In Search of the Perfect Investment

I like the stockmarket less and less. I look and feel like a jerk one minute; a genius the next. This is not good for my soul.

I look at my Apple. The trend is up. I’m up big today. Apple is my biggest holding. Good.

I look at my Berkshire Hathaway. The trend is bad. Why? Who knows. I have a big holding.

I look at my Honeywell. Up and down like a yo-yo. Yet the company continues to perform well. And I like the space it’s in and what it’s doing there.

I look at Johnson and Johnson. A stomach-churning ride for a great company. Does it sell pills for seasickness? I need some.

Up and down, like a whore’s drawers. Yet the business is the same. The fundamentals don’t change from moment to the next.  A good investor stomachs through these gyrations.

I’m not a good investor.

I made my money with a business I controlled. I grew it with my ideas and the great people we hired. When we sold it and I became an investor, I threw out everything I’d learned and threw my lot in with the gamblers of the western world (or the whole world?).

The business you own, you understand. The businesses you invest in, you don’t understand. Worse, you now rely on management incompetence and management crookery. There’s plenty of both.  And then you have to predict in an unpredictable world. Which brings me to a serious piece by a favorite author, David Brooks, writing in the New York Times this week:

Learning From Mistakes

If you could go back to 1889 and strangle Adolf Hitler in his crib, would you do it? At one level, the answer is obvious. Of course, you should. If there had been no Hitler, presumably the Nazi Party would have lacked the charismatic leader it needed to rise to power. Presumably, there would have been no World War II, no Holocaust, no millions dead on the Eastern and Western fronts.

But, on the other hand, if there were no World War II, you wouldn’t have had the infusion of women into the work force. You wouldn’t have had the G.I. Bill and the rapid expansion of higher education. You wouldn’t have had the pacification of Europe, Pax-Americana, which led to decades of peace and prosperity, or the end of the British and other empires.

History is an infinitely complex web of causations. To erase mistakes from the past is to obliterate your world now. You can’t go back and know then what you know now. You can’t step in the same river twice.

So it’s really hard to give simple sound-bite answers about past mistakes. The question, would you go back and undo your errors is unanswerable. It’s only useful to ask, what wisdom have you learned from your misjudgments that will help you going forward?

Which brings us to Iraq. From the current vantage point, the decision to go to war was a clear misjudgment, made by President George W. Bush and supported by 72 percent of the American public who were polled at the time. I supported it, too.

What can be learned?

The first obvious lesson is that we should look at intelligence products with a more skeptical eye. There’s a fable going around now that the intelligence about Iraqi weapons of mass destruction was all cooked by political pressure, that there was a big political conspiracy to lie us into war.

That doesn’t gibe with the facts. Anybody conversant with the Robb-Silberman report from 2005 knows that this was a case of human fallibility. This exhaustive, bipartisan commission found “a major intelligence failure”: “The failure was not merely that the Intelligence Community’s assessments were wrong. There were also serious shortcomings in the way these assessments were made and communicated to policy makers.”

The Iraq war error reminds us of the need for epistemological modesty. We don’t know much about the world, and much of our information is wrong. A successful president has to make decisions while radiating hesitancy, staying open-minded in the face of new evidence, not falling into the traps that afflict those who possess excessive self-confidence.

The second lesson of Iraq concerns this question: How much can we really change other nations? Every foreign policy dilemma involves a calibration. Should we lean forward to try to influence this or that region? Or should we hang back figuring we’ll just end up making everything worse.

After the 1990s, many of us were leaning in the interventionist direction. We’d seen the fall of the apartheid regime, which made South Africa better. We’d seen the fall of communist regimes, which made the Eastern bloc nations better. Many of us thought that, by taking down Saddam Hussein, we could end another evil empire, and gradually open up human development in Iraq and the Arab world.

Has that happened? In 2004, I would have said yes. In 2006, I would have said no. In 2015, I say yes and no, but mostly no.

The outcome, so far, in Iraq should remind us that we don’t really know much about how other cultures will evolve. We can exert only clumsy and indirect influence on how other nations govern themselves. When you take away basic order, people respond with sectarian savagery.

If the victory in the Cold War taught us to lean forward and be interventionist, the legacy of the 2003 Iraq decision should cause us to pull back from the excesses of that mentality, to have less faith in America’s ability to understand other places and effect change.

These are all data points in a larger education – along with the surge and the recent withdrawals from Iraq and Afghanistan. I wind up in a place with less interventionist instincts than where George W. Bush was in 2003, but significantly more interventionist instincts than where President Obama is inclined to be today.

Finally, Iraq teaches us to be suspicious of leaders who try to force revolutionary, transformational change. It teaches us to have respect for trimmers, leaders who pay minute attention to context, who try to lead gradual but constant change. It teaches us to honor those who respect the unfathomable complexity of history and who are humble in the face of consequences to their actions that they cannot fully predict or understand.

How to gain that predictive advantage? Research. Research and more Research. Then, plenty of diversification.

I have a three-foot pile of annual reports to read this weekend. I have magazines from Fast Company to the Economist, from BusinessWeek to Investor’s Business Daily (which has useful tables, but idiotic editorial).

Skip all the above and focus on what’s really  important — your own health: Is your weight OK? Are you napping a couple of times a day? You’re not still smoking? Are you getting a little exercise each day? Are you learning to cope with stress? Do you have enough money in the bank to take care of two years of expenses? Have you hugged the family lately? have you asked them what excites them? How can you help?

Tips:

+ Write all your auto-pays in a file. This way next time your Visa gets hacked (as it will in the next few months), you’ll know how to change the numbers.

+ Amazon is no longer the cheapest for anything. It’s the most convenient. But not the cheapest.

+ Book well in advance — like at least six months on international flights. These web sites may help finding fares: Kayak, Flyr and Hopper.

+ Sending a wire from your bank’s new online service is a lot easier, faster and cheaper than sending a check.

+ Obsession is a great virtue. Don’t let the naysayers talk you out of your latest greatest idea.

The most comfortable shoes in the entire world. They’re Nike’s Flyknit Lunar 2. They do come in other colors. But this one (which I own) is my personal favorite:

Why do I like this? Is it the romantic in me?

A final thought?

Are you  one of those paranoid people who check behind shower curtains for axe murderers.

If you do find one, pray tell, what’s your plan?

Harry Newton played tennis at 6:30 AM, had his car inspected at 8:00 AM, organized some banking stuff and then wrote this column by 11:00 AM. Good morning.

My mechanic says if your car’s airbag is being recalled, you may want to remove the airbag’s fuses. This way the airbag won’t go off and kill you or your passenger. Or lose your four front teeth — happened to a neighbor). You’ll get a red “malfunction” light on your dashboard. Hitting the reset button will solve that. You can put the fuses in for your next inspection. Meantime, drive carefully and wear your seat belt.

I’m already in Columbia County, mid-New York State, ready for a nice weekend. The weather is perfect. Blue skies. No humidity. We should all be so lucky.