals who, while weak and undeveloped, are nonetheless able to move around, seek shelter, find food, etc., on their own almost immediately after birth. For a young human, being ostracized or unloved by ones parents is a death sentence. Therefore, the human psyche is wired at birth to prioritize adapting to the parents’ emotional needs over fully developing its own.
If certain emotional expressions or behaviors prove to be problematic for the relationship with the parents, the human child will work to repress and hide that part of themselves. They will disown it and their personality will become dichotomized into “me”, the feelings and behaviors and characteristics I acknowledge and accept because they have demonstrated value with my parents, and “not me”, the feelings and behaviors and characteristics I deny possessing or experiencing because they have been a source of conflict with my parents, on whom I depend for survival.
This is what Miller means when she talks about searching for the “true self.” The irony, however, is that
the child does not know what he is hiding.
That is, it is not as if the child knows what his true self is and isn’t and is lying to himself and others about who he really is. It is more like, he has shoddy vision and can’t see a focused image of himself in true detail, or else he has a map of himself leading to the buried treasure of his own reality but he doesn’t know how to read the map and therefore doesn’t know where his self is or even what he’ll find when he gets there. Every now and then this person might get a glimpse or a sense of their true self in a particularly emotionally charged moment but really all they’re experiencing is the anxiety indicating the existence of repressed and disowned selfhood, not a look at what is missing.
To heal, these emotions must be encountered and experienced. Further, painful emotions must be resolved by tracking down their genesis in early childhood experiences. Memories and relationships with respected and important adult caretakers must be studied and re-evaluated through the more objective eyes of an independent adult rather than the way they were first constructed by a subjective and immature child. This not only allows the adult of the now to be released from the terrors of the former child but it can enable the adult to have new modes of living and doing:
Rational, constructive action depends not only on the intactness of our intellectual faculties, but also on the extent to which we have access to our true emotions.
the inescapable conclusion is that for people to be able to organize their lives, they must have access to their emotions.
This is one of the many and for me, the most important, takeaways from this book. It is not enough to rationalize about a choice and a potential plan of action. To actually develop an impetus to act requires an emotional experience. Adults who repress certain parts of their emotional selves due to childhood traumas become incapable of acting in certain areas of their lives. They become procrastinators, perfectionists or otherwise evasive in the area of making a decision, acting on it and then sticking with it.
By finding and integrating one’s lost world of feelings, one has the opportunity to become active and empowered in new areas of one’s life that were otherwise mysterious, frustrating or dormant.
One question that comes up for some people as they consider all of this is, “But why did my parents ever treat me in such and such a way?” Using some of the memories and recollections of a famous cultural writer as an example, Miller says,
like so many gifted children [he] was so difficult for his parents to bear not despite but because of his inner riches. Often a child’s very gifts […] will confront his parents with conflicts that they have long sought to keep at bay by means of rules and regulations. These regulations must then be rescued at the cost of the child’s development.
The parents’ childhoods involved repression as well. For their own survival they learned to disown parts of their emotional experience or certain of their behaviors that caused trouble with their parents. They rationalized this turn of events and created rules for living that would help them avoid these perceived dangers. And then when they had children, these rules and procedures came into question by the existence of the innocent child. And so a new round of repression is started.
The only way the cycle can be broken is for the adult to make the painstaking effort to connect with his child self and understand what happened and how it has impacted him, and then he must choose to live his life differently with that new awareness of his past. This is hard for many to do because
What they do not see, because they cannot see them, are the absurdities enacted by their own mothers when they were still tiny children.
Another powerful idea contained in this book is an explanation of the appeal of irrational ideas to adults with traumatic childhood experiences. The trauma of childhood is itself irrational– there is no “reason” for any child to be abused or neglected by those who brought it into the world, and save those who are simply unlucky in having some external misfortune befall their family (ie, the child is made an orphan when the parents die unexpectedly), there is no excuse or justification the adults could offer a child as to why they are being treated as they are. For survival reasons, the child must make a place in their psyche for irrational ideas to exist because in doing so they “close the loop” on the irrationality and make it seem rational. “Some things just don’t make sense” is a way to make sense of things that don’t make sense.
When this space for irrationality exists, adults can become wedded to irrational ideas and beliefs, such as political ideologies, abusive social relationships or supernatural superstitions. On one hand, they lack the ability to rationally resist these ideas and beliefs because they are willing to accept that not everything has to make rational sense in their lives. On the other hand, they may positively identify with the claims of these ideologies because they appeal to their own experiences or sense of self as a victim who is oppressed by others, that is, they offer a way to feel like they’re getting even. On this point Miller is worth quoting at length:
Oppression and the forcing of submission do not begin in the office, factory or political party; they begin in the very first weeks of the infant’s life.
Political action can be fed by the unconscious rage of children who have been misused, imprisoned, exploited, cramped and drilled. This rage can be partially discharged in fighting “enemies”, without having to give up the idealization of one’s own parents. The old dependency will then simply be shifted to a new group or leader. If, however, disillusionment and the resultant mourning can be lived through, social and political disengagement do not usually follow, but our actions are freed from the compulsion to repeat. They can then have a clear goal, formed out of conscious decisions.
