General ThoughtsInvestment PhilosophyThink DifferentlyWarren Buffett

Walking, Thinking, and Investing

I just came across an article I just read that I thought was interesting, and thought certain readers might enjoy. Although the article has nothing directly to do with investing, I think there are some takeaways for those of us in the investment world. Certainly the article has relevance to anyone whose chosen endeavor requires the occasional deep thinking.

The article is called “Why Walking Helps Us Think”. The article—as you probably guessed from the self-explanatory title—describes the benefit of going for a walk. I’m not sure about all of the studies that it references, but I can say for sure that it is an activity that I believe helps my investment process.

Walking and Productive Thinking

I enjoyed reading the article because I walk just about every day, sometimes for a couple hours at a time. This activity is something that I’ve begun doing more in recent years. My personal exercise routine has evolved since my days as a competitive runner. I still run occasionally, but I find it’s more enjoyable, and—at a more relevant level to this discussion—easier to get what I would call “quality thinking” accomplished. So I do occasionally exercise vigorously, but I think of walking more as an investing activity than I do an exercise activity.

After hours of reading annual reports, making calculations, and spending time thinking in my office, I sometimes find that walking helps me crystallize the work and the thinking that I put in earlier.

Basically, I’ve always felt that investing is a discipline that is most successfully implemented in a quiet environment that promotes thoughts, ruminations, and observations much more than it promotes hustle and activity. I’m a big fan of hard work, and a big fan of those that hustle. But investment is a field where one must diligently work, think, and act, and must resolve oneself that results come later—often years after—that groundwork has been laid.

Buffett, Munger, and Archimedes

Investment results—the fruits of one’s labor—cannot always be pinpointed to a specific episode of work. In other words, a successful investment cannot be credited to one specific activity that you completed earlier. I think it’s much easier for most people to say: “If I do X, then I’ll get Y as a result”. To succeed as an investor takes lots of hard work, yes… but it also takes equal parts patience, discipline, and more specifically, the willingness to work hard now with the expectation that eventually you’ll reap a reward down the road—sometimes years down the road.

Buffett and Munger talk about this frequently. Buffett read the annual report for IBM for 50 years until one day while sitting (and thinking) in his office, he gained an insight on IBM that he hadn’t had previously—and this insight subsequently led to an $11 billion investment by Berkshire in IBM stock. Buffett also said that he came up with the idea to invest in Bank of America using the preferred stock and warrants while sitting in his bathtub.

(Interesting side note: Archimedes didn’t figure out which Greek banks were undervalued while in the tub, but it was the bathtub where he first realized that the volume of his body that was submerged underwater while getting into the bathtub displaced exactly the same volume of water.)

Back to Buffett… Again, Buffett read annual reports for Bank of America and its predecessors for 50 years before finally being able to reap what he sowed all those decades. The work has to get done without a tangible handle on where the reward eventually comes from. And the foundation of that work is often solidified by spending significant amounts of time thinking.

Although I’m not sure if Buffett, Munger, or Archimedes ever spent significant time walking, I think they spent significant time just sitting quietly and thinking—either in the bathtub or elsewhere.

The Importance of Quiet Thinking

Thinking in a quiet atmosphere is virtually unheard of in this day and age. The problem that we have as investors is that this type of behavior is not the typical behavior that’s required for success in virtually every other field. In most fields, urgency, hustle, and activity is often rewarded—and usually rewarded very quickly. Not so in investing. Hard work is absolutely necessary, make no mistake. But you have to be willing to work hard and also accept that the specific result of that work will come at an unknown time and in an unexpected form. That can be too difficult for most people to handle, and I suspect it’s why so many perform poorly in an activity that at its core, is quite simple.

As I’ve said before, I think there are numerous advantages for individuals and smaller investment managers to do very well—much better than the average—if they capitalize on the structural advantages that they have over the larger funds and the majority of the other stock market participants.

Of course, there are the principles of value investing that matter most. And there are certain other requirements such as hard work, skill, and to a much lesser extent, a certain intelligence level—but I think that just as important as hard work (and more important than intelligence) is the ability to do two things: 1) maintain a long term time horizon along with maintaining the discipline and patience required for long term success, and 2) have the ability to slow things down… to spend time thinking.

Have a great weekend. Hopefully you can find time for a walk.

