This is a story about how I started investing.
One of the defining characteristics of investment is that it is, in essence, a mind sport.
Typical mind sports include games (Esports, poker, chess, Go, etc.). I have been playing many games since childhood and am still a gamer who enjoys various games. Whether due to effort or talent, I have been among those who are quite good at games.
This leads me to some questions:
Q. If one could choose what to do for a lifetime, what would be the best choice?
The answer I believe in is that one should choose something they have a competitive advantage in compared to others and can enjoy. Therefore, it’s natural for me to look for work in a field similar to the games I’ve been good at and enjoyed. Somehow, I realized that investing met these conditions, and that’s how I started.
Q. Isn’t trading also a mind sport like investing?
Answer is yes, I believe trading is indeed a mind sport. However, there are three main reasons why I don’t engage in trading:
- Scalability: Investing is overwhelmingly advantageous compared to trading in terms of scalability. A simple example is Berkshire Hathaway. The compnay has grown into a company worth over $1 trillion through investments (and business operations), which is unimaginable through trading. As capital scales up, growth becomes increasingly difficult in trading.
- Time Efficiency: Trading requires dedicating a lot of time to charts and order books. As a lazy person, I prefer investing as it allows me to allocate time as I wish and spend the rest on other productive or recreational things.
- Multidiscipline: Investing requires a multidisciplinary thought process. While accounting or valuation might come to mind as essential knowledge for investing, more critical are core principles and lessons drawn from fields like history, biology, psychology, chemistry, philosophy, and economics. I believe what the most important in investing is applying these insights holistically to the real world.
Charlie Munger particularly emphasizes this multidisciplinary understanding. He always argues that investors should improve their multidisciplinary understanding, but not many in the investment community make such claims.
For someone like me who has been interested in various fields since childhood, it seems natural that investing would require such multidisciplinary understanding. Surprisingly, however, this isn’t common knowledge—and I view this as my competitive edge over other investors who simply invest for the sake of investing.
Intelligence vs. Wisdom and Multidisciplinary Understanding
I’ve long believed that being intelligent and being wise are fundamentally different:
- Intelligence refers to traits like high IQ, academic excellence, prestigious education, and problem-solving skills.
- Wisdom, on the other hand, involves insight into humanity and history, intellectual honesty, patience, intellectual openness, and independent thinking.
What is required for investing is wisdom rather than mere intelligence. What happens when people blessed only with exceptional intelligence invest? The failure of Long-Term Capital Management (LTCM) provides an answer. Despite being run by some of the most intelligent minds in finance—including Nobel laureates—the fund collapsed within five years because its ‘sophisticated mathematical models’ simply couldn’t take the future events into consideration ‘sophisticatedly’. Furtuthermore, I also believe there’s a strong correlation between wisdom and multidisciplinary understanding.
I’ve always admired wise individuals but found them hard to come by—most existed only in books. Surprisingly, however, the world of investing is filled with wise individuals like Warren Buffett, Charlie Munger, Howard Marks, and Peter Lynch—investing legends who embody wisdom.Naturally, I wondered: Why are there so many wise people in investing?
This brings us back to mind sports.
The Nature of Sports
One defining characteristic of sports is that failure to produce results leads to elimination. Conversely, even unconventional methods are justified if they yield good results. For example, if someone were to win a world tennis championship using their toes instead of their hands, no one could argue against them. In other words:
- Right or wrong doesn’t exist beforehand.
- The outcome—winning or losing—justifies everything.
Fields like evolution, hard science, and investment share this characteristics:
- In Evolution – There’s no intent; traits that are advantageous for survival and reproduction persist above all else.
- In Hard Science – Ability to explain reality accruately matters most. Quantum mechanics might seem illogical but has replaced classical mechanics.
- In Investment – Long-term returns justify everything.
Over decades of filtering based on returns (a metric akin to survival in evolution), those who remain tend to be wise individuals. This raises important questions about the relationship between returns and wisdom:
- Does achieving high long-term returns make someone wise?
- Or can only wise individuals achieve high long-term returns?
While I can’t experimentally verify these hypotheses myself, I believe the second proposition is true: Wisdom is a necessary condition for long-term success in investing.
Investing as a Sport for Wisdom
In essence:
- In the sport of investment, wisdom is a prerequisite for success (or survival).
- From my perspective as someone who values wisdom above all else, there’s no better sport than investing.
I aim to become wiser one year or ten years from now—and believe that returns will naturally follow as a byproduct. My goal isn’t returns themselves but becoming wiser and understanding the world better.
That said:
- Returns matter because they serve as a direct or indirect measure of whether one’s judgments were wise.
This encapsulates my view on the path of investing. I find it challenging yet deeply rewarding—which is why I chose to start investing.
Notes
- Many gurus are indeed known for their love of games and often draw parallels between gaming and investing. (Memo from Howard Marks ‘You Bet!’ – https://www.oaktreecapital.com/docs/default-source/memos/you-bet.pdf)
- While wisdom is critical for investment success, I don’t think it’s necessary and sufficient condition. Other knowledge (e.g., accounting or valuation) is essential too—and luck plays a significant role as well. However, compared to these factors which are either relatively easily acquired (accounting, valuation) or uncontrollable (macro environment, luck), wisdom stands out as the most significant differentiator among investors.