Once our own reality has been faced and experienced, the inner necessity to keep building up new illusions and denials in order to avoid the experience of that reality disappears. We then realize that all our lives we have feared and struggled to ward off something that really cannot happen any longer; it has already happened, at the very beginning of our lives while we were completely dependent.
The term “fighting yesterday’s battles” comes to mind when thinking about this irrational space.
While Miller’s analysis applies to any child and any adult experiencing emotional pain and depression (whether they’re aware of it or not!), the book is especially focused on the plight of “gifted” children because of the uniquely problematic experience they can have in this area due to their talents and abilities. Not only do “gifted” children tend to experience these emotional troubles more deeply,
many people suffering from severe symptoms are very intelligent
but they also tend to experience these troubles uniquely through feelings of grandiosity and contempt.
Grandiosity is the concept of identifying one’s personal value as a person with one’s special talents and abilities. One’s greatness isn’t just a part of one’s self, it IS the self. But this complicates the emotional life of the gifted child because it is inevitable that not every part of themselves is grand. There exists then another dichotomy, wherein all the parts that are grand (which may be very few and overall represent a quite limited part of the total person or experience of self) are “me”, and all the parts that are normal or weak (which is likely then the majority and the wider experience of self) are “not me”. And if my parents love and care for the grand gifts I have but dislike or don’t know how to deal with the unexceptional aspects of my self, then
we remain at bottom the one who is despised, for we have to despise everything in ourselves that is not wonderful, good, clever… we despise… in short, the child in ourselves and in others.
“Without these achievements, these gifts, I could never be loved. would never have been loved.”
An emotional experience that often goes hand in hand with grandiosity is contempt.
The function all expressions of contempt have in common is the defense against unwanted feelings. [ie, despising what is not grand about oneself]
Once we are able to feel and understand the repressed emotions of childhood, we will no longer need contempt as a defense against them.
Contempt as a rule will cease with the beginning of the mourning for the irreversible that cannot be changed… it is, after all, less painful to think that the others do not understand because they are too stupid.
Gifted people often experience contempt for others as an expression of insecurity about the repressed parts of themselves that are not part of their gifts. Unable to have empathy and kindness towards themselves in these areas, they become impatient and hostile towards those reminders of their own weakness that they see in others.
hating and offending an innocent person, using him as a scapegoat, can only strengthen the walls of our inner prison of confusion, isolation, fear and loneliness: it cannot free us.
And the most innocent person of all, the most unfair scapegoat a person can choose in this drama, is their child self. Whether these ideas are new or familiar, I encourage anyone reading this to consider the implications of the ideas contained in this book not as if they describe a set of generalized human experiences but rather as if they describe something specific and personal to the reader himself. If this book’s message can be taken to heart and internalized, it can be the jumping off point for great personal change that will ultimately resolve itself in what Miller refers to as a “healthy self-feeling”:
I understand a healthy self-feeling to mean the unquestioned certainty that the feelings and needs one experiences are a part of one’s self.
To Our Little Lion,
The allusion to a New Year reflection post is intentional, as is the suggestiveness of the title that time is moving past us at a regretfully quick speed. Although the first few weeks and months of your life you were changing every single day, the change appeared more gradual and more difficult to notice. Around six months, the pace of change accelerated and after a year you are already entering your personhood and the volume of change occurring is almost impossible for us to note with any detail.
Whereas in the past I sought to document some of the specific observations about your behavior and development that stood out to me, this time I want to share with you about an episode along the way which was particularly trying for the Wolf and me. I want you to understand what happened and how we came to our decision. Finally, I want to do some reflecting but not about you, rather, about us.
When you were born you had some trouble forming a proper latch when you were nursing. It took us several months to figure out that you had a minor and surgically correctable condition called a “tongue tie”– essentially, the fibers underneath your tongue connecting it to the floor of your mouth were a bit too taut for you to control your tongue the way you need to to make breastfeeding easy for you and your mother.
Eventually, with the help of some of our medical consultants, we realized what was going on and had the short (2 minute) procedure performed at a local dentist’s office. However, it took some time afterward for you to develop the strength and dexterity in your tongue necessary to nurse without difficulty. For five or six months, the Wolf was completely dedicated to pumping her milk for you which was then fed to you in a bottle. She had to do this six to eight times a day, for twenty to thirty minutes at a time, and then you had to be fed afterward. It was very hard for her and she was very sad and even angry at times as she learned to accept her choice, which was to provide you with a diet that was largely (75%+) still her breast milk — “the best milk” — even though you couldn’t get to it on your own by nursing. She made that choice because she believed you really needed her and it was important to your immunity, your brain and body development and long-term, your intelligence, health and well-being. It was a difficult challenge, and it was an opportunity for her to form an even stronger bond with you.
