Writing as an Investing Advantage
One thing I have regrettably gotten away from over the last few years is writing and musing on market developments and investment theories or strategies. It is something I want to get back to on a more regular basis. I think one of the reasons I gravitated toward investing at a young age is because I really enjoyed creative writing (nerd!) and investing was one of the few areas where you could integrate writing into a part of the job itself. In fairness, it didn’t necessarily stop me from trying to force writing into my jobs. I think it was in one of my first ‘real jobs’ where I decided to create a daily or weekly internal company letter called ‘Corn in The Morn’ (don’t ask). Given that this piece of investing is something that I gravitated toward, I wanted to highlight why writing can be such an advantage for an investor.
While all of the below points are important considerations for why writing can be an advantage for an investor, we also do not think it is a coincidence that the investors that most would put on their ‘Mount Rushmore’ are more than likely also prolific writers in some form or fashion. So why does writing and investing seem to be so intertwined?
Forces you to Pause and Think
Every day, week, or month there are multitudes of data points flying toward investors whether it be macro data, geopolitical events, earnings season, company specific news or even just stock movements. The 80/20 rule likely rings true here where 80% of the ‘data’ turns out to be more noise versus any actionable signal. Regardless, that 80% still creates a lot of noise that an investor needs to sift through and digest. Writing gives an investor that opportunity to sit down, gather their thoughts, and distill what the important things are to focus on. Maybe the process even leads you to realize there is nothing worth writing about at the time and that is helpful as well! Stepping back, zooming out, and thinking about what is actually worth writing about (if anything at all) can be a huge advantage in a world full of distractions.
Turns Half Baked Ideas into Fully Baked Ones
Often you might see a broad trend or theme and have an idea of where it is going to end up but might not yet have worked out exactly how it ‘gets there’. Writing is a tool that can help develop these ideas or theses. Writing forces you to think about the conclusion you are seeing and check that the assumptions actually make sense and that the path to get there is even feasible in the first place. Writing helps ensure the thesis is fully formed and rational and any holes quickly rise to the surface as the thesis is explained on paper. Being able to explain an idea in a succinct and concise manner is also a good hint that you likely have a solid grasp of the topic at hand. It might not make you appear as an investment genius from a marketing perspective, but we think Da Vinci’s quote that ‘simplicity is the ultimate sophistication’ rings true with investing and being able to develop a thesis into a fully baked, concise thesis helps further develop ones’ grasp of the topic at hand.
Where writing helps to develop a thesis it can also be helpful in telling us that it might not be quite the idea we thought. If the thesis does not come across in a compelling way, why do we think other potential investors will even care about it? It might be a great company or theme but often for right or wrong, others also need to care about it for it to work out. Struggles in the writing phase might also translate to struggles in the thesis ever playing out or getting any attention from broader markets. Similarly, if one is finding they must write a 20-page dissertation to prove a point, that might also be a good hint that we are missing the forest for the trees.
Improves Conviction
This leans a bit on the prior point of fully baking a thesis but it can be difficult to gain conviction without writing about the idea. It also creates something an investor can check back on when that conviction is being tested as a reminder for why you made that investment in the first place. Additionally, checking back on prior writing might even highlight where a thesis has changed over time from the initial investment decision. Spending a bit more time on the name and letting the idea percolate can help conviction through good and bad times. This, however, can be taken too far. You also don’t want to anchor yourself so heavily to a certain idea or thesis that it becomes too difficult to change your mind as things change or simply admit you were wrong on an idea.
Leads to Idea Generation in Other Areas
This is probably the most powerful benefit of writing but also the most nebulous. It is hard to explain but writing, particularly creatively, seems to unlock new thoughts and ideas and creates connections that simply do not happen in the day-to-day grind of work or life. If your writing process is related to trying to spit-out your monthly deliverable in the form of some report to management, you aren’t going to get this benefit. There needs to be a bit of a natural evolution here where ideas percolate, paragraphs are written then erased and re-written then totally thrown out for a new idea that emerges. There have been so many times where a creative flow of writing has led us to totally new themes or even led us to new ideas that interact with a company in question. Maybe it is the software provider of a supplier of a competitor of the company you are researching that leads to one of your best new ideas or just a totally fresh trend you stumble upon that a company is working on but is not even generating revenue on at the time. The point is that some time and creativity is required for these new connections to be made and even if you are sitting in a dark room just ‘thinking’ about these kinds of things, the connections don’t arise in the same way without writing something down. Being able to pull on multiple threads and having the freedom to chase down potentially unproductive rabbit holes can lead to some of the best ideas that are barely a glimmer in the eyes of the market.
Necessary Tool to Communicate Your Thesis to Others
Being able to write and communicate effectively is key in many areas of life and investing is no different. In a lot of cases, we think markets will eventually find good ideas on its own but often times, someone, somewhere needs to tell a bit of a story or paint a picture as to why a certain company, sector, or theme offers an interesting opportunity. There often needs to be a story that has legs and that can grab attention over a long period of time. The recent trends in AI are a great example of this regardless of your views of where AI goes. If there isn’t a ‘story to tell’, why do you think markets or investors will ever pay attention? Writing is an advantage that can help an investor get their ideas across, even if no one is listening and also helps you understand if there is an interesting story there in the first place. If you can’t write a story about an investment opportunity, will anyone else be able to? Will anyone ever care about the investment?
We enjoy writing and are going to try to be more consistent with writing and analysis. But please also do not set your timers to any expected cadence (don’t worry I don’t expect you too). It is more likely that things will come in fits and starts but if we believe that writing is truly an advantage in investing (and we do), then we should also do our best to consistently walk the walk and make the time for more of the creative side of investing.
