“What should I read?” That is a question we often get from our readers, colleagues, family and friends as they seek to hone their investing knowledge and skills. My default answer has always been, “people you don’t agree with.” After all, confirmation bias underlies many investing errors (and a whole lot of non-investing mistakes, for that matter), and the only way to fight it is to confront it head on. Read competing arguments, weigh the evidence and be open to being convinced. We are all human, and no human is right all the time. Reading a well-reasoned piece from your ideological opposite can help you spot the logical fallacies in your own thinking, expand your horizons and make you better. But this week, poring over the many tributes to the legendary P.J. O’Rourke, I realized there is another, perhaps even better answer: Read the humorists. They will teach you much more about observation, critical thinking and defying conventional wisdom—almost always the key to investing successfully—than the economists, sociologists and political pundits that dominate today’s landscape.
By “humorist,” I don’t mean comedian, although the two can overlap at times. A comedian’s job is to tell jokes and make you laugh. A humorist, by contrast, uses wit and satire to comment on life, society, current events and the human condition. They spot the funny, incongruous and absurd in the everyday and build stories around it. They write without taking an emotional stake in either side of an argument—rather, they are detached, on the sidelines and not beholden to any audience. They are Joan Didion plus directness and irony. The best ones think freely and deeply, sport a devil-may-care attitude and write with a razorblade rather than a pen. They take no prisoners and relish standing out from the crowd. They don’t cower at criticism but rather use it as fuel. If everyone agrees with them, after all, they probably aren’t doing their job correctly.
No, you won’t learn basic investing concepts from The Portable Dorothy Parker. Nor will H.L. Mencken’s Chrestomathy teach you to spot bear markets early on. P.G. Wodehouse offers no lessons in security analysis, and Robert Benchley won’t help you understand when and why growth stocks beat value. But in their writing, these and other great writers demonstrate the qualities that most successful investors share: an eagerness to challenge conventional wisdom. The wisdom to see that if Group A says one thing and Group B says the opposite, then the truth probably lies in some underconsidered third option. The ability to spot seemingly mundane, overlooked things of great significance. The clarity to identify potential downstream consequences—O’Rourke’s essays are a masterclass in that.
Several years back, I got to write a book with Ken Fisher called Beat the Crowd. It was all about how to be a contrarian investor—how to take advantage of the knowledge that markets usually price all widely held expectations, then do something different. The main lesson we sought to instill: It isn’t that stocks do the polar opposite of what the crowd expects, but rather that if the crowd is focused on X or its opposite (C), then stocks have probably already priced it in and are focusing on G or P (not Y—markets don’t follow rules). So the key to getting ahead is to figure out what stocks haven’t yet priced and assess whether those somethings are likely to be positive or negative for corporate profitability over the next 3 – 30 months. Sometimes that means spotting the flaws in conventional thinking. Other times that means looking where the crowd isn’t.
The humorists have these qualities in spades. You read them not to learn what to think but for an object lesson in how to think. How to spot the absurdities in life and mainstream logic. How to ferret out contradictions in conventional wisdom. How to see and find the significance in the small things most overlook. How to take in the landscape with a gimlet eye. The more you read their work and internalize their approach, the more you can then turn and use those same tactics when assessing the popular takes on economic data, market trends and forecasts.
One of the biggest mistakes people make when approaching investing, in my view, is presuming quantitative analysis is the be all, end all. Don’t get me wrong, evaluating data is important. But qualitative analysis is as important, if not more so. Because if you can’t deconstruct and evaluate others’ arguments, how can you determine whether and where the crowd is wrong in its thinking? How can you find the hole in their logic that you can then exploit to make better investment decisions? How can you identify the potential second- and third-order consequences of new laws and regulations?
Humorists are responsible for some of the best qualitative analysis ever printed. Read them all, don’t take offense, open your mind and learn the tricks of their trade. In my view, you will be a better investor for it—and, just maybe, entertained in the process.
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