Eventually you gained the strength and ability to resume breastfeeding. You were taken back off the bottle and formed the relationship through nursing with the Wolf that she had hoped to have with you from day one. It was a great relief to realize she could give up the pumping routine and just enjoy feeding time with you like that… we were concerned it might never be possible.
Unfortunately, it took us some time early on to understand what was going on with your feeding and during that time you were undernourished. Then, as we made adjustments, you rapidly began gaining weight and strength. Perhaps because of this, your gross motor development was different than the average infant and you were considered, on a relative basis, to be slow to develop your sitting and crawling.
Because of the trying ordeal with your feeding early on, the Wolf and I decided it was important to get more checkups with your pediatrician than we otherwise would bother with because our principle is to not visit with medical professionals unless something seems to be wrong. At the time of this visit, nothing seemed to be wrong, just the opposite, you seemed very happy, healthy and growing every day. But we were fearful because of our early experience and we wanted to be sure. So your mother took you in for a checkup.
The visit with the doctor was uneventful until the pediatrician noticed you were not sitting up. She became extremely alarmed and said that this potentially indicated a major problem for your health and that you needed to be screened by specialists right away. She didn’t offer many other details beside that and was not willing to entertain questions or curiosities from your mother and me. She claimed she had never in her practice seen a child your age not sit up on their own.
To say this was hard for us to believe would be an understatement. I began calling some of the screening agencies she recommended and tried to understand what it was they wanted to do with you and why it was necessary. I tried to get names and contact information for the specialists who were actually knowledgeable about the specific concerns the pediatrician had for you so I could consult with them directly and skip a step. The more I dug, the more confusing the process we were referred to appeared to be and I began losing confidence in the pediatrician’s recommendation.
Your mother and I spent a three week period feeling absolutely awful. We were worried for you. We felt alone and vulnerable, not understanding what was apparently wrong and not having anyone in an authoritative position we could turn to to just ask questions. We were leaning towards taking the pediatrician’s concerns seriously, after all, we had been wrong in not recognizing your earlier nutritional challenges. On the other hand, it was hard to avoid the sense that we were facing a choice of believing her or our “lying eyes”, as you seemed otherwise to be a cheerful and ever-changing infant.
It seemed like a defining moment for us, and for you and for our relationship with you– to begin to see you symptomatically, as somehow “wrong” the way you were, or to have faith that if you were not showing signs of distress or pain you would develop in due time in your own way and that would be fine.
We did manage to visit with an occupational therapist for a consultation, skipping the strange screening process that was recommended to us. The occupational therapist observed you for a half hour and told us that she saw nothing to be concerned about, that she believed you would learn to crawl and sit up with time and that we could choose to work with her to accelerate the process through therapy if we liked. She seemed confident but we still had some uncertainty, what if you did not? What if there really was a problem and you got further and further behind developmentally, whatever that meant?
Ultimately we decided to wait. The very week the pediatrician raised the alarm you got yourself into a crouching (pre-crawl) position on your own, without any encouragement or assistance from us. Your body just told you to do that. As the weeks went by, your crawling changed and you began pulling yourself up against furniture. Eventually you sat up on your own and began playing and manipulating objects in that position. Today, you are on the verge of walking, spending more and more time every day pulling yourself up on furniture and ledges and practicing standing. It’s clear your body just keeps telling you to try this and you are gaining strength and confidence with each attempt.
In hindsight, there was nothing to worry about. You got there and you are getting there, on your own, in your own way. What might’ve been a disastrous path toward treating a “condition” that didn’t exist and becoming the ward of a variety of specialists and other agents that have no business interfering with your health and development at worst, or a subtle transformation in our own perception of you as somehow “flawed” and not okay as you happen to be at best, is instead an already seemingly distant but painful memory. As difficult as it was to go through, it certainly has given the Wolf and I increased courage to be patient with you and to look to the good in you, to focus on what you are capable of right now and what’s going well for you than to dwell on what you can not yet do or to focus on potential items of worry. It has consequently reduced our stress as parents a great deal to have experience to back this mindset.
So now, a reflection about us as parents.
When I watch other people interact with you, I am always surprised to see how much of what they do and say seems to be about them than about you. What I mean by that is, they seem to be playing out their needs and you are an object utilized in the goal, rather than they are thinking about your needs and treating you as the subject of a relationship they have with you.
What seems to be true of them could of course be true of us, your mother and father. And its something I think we need to be the most mindful of in our interactions with you.
Many people conceive of parenting as a project in filling up an empty vessel. Whether that vessel is to be filled with love, values, knowledge, experiences or anything else, the implicit idea is that the child is empty and the parents’ job is to put things in. The result is a “full person”, a wholesome, well-balanced individual.
We think you’ve got almost everything you need to be who you are. It’s inside of you, just waiting for the right time and place to come out. We can feed you, clothe you and care for you in any other way you need us but the real development work is done by you, not by us. In fact, we can interfere and get in the way of your natural development quite easily, but it is difficult to impossible to think of ways we could improve upon it.
