In the world of investing, knowledge is power. Observing seasoned investors share their insights through platforms like Zoom often leaves many curious about their personal libraries. What literary works have shaped their investment philosophies? By delving into the books they cherish, aspiring investors can glean valuable insights that may enhance their own investing practices.
Recently, a number of distinguished investors were asked a straightforward question: What books do you believe are indispensable for those aiming to refine their investment acumen? Their suggestions were diverse and insightful, offering practical wisdom for both novice and experienced investors.
The importance of numerical literacy
David Abrams, founder of Abrams Capital, emphasizes the significance of numerical literacy in investing. He recommends Innumeracy by John Allen Paulos, a concise book that explores how many individuals struggle with understanding numbers. Abrams asserts that a solid grasp of numerical concepts is the first step toward successful investing. “You don’t need to be a mathematical genius,” he notes, “but having a fundamental understanding of math is essential.” With this foundation, navigating complex financial information becomes significantly easier.
Additionally, Abrams suggests Black Box Thinking by Matthew Syed, which draws an analogy from the airline industry. This book highlights how airlines analyze mistakes through their black boxes, a practice that often contrasts with industries like healthcare, which may overlook failures. For those seeking self-improvement, embracing and learning from failures is crucial.
Insights into human behavior and market dynamics
William Bernstein, co-founder of Efficient Frontier Advisors, recommends two enlightening books. The first, The Secret of Our Success by Joe Henrich, delves into the intricacies of human behavior, examining how our brains function and how societies operate. His second choice, Expert Political Judgment by Philip Tetlock, analyzes the traits that distinguish proficient forecasters from their less successful counterparts. Bernstein notes, “The takeaway is that there are very few accurate forecasters.”
Warren Buffett’s letters to the shareholders of Berkshire Hathaway, recommended by both Abrams and Tobias Carlisle, are another invaluable resource. Carlisle likens reading these letters to receiving an MBA education for free. He humorously critiques the conventional wisdom taught in business schools, sharing how Buffett’s insights profoundly influenced him at a young age.
Ric Dillon, founder of Vela Investment Management, also endorses a curated version of Buffett’s letters, The Essays of Warren Buffett: Lessons for Corporate America, compiled by Lawrence Cunningham. Dillon describes this book as “priceless,” highlighting its coherent framework for investing and corporate governance.
Adapting to market changes
Bernard Horn, founder of Polaris Capital Management, recommends Adaptive Markets by Andrew Lo, which likens investing to sailing in ever-changing winds. Horn emphasizes that “the investment landscape is continually evolving, and keeping up with advancements is vital.” He warns that without ongoing education, investors risk being outpaced by others in the field.
Barry Ritholtz, founder of Ritholtz Wealth Management, suggests starting with Thinking, Fast and Slow by Daniel Kahneman. This book highlights how our cognitive biases can impede sound investment decisions. Ritholtz explains that understanding these mental traps is crucial for any investor. He also recommends Winning the Loser’s Game by Charlie Ellis, which compares investing to tennis. Ellis emphasizes that most amateur players lose not by scoring points but by making unforced errors. This analogy serves as a reminder that focusing on consistency and avoiding mistakes is key to success in both tennis and investing.
Tom Sosnoff, founder of thinkorswim and tastytrade, mentions When Genius Failed by Roger Lowenstein, which chronicles the rise and fall of Long-Term Capital Management. He also points to Where Are the Customers’ Yachts? by Fred Schwed, a humorous title that critiques the disparity between Wall Street professionals and their clients. The book serves as a stark reminder that intelligence and prestige do not guarantee success in investing.
Recently, a number of distinguished investors were asked a straightforward question: What books do you believe are indispensable for those aiming to refine their investment acumen? Their suggestions were diverse and insightful, offering practical wisdom for both novice and experienced investors.0