There was a wonderful article in The New Yorker recently (February 2, 2014) titled, “The Pursuit of Beauty.” It is about a Chinese mathematician at the University of New Hampshire who received a MacArthur Award for solving a problem in pure mathematics that has baffled theorists for 150 years. Pure math is done with no practical purpose in mind but solving a problem like this is still a major accomplishment.
The interesting part of the article for me is how Mr. Zhang arrived at the solution. He didn’t toil away at a desk, pencil in hand and computer at the ready but instead almost day dreamed his way to the answer. As Zhang says “It often seems to me, especially when I am alone, that I find myself in the world. Ideas of numbers seem to live. Suddenly, questions of any kind rise before my eyes with their answers.”
Barton Biggs the former Market Strategist at Morgan Stanley and a wonderful writer liked to say that to do great thinking you have to have “time heavy on your hands.” By this he meant you can’t be multi-tasking, you can’t be emailing while listening to conference calls. You have to have your mind at ease, your thoughts often wandering. But this is not how the investment business works. Professional investors arrive early at work, stay late and plow through mountainous stacks of reports. Not much chance to have time heavy on your hands.
But great thinking often requires this. A French philosopher once said that great discoverers, “see what everyone else sees but think what no one else has thought.” Warren Buffett likens investing to a baseball game with no strikes or balls. The pitcher pitches and it doesn’t matter whether it is a good pitch or a bad pitch. You simply wait for the one you really want. But this is difficult. With the waterfall of information we face every day, there is pressure to have ‘an idea-an-hour’ so to speak. But Buffett argues you may only see 5-10 perfect pitches in a career. Expecting to come up with great ideas on a regular schedule is unrealistic. It is very difficult for most of us to adjust to this pace, to wait for the opportunities to come to us. We want to work hard and discover the great things. We don’t want to have to learn to go sit quietly in our rooms. But this is what successful investing requires.
Benjamin Graham, the father of security analysis and a teacher of Buffett observed that it is the individual not the institutional money manager who has the advantage in the market arena. How is this? Institutional investors are chained to short term performance and to that open faucet of market information that they are asked to make sense of every day, regardless of whether there is any logical explanation. Underperform the averages or your competitors for very long and your career is at risk. An individual can truly exercise sound judgment, and have the courage and the patience to be successful in investing. Sound judgment is required to buy securities trading below their intrinsic value. Courage is often required to go against the herd in order to stick with your best judgment. And patience gives your investments the time to work out.
I was struck by a quote in a book review in a recent Christian Science Monitor (January 26, 2014). Alexandra Fuller’s, “Leaving Before the Rains Come,” is a personal history of growing up in Africa and then moving to America. Fuller says, “In Africa, we filled all available time busily doing not much and then we wasted the rest.” But in America, urgency rules and time must not be wasted. “Of course I changed and sped up.” Speed is important in many things but to do your best thinking remember, you often need to have time “heavy on your hands.”