The ways in which we would be tempted to interfere would be the ways in which we feel incomplete as ourselves. What we want to pour into you are the things we wish we were in touch with ourselves. If we feel empty in these ways it becomes more likely that the time we spend together is less about getting to know who you are and more about getting to know the distant parts of ourselves. The danger is that we use you like an object on this quest for self-knowledge.
The true heavy-lifting we can do as parents is to keep working on ourselves. If we can model whole, complete, satisfied individuals to you through our own lives, we give you an aspirational development goal that is in alignment with our parenting goal. If we spend at least as much time working to become the best versions of ourselves we can be as we do trying to be “better parents” with more tips, tricks, techniques, tools, knowledge, experience, values, resources, etc., we will be of far more value to you as you grow than we would be if we convinced ourselves that giving you things or putting things into you could make up for the existential emptiness we demonstrate to you with our daily lives, lives you are intimately aware of because you are right beside us the whole time.
What’s interesting about this for us to realize is that this is actually best for us, too. But since our goal is to live with empathy and look for ways to cooperate it maybe shouldn’t be surprising that what’s best for you is also best for us.
“How do I learn how to invest?”
I don’t get asked this often, but I do get asked often enough that I should have a resource on this topic on this blog. My recommendations are qualified as follows: first, when people ask me how to get started with investing, they usually mean public (US) equity markets, not real estate, commodities or venture capital so that is what I am responding to; second, when I think of investing in public equity, I think of the “value investing” approach, there are other ways to invest but I don’t understand them or I do not trust them so I don’t recommend them; third, I try to form a recommendation based off of what I wish someone had told me when I had this question, so it may fit a person better or worse based on their previous knowledge, experience and intelligence; fourth, I think people are usually looking for reading material when they ask this question and I think that’s the best way to learn what needs to be learned so that is what I recommend; finally, I have struggled for over ten years with DOING rather than THINKING/READING, so my strongest recommendation is to put this knowledge and the concepts learned into practice almost immediately and start learning through action as soon as you can– it’s the only way to build the confidence I mostly never had.
I think there are a few key things a person needs to get comfortable with in order to build a solid foundation as a student of investing practice. Personal discipline, inspiration and technical know-how are the required ingredients.
Personal discipline is about generating meaningful savings. Without savings, there is nothing to invest. And without a habit of saving, an investor will have difficulty weathering the inevitable setbacks in their portfolio, taking advantage of periodic market tumbles with dry powder and resisting the temptation to sell at the worst possible moment to fund a lifestyle need or unexpected emergency. To be a great investor, I am convinced, you must be a great saver. Capitalism is built on savings, so by learning how to save you are not only building a bright financial future for yourself but helping to tend to the foundation of modern society.
Inspiration is about seeing the end game, knowing what is possible and staying motivated through the hard work and daily grinding that are the meat and potatoes of actual investing work. By studying a master you can understand not only what it takes but what to expect from your own results. And having realistic expectations is important in a business where you are your own worst enemy and the most important entity to manage.
Technical know-how is about the mechanics of investment analysis. Having a rudimentary knowledge of accounting as the “language of business” so that you can intelligently read financial statements (the reports public companies issue about their operations) and understand what is going on, and understanding what great value investors look for when analyzing an investment opportunity in terms of safety and calculated return are the actual tools you need to “do investing.” But trying to get this information before you are disciplined about saving and inspired to pursue the hard work of investing is surely putting the cart before the horse.
The meta lesson here is patience! Something all great investors need to succeed.
For the dedicated student, I have five resources I strongly recommend to methodically take oneself through these concepts. Here they are in order.
Savings and personal discipline
The first book is The Richest Man in Babylon, by George Clason. The book is a collection of lessons about how to save and the benefits of saving in the form of parables of wisdom from ancient Babylon. The narrative is extremely dated and not Politically Correct but that is exactly what makes what might otherwise be a dry subject quite wondrous and entertaining to read. When you read The Richest Man your life will change if you previously haven’t been a saver or didn’t understand how to save; for those who do, it will strongly reaffirm what you do and help you connect how critical it is to your long-term investing plan.
The second book is The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, by Thomas Stanley and William Danko. Millionaire is a statistical study of America’s self-made millionaires– how do they live? what are their habits? what are their families like? how do they make key financial decisions in their life? You will see the importance of savings and frugality as a common theme. But you will also learn that millionaires don’t live millionaire lifestyles by and large and they certainly don’t build their lives around competing with their neighbors on consumptive habits. Because investing is a long enterprise where small advantages accrue over time (and small mistakes and expenses snowball just as easily), a person who fully integrates their desire to live life patiently and without excess will have a much higher chance to be successful as an investor.
