You Are Not a Gadget – Jason Lanier
My maternal grandfather passed on recently at age 91—he led a fine and blessed life full of all those heroics and achievements the Greatest Generation was known for.
He told a lot (a lot!) of stories, sometimes about the war (to my brother, the soldier), and sometimes about business (more often to me, the “business guy”). He was a great businessman in his own right—his construction company built many of the churches and schools now supporting much of the Central Valley of California.
Yes, he told a lot of stories … but that’s precisely what they were: stories. He wasn’t full of hollow aphorisms; he learned by doing, by experience. So when he expressed his wisdom, it was with a parable. This is the value of narrative as a learning mechanism.
One of my last talks with him was over Easter, and something hit me right between the eyes: Whenever my grandfather tells stories about business, he only talks about people.
Not so in today’s investing world. Here, we say “It’s Bank of America giving me a loan,” or “Cisco makes those routers,” and so on. My grandfather, who dealt with unions, politicians, courts and all sorts of vendors—all potentially faceless, abstract entities—never referred to them as such. He spoke about the people he knew in those companies—they’re who he did business with.
Just a few weeks ago I was sitting in Ken Fisher’s office, and he began speaking about his father, the legendary growth investor Phil Fisher. I saw it then, too: Ken and his father thought about people first and the company second. Ken Iverson of Nucor, for instance. Or Moore and Noyce from IBM.
I don’t see much of this in investing today—young analysts are taught concepts, statistics and other abstractions. Today’s relationships are correlations, dependability is now standard deviation and so on. Ben Graham would be appalled. True, magazines like Forbes and Fortune are full of profiles of big-time executives, which is fine enough. But by the time analysts start talking stocks, most or all of that falls away.
Math-logic thinking has been both a boon and a bane to finance: It’s created tremendous new efficiencies, new products and new frontiers. But it is also dehumanizing and generates an artificial worldview more often blinding than illuminating.
As I’ve often posited, non-investing books frequently yield much insight. On that basis, Jason Lanier’s You Are Not a Gadget just might be the best investing book of the year.
The book is about technology’s role in today’s world. On its face, this is already highly relevant for investing—money itself is basically beeps and digital blips, as are trading and most transactions.
Lanier’s basic view is that “computationalism” (reducing everything to bits and numbers to be computed) is a worldview that is ultimately incomplete and unsatisfactory—leading to misleading perspectives. He illustrates this in a variety of ways.
First, music. We know digital music is a close replica of “real” music but ultimately inferior—like the real thing but a step removed. Yet, since the world moved to MIDI and MP3, that’s pretty much all we use now. (Those who still use vinyl records will very much appreciate this difference.)
Also, Lanier tells us much technology tends toward universally accepted principles and modes of behavior—if we all read our digital documents in Adobe pdf, it’s easier for the whole system. Finance is very much like this with standard curricula like the CFA.
Lanier acknowledges the value of this, but also laments what is lost. In essence, thinking is being pushed through these small interfaces of our own creation—much narrower than the richness of human behavior. Finance and accounting, if they are anything, want to be highly reductive. Take Facebook as an example. It seems like a liberating technology but actually forces everyone to more or less express their lives through the same set of tools, in largely the same reductive ways. Lanier calls this “personal reductionism,” and it also describes what math and traditional economics—even now canonized behavioral economics—tend to do, too.
What this leads to is striking. Lanier observes that so much of today's analysis, from the highest levels, is a sort of mash up of data—yielding fewer truly new insights. This is almost precisely what statistical analysis in investing is today: constant mash-ups using statistical tools to find any possible relationship.
I cannot tell you how many times I’ve been presented with what someone believes is a novel insight based on a bunch of correlations (math-speak for relationships), when almost without doubt there are hundreds if not thousands of similar analysts trying to do the exact same thing the world over with largely the same data.
What there isn’t is much unique iconoclasm—what people believe is “different thinking” today is often just a version of the same thought everyone else is having through the same set of reductive lenses. Edward Tufte, in his critique on using PowerPoint, for instance, made this observation some years ago: The software itself actually directs the style of thought—PowerPoint forces the mind into a narrow set of tools.
Uniqueness of thought is, as ever, exceedingly rare—always has been.
We talk about information as if it were real—more real now than our own emotions, or at least more valid. We give credit to computers where really it belongs to humans—the Watson the super computer is an example. Watson was an elegant solution to a problem thought up by a team of computer scientists—but the genius wasn’t in the computer, it was in the scientists who created it.
Lanier's point is that data and technology are nothing without humans—this is the ultimate point the Turing test posits and has yet to be achieved. Yet, we seem to think about data as if they were separate entities from us—independent. Same for investing, increasingly.
Thinking about people first—whether it’s your neighbor or someone potentially on the other side of a stock trade—is an old-school investing approach, but for those who can do it, it’s increasingly an investing advantage, simply because fewer do. That’s what my grandpa would do, I’m sure of it.
Bonus Book Review: Carte Blanche
Carte Blanche – Jeffrey Deaver
I read all the James Bond books. If you need a quick summer read, Jeffrey Deaver’s Carte Blanche is a fun, pulpy James Bond thriller. Deaver deftly creates a plot germane to today’s post-Cold War era, complete with blockbuster movie set pieces and locales. But Bond himself is old school—that ineffable, hardened, stoic character of Ian Fleming’s original conception.