Ignoring Identity and Embracing Uniqueness
Recently, someone asked me, "How would you identify yourself as an investor?"
"I try hard not to." My answer surprised the recipient.
I have thought a lot about this over the last 5+ years. Since reading Poor Charlie's Almanack, The Most Important Thing, and The Almanack of Naval, I've placed large (and maybe too much) emphasis on the psychology of investing. If business biographies are my favorite section of Amazon, psychology and communication are 1b and 1c.
So much of success in life, business, and investing is mastering yourself - your bias', your habits, your fears, and your aspirations. Those four personal traits are meant to make up part of a unique identity. But, we commonly leave them to groupthink powered by forces we're often unaware of.
This is why I avoid the word identify.
Any accidental membership to a group should be a lagging indicator, not a leading one, of who we are as people and professionals. The more we cede our responsibility for decisions to an identity, the more we empower others to ultimately make decisions on our behalf. We begin, consciously or not, to try to fit into a box so that we don’t break a mold others have for us.
If our beliefs line up into these neat little packages, we should be highly suspicious of our thought process. Preconceived notions prevent us from accurately analyzing situations and making decisions on the merits.
It also breeds tribalism which can quickly create an us versus them world view for which there is no middle ground. To be part of the tribe requires complete belief in the tenets that define the group - something I refuse to do and believe is dangerous on many levels.
For example, I don't want my decisions or opinions on any single climate technology to be predictable just because I invest in climate companies for a living. I shouldn't love any investment idea due to its impact, nor should I hate one solely for its lack thereof. Conversely, innumerable non-impact investments are good investments.
I'm not, nor do I claim to be, perfect in this regard. But this is the standard by which I try to hold my thought processes. Do I have biases? Hell yes. Do I try to check them? Also yes.
F. Scott Fitzgerald famously said:
"The test of intelligence is the ability to hold two opposing ideas in mind at the same time and retain the ability to function."
Holding and debating conflicting ideas with ourselves and others is equivalent to resistance training for the mind.
Most of our decisions contain answers that lie somewhere in the middle of the extremes. They require us to make assumptions about complex ecosystems and check our biases. The human mind loves shortcuts, but when we substitute our own knowledge or value systems with the beliefs of a group, nuance becomes the first casualty.
Unfortunately, we don’t just lose subtlety when tribalism takes hold. Everything begins to look and feel the same too. This applies to the extremes of politics to the investment strategies of everyone chasing the same trends.
We can look to history and biology for additional examples that prove the same point.
Japan is one of the most culturally unique places in the world because it’s an island, and not just physically. It was shut off from the world for almost 300 years during the Edo period.
Charles Darwin’s finches demonstrated that the greater the distance between two species, the more different they became.
Isolation breeds uniqueness.
It may not seem like it. But, this is a trait of a great investor - to see the world just differently enough that you create alpha over your peers before they see the trend you caught first. You can’t do that thinking like everyone else.
If we want to be innovative, we often need to think alone. If we want to be creative, we occasionally need to work alone. If we want to be original, we need to cut out the foreign substances of groupthink.
As William Deresiewicz said in his famous essay Solitude and Leadership:
Not learning other people’s ideas, or memorizing a body of information, however much those may sometimes be useful. Developing your own ideas. In short, thinking for yourself. You cannot do that 20 seconds at a time or while scrolling social media or YouTube.
Instead of being tied to an identity, I refer back to a set of guiding principles for each investment/decision I make. A non-exhaustive illustrative list includes:
Do no harm
Do I have a clear thesis?
Would I work for this management team?
Does this align with my personal values?
Does this clearly fit the investment mandate we've been given?
Are my incentives aligned with the founders and vice versa?
These principals can change, but they do so rarely and only after much consideration.
Not only do they provide a system for decision-making, but they provide an effective filter for saying no, which is just as important. In a business where chasing the wrong trends can lead to spectacular failure, knowing when and where to say no can save you a lot of time and money.
Finally, the scary part of all this is that it’s now easier than ever to pick up a set of prepackaged beliefs. It’s true both personally and professionally. But, the more you cede control the more you empower others to determine your outcomes.