Okay, you’re saving money and you’re not going to let your spendthrift neighbors new car in the driveway distract you from your mission. You’re not even going to WONDER how he affords it– you know he can’t and that it doesn’t matter a wit to how you do as an investor. You’re ready to be inspired, and who better to do that job than the arch-master of modern investing, Warren Buffet? It’s time for your third learning with Buffett: The Making of an American Capitalist, by Roger Lowenstein. There is a second Buffett biography which I think is superior in a number of ways, but that is for later on. You can obsess over those details later. Lowenstein is enough right now and he still tells a good story– who was Buffett? how did he do it? what was his philosophy of investing? and what were the key episodes in his investing career that made him his billions? Reading this Buffett bio will not only make your eyes twinkle as you dream of your own pot of gold at the end of the rainbow, it will clue you in to the fact that there might be some rain along the way.
To analyze companies on the stock exchanges, you must be able to read the financial filings they make with securities regulators. In the US, these are called 10-K (annual) and 10-Q (quarterly) reports. And these reports are typically not glossy, photo-filled corporate feel good story books nor would you want them to be– they are filled with numbers, tables and charts and they’re primarily related via accounting conventions. To understand what these financial statements are saying, you should read your fourth book, The Accounting Game: Basic Accounting Fresh from the Lemonade Stand, by Darrell Mullis and Judith Orloff. The book walks you through the accounting for a simple business, a children’s lemonade stand. You won’t be ready to audit a company or step in for your CPA friend on the weekends, but you don’t need to, you just need to understand what the difference between the three major financial statements are, what revenue is and where profit comes from, how to tell if a company has a health financial picture or otherwise, etc. That’s enough and this simple and “childish” book can get you there.
You’ve learned how to save and how to focus on yourself rather than your social circle’s economic position. You’ve read about how the grand master became the grand master and gotten a rough idea of what investing is and isn’t. And you’ve gotten the basics of accounting down so you can actually understand what you’re looking at when you peer under the hood of a public company you’re considering putting your capital to work with. But how do you actually find, analyze and make investments?
Your fifth resource is The Essays of Warren Buffett: Lessons for Corporate America, by Laurence Cunningham. This is a handy resource for the collected writings of Buffett on a variety of topics related to investing and corporate value. You can learn about what makes a business well-managed or poorly managed and from there you will be a lot less dangerous to yourself when you actually try to invest in one of these companies.
However, there is a cheaper and even more rigorous way to drink at this trough. Try Warren Buffett’s Letters to Berkshire Shareholders (1977-present) available at no cost at the Berkshire Hathaway website. Berkshire is Buffett’s public holding company and the accumulated legacy of his investing activities since the early 1950s. In these letters he lays out his principles and explains the happenings in his business in enjoyable detail and with meaningful repetition. By the time you finish these 50+ years of letters you will have a better knowledge base of how to invest successfully than 95% of market participants, of that I am confident.
And you can build on it still further by hunting down the private partnership letters Buffett wrote prior to the Berkshire days (1950s-1976), by reading the Berkshire Hathaway “Owner’s Manual” and by reading the two special letters from Buffett and his partner, Charlie Munger.
If you read, re-read and understand all of that and then actually apply it, you have learned how to invest. Now all you have to do is do it!
While the recommendations above don’t represent the ten plus years I’ve devoted to studying this topic in totality, I do think they cover 80% of the conceptual ground. And it bears repeating, they cover 0% of the activity ground, to cover any of that you need to start investing, even if you don’t have 100% confidence and might make a few (small, at this point) mistakes.
For the other 20%, I have recommendations on intermediate and advanced level readings that I would not make to any but the extremely motivated or the deathly curious. And beyond those titles, I recommend nothing but a course of vigorous doing. No amount of reading can ever make up for the practical experience of attempting to find, analyze and invest in actual companies.
But some people who have asked me about this topic have, after having the above laid out for them, complained they do not have enough time. You can guess what my reaction is in that case– if you don’t have time to sharpen your axe, you are unlikely to fell any trees. And more likely, you will trip on the damn thing on the way to the forest and mash up your leg.
That being said, I realize the subject can seem intimidating the way I’ve laid it out. And I think that it’s important people get the best chance to prevent the commission of grievous errors in this domain as possible if they’re determined to act despite my apprehension. I have given some thought to a condensed list of super-accessible readings that even those short on time and discipline can get through on the way to the nirvana of being an investor.
The Quick Way To Learn About Investing
If you’re determined to jump right in to investing, there are two things you need to know:
I still think it’s critical to understand the importance of saving and how to do it. Without saving, there is no investing and I think a person who doesn’t understand this early on is going to suffer for it years later, especially if they are retirement-oriented.
As to the second question, it’s a personal decision determined by available time, motivation to learn and act and also expectations about returns. For people who just want to watch their savings grow faster than their bank account would permit but who otherwise don’t want to treat investing like a business or even a hobby, index investing is the way to go, all caveats aside. And if you’re going to go that route, you need to understand how to minimize your costs and (ironically) minimize your own involvement so you don’t make bad decisions about buying and selling at the worst possible time.
