Investing Is My Art, Writing Is My Tool
Process | 5 min read | Why writing is the foundation of my investing process
The best investing book I read this year wasn’t a book on investing. It wasn’t even a book on business. It was a book on writing.
I found David Fryxell’s How to Write Fast (While Writing Well) in my local bookstore on a lazy Sunday. I was perusing through the shelves when I saw a bright blue book in pristine condition. At first, I thought it was a newly published book. When I turned to the inside flap, it said “Published in 1992.”
That’s odd. I skimmed table of contents and saw unusual chapter titles such as “Finding Fast Stories” and “Secrets of Speedy Research.”
It was $5. I decided that it was worth taking a deeper dive.
I could not have read the book any faster.
The book brought me into a world that was so different, yet so similar. After each chapter, I began to see more and more parallels between the writing process and the investing process.
By the end of it, I became convinced that all investors would be better off if they wrote out what they were thinking.
Writing helps you think better. In an email exchange with my friend Jake Taylor from Farnam Street Investments, he said, “Writing is just better-structured thinking.”
In my 2020 Annual Letter, I described how writing a monthly newsletter helped me improve my thinking:
#2 Writing Helps You Think Like A Journalist
Writing is one of the most challenging, but most beneficial skills to master in the investment process.
Bruce Berkowitz has a quote that says: “We continually challenge ourselves… with investments we own or consider owning by playing mental war games… We call this stress testing process ‘killing the company.’”
The practice of writing and rewriting is the act of waging mental war against yourself, challenging everything you believe.
It takes a long time for me to write 5,000+ words about a company. Not because it is a lot of words, but because I am constantly killing the way I view the company. I find myself constantly rewriting paragraphs because I am not afraid to change my mind.
For example, let’s say I am writing a paragraph on a company’s customer loyalty. I put myself in the customer's shoes (empathy) then build a preconceived idea. The logic sounds good in my head, but when I write it out, I start seeing the flaws.
Have I considered how product economics influence customer loyalty? Have I considered how physical distance to competitors decreases psychological switching costs? Have I considered how the purchase frequency influences customer loyalty?
As a writer, you hate having these thoughts. You may have written anywhere from 250 to 500 words just on this topic alone. It took you half an hour to an hour to write out that entire section. You know you’ll have to spend at least another hour researching those questions that popped up into your head, but will you?
But as an investor, I love having these thoughts. That’s why I love writing. It is rare to find someone who is more willing to challenge your thoughts than yourself.
Writing gives you an outlet to put out an idea, tear it down, put out another idea, and tear it down again. At some point, you’ll find an untearable idea — an idea you cannot disprove with hard facts. That’s when you as an investor, the investigator, have hit the jackpot. That’s an idea you can bet on.
In the David Fryxell’s book, he described writer’s block as a myth: “Ultimately, writer’s block is a failure of the ego – it’s a matter of not being in charge of your own mind.” I believe the same “psychological block” exists in investing.
People may give up on a particular opportunity, claiming that it is not within their circle of competence. For some opportunities, they could be right. But I would bet at least a few of those passed opportunities were actually in their circle of competence, which they would have discovered if they pushed forward and used writing as a way to channel better-structured thinking.
Now, not everyone is going to start a blog or write long reports like myself. However, writing, no matter what form, should be a part of every investor’s process.
One simple way to begin writing is through the platform Journaltyic.
I have been actively using Journaltyic for about a year now. It has given me a place to write privately about current holdings and potential opportunities, among other things. It’s as simple as using custom tags, contracts, and checklists to organize my thoughts and record my decisions.
Once in a while, I’ll use the ‘Stock Dashboard’ tool to see what I was thinking and how I was feeling regarding a particular decision. Because the dashboard overlays your journal entries with the stock’s price chart, I can immediately quantify the opportunity cost from any mistake I may have made and identify if it was the result of (a) a poor hypothesis (b) biased thinking (c) or a combination of the two.
Better-structured thinking and closing feedback loops — that’s the power of writing. And that’s the power of Journalytic.
Last week, Journaltyic moved from Early Access mode to Beta mode. Now, anyone can create an account. The platform is completely free. In connection with the launch, John Huber will be hosting a webinar called Improving Your Investment Process on Monday, December 19, 2022. John Huber will take you through his investment process in detail and highlight some tips and tricks for getting to most out of Journalytic.
Clearly, I am talking a lot about Journaltyic. While I am not being paid to promote the platform, I am quite biased. I have been using the platform on a day-to-day basis for 12+ months now. I also personally know Jake Taylor and Philip Peterson, the investors who created the platform. My motive is selfish and simple: I want to see Journalytic continue because I have gotten so much value out of it. And the only way the platform continues is if new users like you join.
With that being said, Journaltyic is just one place to start writing. Regardless of where you do it, I think you should just start. Start somewhere. Start anywhere.
Because over time, you’ll begin to see investing as your art, and writing as your tool.