A friend forwarded the Vanity Fair article about Michael Burry who will be featured in a book “The Big Short: Inside the Doomsday Machine,” by Michael Lewis. It is the interesting story about a value investor who found his own niche.
Interestingly I found his investment philosophy the similar to my own views.
He was genuinely interested in computers, not for their own sake but for their service to a lifelong obsession: the inner workings of the stock market. Ever since grade school, when his father had shown him the stock tables at the back of the newspaper and told him that the stock market was a crooked place and never to be trusted, let alone invested in, the subject had fascinated him. Even as a kid he had wanted to impose logic on this world of numbers. He began to read about the market as a hobby. Pretty quickly he saw that there was no logic at all in the charts and graphs and waves and the endless chatter of many self-advertised market pros. Then along came the dot-com bubble and suddenly the entire stock market made no sense at all. “The late 90s almost forced me to identify myself as a value investor, because I thought what everybody else was doing was insane,” he said. Formalized as an approach to financial markets during the Great Depression by Benjamin Graham, “value investing” required a tireless search for companies so unfashionable or misunderstood that they could be bought for less than their liquidation value. In its simplest form, value investing was a formula, but it had morphed into other things—one of them was whatever Warren Buffett, Benjamin Graham’s student and the most famous value investor, happened to be doing with his money.
Burry did not think investing could be reduced to a formula or learned from any one role model. The more he studied Buffett, the less he thought Buffett could be copied. Indeed, the lesson of Buffett was: To succeed in a spectacular fashion you had to be spectacularly unusual. “If you are going to be a great investor, you have to fit the style to who you are,” Burry said. “At one point I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham, but rather set out on his own path, and ran money his way, by his own rules.… I also immediately internalized the idea that no school could teach someone how to be a great investor. If it were true, it’d be the most popular school in the world, with an impossibly high tuition. So it must not be true.”
As part of Burry’s success he figured out the sub-prime market collapse, and he ran into the problem of defending his approach. And makes an excellent point about the problem of defending one’s ideas.
Inadvertently, he’d opened up a debate with his own investors, which he counted among his least favorite activities. “I hated discussing ideas with investors,” he said, “because I then become a Defender of the Idea, and that influences your thought process.” Once you became an idea’s defender, you had a harder time changing your mind about it.
Which brings up a lesson I’ve been waiting to write a blog entry about. One of the biggest lessons I learned in Aikido that sticks in my mind is when trying to do a particular technique in training I would get stuck and fight too hard which creates more tension destroying the energy flow. The sensei (teacher) came over and said “Move, give up the space you are in.” It clicked the attacker is attacking the space I occupy, if you give up the space to the attacker, blend and move with the energy, you can successfully complete the technique.
This lesson has stuck with me for years and years to be willing to give up your space to an attack. Defending a mental space does influence your thought process.
BTW, know who else is a Black Belt Aikidoist? Jonathan Koomey. He trained up at Berkeley Aikikai. My training was at Aikido San Jose. Maybe one of these days when Jonathan and I are at the same conference we can have some fun with some Aikido techniques.
An Energy and Resources Group graduate student and Dr. Koomey created the first peer-reviewed analysis of power use in high-density computing facilities (13, 14). Dr. Koomey maintains active collaborations with industry leaders about the electricity used by data centers and has published recent studies on the total power used by these facilities (19, 20) and the total costs of these facilities (21).
I know at least one person will get this idea of “giving up the mental space to win.” :-)