And if you think you want to take a more hands-on approach and really be an investor rather than just an sophisticated saver, then you need to get a quick tutorial on how an investor thinks about what he’s trying to do which you can immediately then begin applying as a framework to potential investments you find.
My quick path then has three primary readings:
TRMIB is still my top pick for learning about saving and how to do it. The Bogle book I think is all you need to understand what index investing is, how to do it safely and whether it is right for you. You could immediately begin an index investing program after reading that book if that’s what you wanted to do.
Rather than a book, for learning the basics of value investing, fast, I recommend the essay embedded in Buffett’s 2013 shareholder letter. It is his all-time best description of the value approach and what a value investor is trying to accomplish and therefore what he looks for in an investment. If you read that and don’t get what he is saying, start your index strategy. If you do, you’re off to the races and surely will be inspired to read and do more. But the argument he lays out is robust enough to allow you to do some immediate qualitative heavy lifting if you start looking at individual companies to invest in. It’ll be pretty clear to you if they company offers an opportunity, at current prices, that jumps Buffett’s hurdle.
The Third Way
In economic history, the socialists who realized their dreams of a planned communist economy could never work switched tactics and advocated a “Third Way”, the private-public regulated market economy. Of course, it turned out to be just as nefarious as the pure communist economy in its own way and the point is there was no real Third Way available. There was only the market economy or various flavors of central-planning chaos.
People reading this who don’t want to read 5 books and don’t want to read 3 books/essays but who still want to learn about investing might be wondering, “Oh, but isn’t there a Third Way?” Actually, in this case there might be.
Recently I reviewed The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market, by Toby Carlisle. This might be the best option as far as a one-stop shop for a total neophyte goes. The book assumes you know how to save and are ready to invest. From there, it offers a simple metric (the Acquirer’s Multiple) for identifying interesting investment opportunities. It explains why the metric is an indicator of value and it walks through several historical-biographical case studies of other famous investors showing how they succeeded with an opportunity indicated by this metric. The book does a great job of explaining (by both showing and telling) why value “works”, ie, the concept of mean reversion. I think these two pieces help to inspire a new investor to feel confident and motivated about looking for their own opportunities.
The book has a bias toward action. A person new to investing could read it and then immediately run a screen of low multiple stocks and begin vetting them for an investment. And it has a helpful checklist at the end of the book to improve your overall decision-making process.
If someone insisted on one book and was clearly indicating they weren’t planning to go deep and just wanted to get busy, I think they could do a lot worse than reading this book and I am not sure they could do better because I can’t think of anything else that is simple and easy to understand (written without technicality), covers the basics of value as an approach and offers a practical tool for putting the philosophy to work.
While I think it’s really dangerous to try investing without reading or understanding anything, I also know from experience it’s dangerous to overthink it and fail to act. Following the 5, 3 or 1 item approach outlined here I think gives the interested student some basis to begin acting knowledgeably and to arrange their further experience and study into a meaningful structure for organizing thought.
by Irene Van der Zande, published 2011
A friend had recommended “The Toddler Years” as a resource for continued learning and practice with regards to piloting RIE from infancy into childhood. And indeed, the book is similar in format, structure, tone and event content to works we’ve read previously and enjoyed such as Your Self-Confident Baby and Dear Parent: Caring for Infants With Respect. Much of the material and insight in the book comes via childcare practitioners at a day facility in Santa Cruz, CA and the book has a preface by Magda Gerber. This is definitely “RIE-approved”.
As I was reading this book and noticing the similarities, I asked myself, “Why do we do what we do [as parents]?” When we first learned about RIE and NVC, it was easy to get overwhelmed with all the new DOs and DONTs in terms of behavior and lose sight of the goal. The goal is not to follow some set of rules, arbitrary or otherwise, or even to be Good Parents as some kind of exercise in living an ideal, but to live our lives in relation to our children a certain way– to treat them with the kind of respect we’d hopefully treat any other adult.
As I was reading the scenario-specific counsel in this book, I realized that “what to do” in any of these situations shouldn’t be mysterious. We can get to the answer quite easily by inverting the situation and asking ourselves what we’d do if an adult acted like a child? How would we treat that adult? With condescension, disgust, frustration, anger or worse, violence? Or would we practice patience, understanding, offer our assistance and respect their needs and choices as much as we could?
That being said, these lessons about commonly occurring parenting dynamics are indeed helpful pre-practice and may result in the thought processes and related behaviors becoming more intuitive and flow-y rather than flustering or rehearsed.
Just like all of us, toddlers are happier when they have some control over their lives. This also makes it easier for them to accept what they don’t have a choice about.
The first act of a child’s life, being born, is a set of circumstances the child itself had no choice in creating. Nor is the child aware of its lack of choice, in this situation or any others, for some time after birth. Nor even is the child capable of exerting any influence over the course of its life, via choice, even if it was aware of the choices that existed.