8 thoughts on “Walking, Thinking, and Investing

  1. Great article, as always. Creating the right environment to work is something that eludes me. How do you structure your work space? How do you regulate your access to the internet (stock quotes, financial news, twitter etc.). I know that in theory that a business like investment doesn’t need constant checking but I always get sucked back to my screen staring at stock quotes, checking twitter or my e-mail. It is like an addiction which I know is detrimental to my productivity and investment results. As Buffett says the intellect is the smaller part of success, the more important part is emotional discipline. Ok, since I realized I wasn’t born with this discipline I starting reading the stoics and books on how to create positive habits. I found out that reading and understanding doesn’t necessarily lead to a sustained change in behaviour (kind of like an overweight person who knows exactly what needs to be done to lose weight but doesn’t do it anyway). Guy Spiers seems to have had similar challenges and one of his solutions was a change in environment. Therefore my question to you. How do you deal with that or are you one of those lucky people born with discipline and the right personality to be a good investor?

    1. Thanks for the comment Bob. Good question…. I work with a laptop on my desk, and I have a second monitor for when I’m doing research (two screens sometimes helps me put various financials on one screen while reading something on the other screen). However, I spend a lot of time away from the screens. I order hard copies of most of my annual reports, so I can read them wherever I’m at, and then I can also make notes in the reports, file them away for later review, etc… plus, I just enjoy reading paper reports more than scrolling on a screen. The computer is helpful for me when I want to take notes and “clip” things from reports to drop into word docs, etc… but I spend an equal amount of time away from it.

      As for time management, I always designate a specific time to check email, blogs, news, etc… so I stay very focused on whatever specific task I’m currently working on. I don’t check emails outside of a few specific designated times, and that helps me from getting distracted. As for stock quotes, I check a watchlist of mine once a day, just to see if any stocks have dropped, but I rarely check quotes on things I own. I usually see the quotes in the morning paper, along with a quick glance at the new low list, and a quick glance at my watchlist of businesses I’d like to buy at a certain price, but other than that, I’m never checking quotes. 2 minutes a day is really plenty of time to review the prices that Mr. Market is offering you on various businesses. More than that is probably time wasted.

      Technology is great, but yes, it definitely can create distractions. So I think if you’re prone to getting distracted by emails, news, quotes, etc… the best thing to do is close those windows and focus only one one task at a time, or just close the computer altogether and read hard copies of reports. I think I’ve read of one guy who actually prints out things he wants to read each day, and then stacks the articles on his desk and reads them. I don’t go that far, but I definitely close the computer a lot of the time.

      Hope that helps… thanks for reading.

  2. I think Charlie Munger said it best, if you just keep thinking and reading then you don’t have to work. The hardest part of investing is not doing anything. Good stuff as usual, thanks for the post!

  3. Nice post as always! I agree although I work in science. My work style in general is just to think about things a lot, stay healthy, exercise, etc, until I find some deep insight, and then figure out how to what to do with it.

    I view the world as consisting of far too much ant-like behavior of working with much exertion. I’m either too lazy or philosophic to do that. I prefer the alternative approach of discovering elegance. Like a bird that carefully exploits thermals to glide without apparent effort. Similarly, I’m inspired by the elegance of the theories developed by some of the best physicists like Maxwell and Einstein. Now arguably these physicists worked hard, but I don’t think of such behavior as work per se. I see it as understanding beauty, or finding simplicity in what appears complex.

    In high school, I once took a trigonometry class that lasted a semester. I then proved everything of importance from the course using Euler’s formula, on one page, in a few hours. Euler’s formula is a beautiful equation (called “the most remarkable formula in mathematics” by Richard Feynman). Mine was not an interesting accomplishment mathematically — any good high school student would be able to do the same. But it shows that people want to make everything overly complicated, hard to understand, and full of “labor.” So I actually found what I had done to be remarkable philosophically — I realized I wanted to make my understanding simple and beautiful. Even if that approach earns little social credit, and indeed in academia reviewers sometimes scoff at my techniques as being “too simple.”

    Investing is my hobby so I usually only spend about 1 day a week looking for investments. It seems more than enough. Probably if I were to switch to investing as a career I’d spend the other 4 working days reading economics, biographies of famous businesspeople, walking around malls, trying to get access to the books of any local businesses, looking for obscure arbitrage opportunities in the physical world, or creating betting markets using my computer science know-how.

    I tend to view any person who speaks with complexity as not understanding what they are talking about. Even if they have a Nobel Prize. The human mind can only understand very simple models. Many simple statements in pure mathematics took tens or hundreds of years to prove, and then many more years to simplify the proofs to get at the real insights. I think that should really give pause to any one who is expressing belief in complex information, especially when that information is partly subjective.

    If one permits such complexity, then how many fundamental errors have crept in to one’s reasoning?

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