Are you a curious person? Do you always ask questions, determinedly seek out new information or continually want to know why? If there is one thing the Investment Masters seem to agree on, it's that you don't need a sky-high IQ or advanced mathematical skills to be a successful investor. What you do need is curiosity. And curiosity is an unbelievably powerful tool. Some of the most famous thinkers and innovators in human history (think DaVinci, Marie Curie, Thomas Edison and Einstein, to name but a few) have had one simple thing in common - curiousity. Einstein himself attributes curiosity to his success: 'I have no special talent. I am only passionately curious."
Curiosity can be described as the drive that brings learners to knowledge. Curiosity is about being aware and open, checking things out, experimenting, and interacting within one's surroundings. Other physical manifestations include observing, reading, wondering, thinking and questioning.
Fostering curiosity can often provide an edge the market has overlooked. It can lead to new ideas and provide insights for further analysis. We know the Investment Masters are all voracious readers. What you may not know is they read widely; newspapers, annual reports, trade magazines, history books, business books, biographies; basically anything they can get their hands to accumulate large, mental databases of information.
"My policy [is] reading every annual report in sight that can further my knowledge about anything." Warren Buffett
"Be widely read and curious.” Ed Thorp
“Being a successful investor you need to be hungry, intellectually curious, interested, read all the time.” Ted Weschler
“[Investing] requires endless curiosity, the relentless pursuit of additional information, the raising of questions, and the search for answers.” Seth Klarman
"Curiosity is the engine of civilization. If I were to elaborate it would be to say read, read, read, and don't forget to talk to people, really talk, listening with attention and having conversations, on whatever topic, that are an exchange of thoughts. Keep the reading broad, beyond just the professional. This helps to develop one's sense of perspective in all matters." Peter Cundill
“My whole life I’ve been a reader. I’m curious; I want to know how things work. Even more importantly I want to know what is going to happen. And what’s going to happen is often related to what has happened. I read history, I read psychology, I read finance and business. I read a lot of biographies. I’m drawn to anything that makes me a better person, makes me a better investor and makes me a better philanthropist or just makes me more knowledgeable about the world.” Seth Klarman
“I learn and I’m curious about all businesses. That’s why when opportunities come, within a few seconds you can smell it. How can you develop that smell? The only way to really do that is just reading page after page.” Li Lu
“Curiosity, hard work and more than a little luck goes a long way” Chuck Akre
Often they'll stumble on a snippet of information that provides inspiration for further analysis.
“Who knows when some little fact stored in the back of your mind pops up and really does make a difference.” Warren Buffett
When Buffett reads annual reports he's seeking as much information as he can about the person running the business and how they think about what's really going on in the business. At the 1996 Berkshire meeting Buffett expanded on the idea:
"What I’m trying to do as I read [annual reports], I like to understand just generally what’s going on in all kinds of businesses. If we own stock in a company and in an industry, and there are eight other companies that are in the same industry, I want to own or be on the mailing list for the reports for the other eight, because I can’t understand how my company is doing unless I understand what the other eight are doing. I want to have the perspective of, in terms of market share, what’s going on in the business or their margins or the trend of margins, all kinds of things. If I’m thinking about investing in a specific company, I try to size up their business and the people that are running it. And over the years, I have found reading a lot of reports to be quite useful in terms of making business decisions at Berkshire."
"The way you learn about businesses is by absorbing information about them, thinking, deciding what counts and what doesn’t count, relating one thing to another. And, you know, that’s the job. And you can’t get that by looking at a bunch of little numbers on a chart bobbing up and down about a — or reading, you know, market commentary and periodicals or anything of the sort. That just won’t do it. You’ve got to understand the businesses. That’s where it all begins and ends." Warren Buffett
Buffett is curious; he's a learning machine. Alice Schroeder, Buffett's biographer, explains;
"[Warren] expends a lot of energy checking out details and ferreting out nuggets of information, way beyond the balance sheet. He would go back and look at the company's history in depth for decades. He used to pay people to attend shareholder meetings and ask questions for him. He checked out the personal lives of people who ran companies he invested in. He wanted to know about their financial status, their personal habits, what motivated them. He behaves like an investigative journalist. All this stuff about flipping through Moody's Manual's picking stocks, it was a screen for him, but he didn't stop there." Alice Schroeder
It's unlikely you'll find the information you need without asking questions. I'm often amazed when I attend company briefings and investment managers don't ask any questions. I always try to come from the angle that there are no stupid questions.
“There are no foolish questions and no man becomes a fool until he has stopped asking questions.” Charles Proteus Steinmetz
“Always ask questions and never be afraid to do so. The only dumb question is the one you do not ask.” Jim Rogers
"[It's important] not to be afraid to be ignorant and ask questions" Jim Leitner
Most companies presentations focus on what they think investors want to hear, the positives. Only by asking questions can you address areas of likely concern. Directed questions can facilitate learning and understanding and give you the confidence to do the right thing in times of uncertainty. Be attentive and ask questions.