But over time the child’s life becomes increasingly defined by choice both in terms of awareness and in terms of action. It is no wonder then that “choice” is an important theme in the development of the life of the toddler and that we as parents and caregivers can render a great service to our children by giving them choices whenever we can and being understanding with them when they react against the situations where they lack choice but might like to have one for whatever reason.
One way to offer choice is via closed questions, that is, “Would you like to have an apple for your snack, or a banana?” versus “Would you like a snack?” The reason to offer closed questions is because it encourages the child to make choices we can live with. It can be easy to get bogged down in the subtle reality of how little toddlers have to choose about their life at times– we know they NEED a diaper change but they don’t WANT one, etc. Using closed questions frames the choice around taking a positive action the caregiver believes is necessary and hopefully avoiding fighting and antagonism over choices that don’t exist.
When there is no choice, we need to be careful not to offer one by mistake.
Saying, “We’re going to Grandma’s, it’s cold outside, do you want to wear your jacket?” might elicit a “No!” and a frozen child, when what we really meant was to offer a closed question such as, “Would you like to put your jacket on yourself or would you like me to help you put it on?”
Spend a lot of time giving children names for their feelings.
As adults, we have a certain awareness of our feelings such that we can distinguish one feeling from another, the intensity of the feeling, its source and perhaps most importantly, we can label our feelings in order to communicate about them more clearly. (This is the ideal with adults, anyway… any student of NVC is aware of just how limited even many adults’ capabilities are in this regard!)
With young children it is different. Feelings might seem to come from nowhere and shock or surprise. They might seem uncontrollable. One kind of feeling of a high intensity might seem similar to that same feeling at lower intensity (ie, just “good” or “bad”, pleasant or unpleasant) and there is most of the time no sense of the character of a feeling and the name it carries. Talking about feelings with young children and repeating the names of the feelings we observe them experiencing can help a toddler start to gain mastery and awareness of their feelings.
Children need to understand their feelings. They need to know their uncomfortable feelings are just as important as their pleasant feelings. By accepting these feelings, we teach our toddlers to accept themselves and each other.
The goal of many parents and caregivers seems to be to raise a child who only experiences good feelings. Feelings of pain are warded off, “Oh you’re alright, nothing happened!” as are feelings of shame or fear, “Be a big boy, don’t cry!” Perhaps the motivation is to provide children with that ideal experience, “childhood innocence”, as long as possible and to protect them from reality which is sometimes disappointing, frightening, infuriating or just plain unfair.
But accepting some feelings and rejecting others leads to self-repression and a certain kind of schizophrenia. There is the “me” that has feelings which are acceptable to the adults and caregivers in my life, and there is the “not me” that has feelings which make them uncomfortable, which seems to pop up in my life at the most embarrassing times. Helping children to experience all their emotions as equally valid allows them to build confidence in the unity of their self.
Limits can be stated in firm but respectful words. We can do this by using what is called an “I” message. That is, instead of saying “You must do this” we can make it clear that we are speaking for ourselves:
“I want you to be gentle.”
“I need you to help me get your clothes on.”
“I don’t like it when you run away.”
We can talk about what the child is doing rather than using blaming or labeling words.
Some people find parenting with respect challenging because they equate it with a kind of “anarchy” and the giving up of their authority even in matters of safety or in enforcing their personal preferences in their own home or life. It can be hard enough to adjust to living with a messy spouse, for instance, now a diabolical two-year-old is supposed to reign over me?
This is a false dichotomy. Respect is a two-way street. And imperative to having respect and giving respect is to be clear about who is respecting what. Using the “I” technique makes it clear that limits have to do with individual needs and don’t involve arbitrariness or authority.
Children who are confident in their ability to learn through practice are more likely to grow into independent people… making things happen rather than waiting for things to happen to them.
We learn to be action-oriented in our lives or we learn to wait for a rescue that isn’t coming.
There are two models of failure and its significance that humans can internalize according to recent psychological research. One model is failure-as-feedback, in which failure indicates that an action was not performed properly to achieve the desired result with the possibility that it could be performed properly with further practice.
The other model is failure-as-wrongness, in which failure indicates that a person is not appropriate to a task at hand in some existential way and their inability to achieve success in this instance is evidence of their wrongness or lack of completeness as a functioning person.
It is imperative that children have opportunities to practice actions, to experience occasional failure, and to be encouraged to try again in order that they build confidence in themselves and in the model of failure-as-feedback. Without internalizing this principle, they are apt to experience a life of growing self-doubt and confusion on a fundamental personal level.
Toddlers live in the here and now. Yesterday is ancient history and tomorrow might as well be next year.
How wonderful that toddlers can remind us that the present is all we ever have! As adults it is so easy to live with regret, or to drift through the present ever-anticipating the future.
Of course, they may serve us these reminders in unpleasant ways with their seeming impatience, or their repetitious requests or insatiable demands for things they’ve already been given before. But it’s important either way, for our own sanity and enjoyment of life, that we remember that they only behave this way because the present urge is the only one they know at this moment in their life.
Give warnings before bedtime so the child has a chance to finish playing.
