Michael Hanson

Book Review: Supermoney: The Investing Classic You Need to Read

By, 08/30/2017
Ratings1114.243243

Supermoney  – by Adam Smith

I must admit to you with a degree of regret, shame and general embarrassment: Up to a couple weeks ago, I'd never read Adam Smith.

It’s true! But not in the way you're thinking. Through much of the back half of the 20th century, a fellow writing under the nom de plume Adam Smith (real name: George J.W. Goodman) was a popular author on all things money. Alongside The Money Game and Paper Money, Supermoney completes an all-time classic trio.

There is an erudition here—a kind of earnest satire no financial author today really conjures save maybe Jason Zweig. Today’s popular economics writers are such bad artists—so hyper-focused on data and high-mindedness they lose the human touch. Supermoney is a real book of creative non-fiction: of penetrating insights about money—everything from Wall Street brokers’ salesy and often caustic approach to life to the psychological torture average Joes put themselves through watching their portfolios rise and fall, stressing over the noise and losing the big picture. It’s light, entertaining and educating. Books rarely do that any longer. I’d go as far as to say humor writing enthusiasts ought to have these in their library regardless: They’re master courses in pacing, rhythm and observational comedy.

If I changed a few antiquated references and told you Supermoney was written five years ago, you’d believe it. The struggles of yesteryear are the same as today. Problems this industry can’t shake: like the perverse incentives brokers have in collecting commissions, average folks’ worrying too much about how a single “dog” in their portfolio is doing instead of spending energy on how their portfolios perform as a whole—it’s all there and fresh as ever. It will shock many, but the economics and investing communities have been talking about trade deficits, the dollar’s rise and decline, wealth inequality, technology destroying jobs and all the other issues that seem so “new” today for decades.

But the real magic of Supermoney is its theme: It’s about knowing yourself as a clear path to investing success. Before you do that trade, ask yourself: Do you really know anything others don’t? Is reacting to the front page of The New York Times or The Wall Street Journal really the right thing to do? Do you understand yourself enough to know you tend to get too invested (pun intended) in your own ego about this or that stock you like? And on and on.

This is such a quaint yet powerful concept relative to today’s cesspool of intelligentsia, who didactically admonish that we have no free will, that we’re effectively biased flesh automatons incapable of anything resembling a rational choice. The truth, as is so frequently true, is in the middle: We’re abundantly capable of both reason and sheer nonsense. (Check today’s psychology literature, specifically within economics and you’ll find the vogue is a relentless drive to degrade human intelligence and find prescribed “heuristics” to make us all live better than we could for ourselves).

We act as if Daniel Kahneman reinvented the world, but it turns out otherwise intelligent humans have known for thousands of years we're subjective and biased, and that introspection and humility are a great way to move toward knowledge and better decisions. Supermoney reveals all this in a special kind of way: the book promotes a human—dare I say artful—approach to knowing thyself. Before the days of books with 100 pages of “scientific” citation and other detritus in book that total 200 pages to “prove” how serious and high-minded we all are; people used to (gulp) look to things like philosophy, even in investing. Whose approach to knowledge was better: Plato’s math and theory focus, or Aristotle’s emphasis on induction and empiricism? And where exactly did formal logic fit in for each? How many of today’s statistical wizards (because that’s what psychology and economics mostly is today) could articulate that conflict to you? It matters because all those statistical approaches—approaches to knowledge in general—ultimately rest on an understanding of such nuance. Yet these days we have fresh-faced math whizzes on Bloomberg telling us how their “model” is looking for oil futures in the months ahead. It’s insane.

The problem with today’s credentials—be they CFAs or PhDs in economics—is that they teach us all about how biased “humanity” is but offer virtually nothing on the path to singular self-knowledge. It’s a tragedy because knowing yourself will serve you far better than trying to figure everyone else out (which, by the way, isn’t possible). Here’s a controversial suggestion: Think of self-knowledge as a journey informed by experience; not a lesson to be learned or a problem to be worked out. You might just be happier and smarter in the long run.

Lastly, I’d be remiss if I didn’t mention there are wonderful passages in Supermoney about the acumen and different thinking of Phil Fisher, the legendary investor and father of Fisher Investments’ Executive Chairman, Ken.

As every generation does, we believe we’re the first to confront certain issues and the first to really think the deepest thoughts about them. Supermoney is the most enjoyable way I can fathom to explode that myth with regard to investing.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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