"You have to be very careful to look hard at what’s really happening. You know, as Yogi said, 'You can observe a lot just by looking.'” Warren Buffett
"If you want to get smart, the question you’ve got to keep asking is: Why? Why? Why? Why?" Charlie Munger
"You just keep asking questions." Warren Buffett
If you find a business with characteristics that defy expectations, it is vitally important to determine how they have been achieved. And the answer to that question starts with a question.
“Well, I love [the] example of State Farm. I mean, the idea of picking some extreme example and asking my favorite question, which is 'what in hell is going on here?'; that is the way to wisdom in this world.” Charlie Munger
It's little wonder a hallmark of the Investment Masters is curiosity.
"We made some of our luck by being curious and seeking wisdom, and we certainly recommend that to anybody else." Charlie Munger
"You have to have a real curiosity about it. I mean, you — I don’t think you can do it because your mother’s telling you to do it, or something of the sort. I think you — it really has to turn you on." Warren Buffett
“A broad curiosity blended with some contrarianism and a sense of what makes you money is the right combination of traits.” Seth Klarman
"People who are curious are going to be better investors and better stewards of others’ money. If there’s no curiosity, you’re basically doing something that’s already been done by someone else." Henry Kravis
“I’m curious; I want to know how things work. Even more importantly I want to know what is going to happen.” Seth Klarman
"If you have a passionate interest in knowing why things are happening, you always are trying to figure out the world in terms of why is this happening or why is this not happening, that cast of mind, kept over long periods, gradually improves your ability to cope with reality. And if you don’t have that cast of mind, I think you’re destined, probably, for failure, even if you’ve got a pretty high IQ." Charlie Munger
“Good ideas generally come from individual curiosity.” Michael McConnell
“I generally find the best investors are very open and have almost a child-like curiosity about how everything works. They don’t come to the table with preconceived notions.” Oliver Kratz
"You have to keep at it with a lot of curiosity for a long, long time." Charlie Munger
“You have to be naturally interested in interested and curious about everything – any kind of businesses, politics, science, technology, humanities, history, poetry, literature, everything really effects your business. It will help you. And then occasionally you will find a few insights out of those studies that will give you tremendous opportunities that other people couldn’t think of.” Li Lu
"We like people who are intellectually curious. I don't see how you can wise up over time if you aren't working at it." Charlie Munger
Even better, the results from asking questions, digging deeper, being attentive, observing anomalies and testing ideas are unlikely to be competed away by computer systems. It is the qualitative factors rather than quantitative factors that often explain extraordinary company results.
“There are a lot of things that involve thinking that artificial intelligence isn’t going to find.” Ed Thorp
"Curiosity is an inherent kind of arbitrage that no amount of computer technology can overcome." Alice Schroeder
“Computers will never, in my opinion, replace the judgement and intellect, and the ability to connect the dots, that people do.” Ken Griffin
In his latest letter, Oaktree's Howard Marks surmised a similar train of thought...
"Computers can do an unmatched job dealing with the things that can be counted: things that are quantitative and objective. But many other things – qualitative, subjective things – count for a great deal, and I doubt computers can do what the very best investors do:
Can they sit down with a CEO and figure out whether he’s the next Steve Jobs?
Can they listen to a bunch of venture capital pitches and know which is the next Amazon?
Can they look at several new buildings and tell which one will attract the most tenants?
Can they predict the outcome of a bankruptcy reorganization where the parties may have motivations other than economic maximization?
The greatest investors aren’t necessarily better than others at arithmetic, accounting or finance; their main advantage is that they see merit in qualitative attributes and/or in the long run that average investors miss. And if computers miss them too, I doubt the best few percent of investors will be retired anytime soon." Howard Marks
It's little wonder Ray Dalio places curiosity at the top of the list of priorities he looks for when hiring someone to work at Bridgewater.
"[I look for the] five Cs—character, curiosity, creativity, common-sense, and consideration." Ray Dalio
Curiosity is a vital tool for investors. In fact it may be the most vital. We need information to make our investment decisions, and Munger's view that you have to keep asking 'why?' is one of the simplest ways to get there. I once read that the CEO of Toyota had a belief that to get to the heart or root of any problem, you had to ask 'why?' seven times. And that makes sense. If we are curious, and really want to know something, we should never stop seeking information and we should never stop asking that most simplest of questions. Just think what would have happened had Thomas Edison not been curious. Or Isaac Netwon, or Henry Ford. Or Marie Curie or DaVinci for that matter. Would we possess their incredible inventions or innovations today?
So never stop being curious. "Why?" I hear you say. Because quite simply it makes all the difference in the world.
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