27th March, 2023
In the endnotes of his brilliant book, ‘Winning the Loser’s Game,’ Charles Ellis wrote about two of his best friends who, at the peak of their distinguished careers in medicine, agreed that the two most important discoveries in medical history were penicillin and washing hands (which stopped the spreading of infection from one mother to another via the midwives who delivered most babies before 1900).
Ellis’s friends also counseled him there was no better advice on how to live longer than to quit smoking and to buckle up when driving.
The lesson Ellis leaves the reader with is this –’Advice doesn’t have to be complicated to be good.’
The world is complex. Consider the various reasons floating around explaining reasons for current problems facing the world– war, bank failures, high interest rates, recession, FPI selling, China, supply chain disruptions, climate change, shift from fossil fuels leading to low capacity build up, ageing population in the developed world, weak GDP etc etc.
This is not a complete list, but enough to suggest that the world is complex.
How do you deal with such complexity in life without losing your sanity?
Only by believing that life is simple and come what may, it goes on.
Any good doctor tells you the simple ways of maintaining good health are rise early, exercise, go for a walk, do meditation, eat less junk food, control alcohol, have a good sleep routine etc.
But, who follows that – virtually no one.
We tell our clients, the best way to invest is to start early, invest in well diversified mutual funds, let compounding do the trick, don’t look for returns, look to achieve financial goals, create behavioural alpha, avoid complex products which are inherently risky but to no avail.
Of course, this goes against common belief that your life and investment process must be complex to be profitable.
This is because, like the Dutch computing science pioneer Edsger W. Dijkstra said, “Complexity sells better.” Against that, “simplicity requires hard work to achieve it and education to appreciate it.” And not many people would want to walk on that road less travelled.
Simple can be harder than complex. You have to work hard to get your thinking clean to make it simple.
But then, as Steve Jobs said in an interview in 1988, “it’s worth it in the end because once you get there, you can move mountains.”
That’s also true for all aspects of life and also for investing.
In practicing simplicity, and staying the course, over time you can also move mountains.
Follow simple advice & stay blessed forever.