Not only do small children seem to sleep fitfully at times, but they also go to sleep fitfully. And sleep seems to creep up on them and snatch them when they aren’t expecting it. One moment they are playing with their toys and screeching with gaiety, the next they are rubbing their eyes and ears and about to topple over with sudden onset of wooziness.
Adults can help children anticipate the future, and their own need for sleep, by following bed time rituals which include buffer time and light warnings that sleep is coming and it is time to begin winding down.
The “S word” – Sharing
Toddlers do not learn to share by having grown-ups make them do it. Having to give up a toy makes a toddler feel angry, not loving.
Why do adults think sharing is so important? Is it simply mindless repetition of their own childhood experience? Is it a social or cultural imperative tied to recent historical developments? Is it a way to feel equal while ignoring that we are not?
Sharing is not in the vocabulary of small children although, curiously, property rights are! The individual child’s property right, at least. While there are many ways to respect small children by thinking of them and treating them as capable of something they have not yet mastered, sharing seems to be one of those things that does not lend them respect or enjoyment when it is expected of them.
In our home we don’t care for sharing as a principle. So avoiding the “S word” will be relatively easy for us!
If a toddler finds out that having a tantrum is a way around our limits, the child may start throwing tantrums all the time.
Another idea that is interesting about tantrums is that they belong to the child, not to the parent. It is easy for the adult to assume a tantrum is a demonstration of a critical failure in their parenting, rather than a critical failure in the emotional regulation of the child. Of course they often come at the most inopportune times as well, right before trying to leave for an errand, or out in public amongst a bunch of gawkers.
Even during a tantrum, the child is experiencing an emotion they are truly experiencing and it’s worth it for parents and other caregivers to practice patience and understanding in these moments, validating the emotion even if it is disagreeable and talking through it with the child, along with giving them space to express their emotion, to exhaustion if necessary.
The time to start toilet learning is when our toddlers show signs of being ready, like:
The book does not call it toilet “training” for a reason. This is not a rote memory behavior or even a reflex. It requires conscious effort and it has a psychological root. Being ready to use a toilet for elimination is an egotistic decision and like many other similar experiences in life we can help the child by waiting until they’re ready rather than expecting to do something they’re not yet capable of or don’t see any benefit in themselves.
Eating and weaning
Toddlers will eat when they’re hungry, but might not eat much.
Toddlers need to eat more often than we do. Their stomachs are smaller.
Toddlers like to have choices.
Meals are served outside whenever the weather permits.
One thing I thought could’ve been added in this section is the observation that sometimes toddlers will eat quite a bit! In fact, too much and too fast if you keep putting food in front of them. We are learning to offer one piece of food at a time and waiting until our Little Lion requests more (with reaching, grunting and looking for the food). Even then, we try to pace things as his belly is bound to fill up quicker than his brain gets the signal that it’s time to stop.
It helps to remember that, just as there are no perfect people, there are no perfect parents or children. There are no perfect families either, even if they look that way from the outside. It’s not our job to be perfect, but to do the best we can.
I’ll let that one settle in on its own.
It’s healthy for our children to see us having interests besides our families.
It’s also healthy for our children to see us acknowledging their needs without actually fulfilling them, instantaneously or at all. New parents often forget that it’s okay to use the bathroom, even if it means a crying child. And these kinds of over-permissive decisions can extend beyond those first few months to picking the child up whenever it beckons, interrupting a rhythm or flow in some household chore to immediately respond to the child’s request, etc. The child isn’t always going to get what they want in life and it’s okay to model that now, in toddlerhood. Just realize you may hear a bit more crying and whining as a result of your decision.
Being polite by acknowledging people socially is an adult need, not a child’s.
Teaching children to wave hello and goodbye, to high-five, to smile or “be nice” to strangers who greet them and to say please and thank you may seem cute but it is not necessary and it may even be unsafe (why undermine a child’s instinctive apprehension of strangers?)
Some people who do not understand that children are individuals and not objects can find it frustrating and demeaning to deal with an “aloof” child. Why is it so important to this person to be acknowledged by a tiny toddler who is more interested in drooling over their toys? What does their need for acknowledgement and validation-in-existence truly imply?
Guilt keeps us looking backward and feeling bad about what we should have done instead of looking forward and feeling good about what we’re going to do next.
This idea is tied to the failure-as-feedback model. If we are always learning and growing, as the toddler is, and we want to model this as normal, we would do well to focus on what we’ll do next and not to obsess about the past.
Enjoying your child
Childhood passes quickly. And it never comes back. “They won’t need me as much as they do now.”
A truly bittersweet thought. To acknowledge that the pain, discomfort and disruption of being always needed is ephemeral; but so too is the joy, confidence and excitement of being the center of a young person’s world.
Beware the barrenness of a busy life.
Routine, in an intelligent man, is a sign of ambition.
~W. H. Auden
To attain knowledge add things every day. To attain wisdom subtract things every day.
To follow, without halt, one aim: there is the secret to success.