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More Than You Know

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More Than You Know

Finding Financial Wisdom in Unconventional Places

Columbia UP,

15 min read
10 take-aways
Audio & text

What's inside?

A collection of expert essays offers explanations of how the market moves based on data from unexpected places.

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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

This book began as a series of 50 short essays Michael J. Mauboussin wrote for investors. He advocates using a multidisciplinary perspective to try to understand how markets behave. By its nature as a collection of essays, this book is capricious and desultory, jumping around from subject to subject. The essays do not necessarily relate to each other, but that has some advantages, given the author's belief in multiple analyses. His book is not the place to seek a sound, consistently argued theory about why the market does what it does. On the contrary, Mauboussin repeatedly contends that no one really understands why the market acts the way it acts. In fact, he says, attempts to explain it often rely on patterns that aren't really there. getAbstract highly recommends this book as an excellent antidote for the disease of being overconfident about the wisdom of prevailing financial and economic opinions.

Summary

Process versus Outcome

Investment decisions should depend on investment philosophy, but the right philosophy is more a matter of having the right temperament than a record-breaking IQ. Being patient and diligent in pursuing a sound investment process is more important than achieving great investment outcomes. A good outcome does not justify a bad process. But even though a good process may sometimes produce a bad outcome, in the long run it will outperform a bad process. Sadly, the investment community often encourages an excessive focus on outcome rather than process.

Beating the Market

Although beating the market is very hard, some outstanding money managers consistently achieve this goal. In general, they differ from average money managers several ways:

  • They have lower portfolio turnover.
  • They put more money in their top stocks, in a higher concentration than the index.
  • They are value investors and buy bargains.
  • Most are not based in New York or Boston.

Investors argue about whether investing is a profession or a business. In recent years, business has dominated professionalism. Professionals think for the ...

About the Author

Michael J. Mauboussin is the chief investment strategist at a major capital management company and an adjunct professor at Columbia University's Business School.

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