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“We owe almost all our knowledge not to those who have agreed,
but to those who have differed.”
- Charles Caleb
Colton
I think anyone would agree that “The Rogue
Investor” is a curious title for an essay on stock
investing.
After all, a rogue implies someone that chooses to break away
from the group with total disregard for the established order. Conversely, an investor implies a level of financial
knowledge presumably above the common rogue.
However, these seemingly contradictory words have a deeper
meaning when you are trying to determine how and why some
individuals achieve financial success.
Ask the two richest men in the world, Bill Gates
and Warren Buffet, “How did you achieve financial success?” More importantly, ask successful, happy people regardless of
their ranking in the world. You
will get a variety of responses, but there will be similarities.
Gates and Buffet would likely say own stock in successful
companies. Most wealthy
individuals would echo this response.
Many financially successful people also would agree that to
reach your full potential in life you must work at it and not be
afraid to be different. In
fact, society has even developed a word that is often used to
politely describe how successful people are different: eccentric.
The not being afraid to be different is probably
the most important and most difficult part about success in
investing and life. That
is because most everyone in modern society is conditioned to fit in
the middle of the bell curve. Questioning
conventional wisdom goes against our training and requires more
effort than most individuals have the will or time to undertake.
However, by definition, the two percent of the population
that controls more than 75 percent of the wealth must have done
something different than the majority to reach and maintain their
status.
Bill Gates dropped out of Harvard to start a
personal computer software company when, for all practical purposes,
personal computers had not even been invented.
Warren Buffett, founder of Berkshire Hathway, stock picker
extraordinaire, and arguably the most famous Wall Street
personality, ignores Wall Street.
Sam Walton, the founder of Walmart and a billionaire, drove a
used pickup as his company vehicle.
The list of successful rogues is long because, according to the
societal norm, successful people are not normal.
Once
you realize that you must think and act independently of society to
be successful, you are 90 percent on the way to becoming a success.
The second ingredient vital to success is finding
and using the proper knowledge.
This is where the true meaning of the word “investor”
becomes important. Unfortunately,
the concept of investing is usually not conveyed properly in our
society. This is
because the "financial wisdom" portion of the bell curve is shaped heavily by big money,
primarily large corporations and the media.
These two entities are most able to control and influence
communication, including education.
Corporations influence us by controlling the flow
of money into basic education and research that best serve their
interests. As a result,
our educational system spends more time on training us to be
employees, rather than providing the basic knowledge we require to
function successfully as individuals.
Corporations also have a financial interest in convincing the
public that they are incapable of understanding the knowledge
required to invest their own money.
The popularity of stock mutual funds is a classic example of
corporations convincing the public that they should pay for a middle
man to buy stocks for them even though year after year more than 75
percent of all stock mutual funds produce below average returns.
The media also suffers from a public welfare
investing conflict of interest.
The media must create headlines and sell advertising space
while appearing to be sympathetic to the individual.
The result is at best confusing.
It is also usually conflicting, portraying the media as
financial experts teaching the generic consumer how to make
financial decisions.
The media’s emphasis on current events also
encourages bad investing habits by making society focus on short
periods of time that have little or no influence on the longer-term
process of creating wealth. As
best described by Benjamin Graham in the classic book The
Intelligent Investor, investing is much different than
speculation, requiring enough knowledge, margin of safety and
passage of time to make an individual reasonably sure of a positive
outcome.
The lesson for the individual seeking financial
success is to largely ignore the corporate financial community, the
media and society’s definition of investing.
Gloria Steinem summed it up best when she said, “The first
problem for all of us, men and women, is not to learn, but to
unlearn.” By using
the same common knowledge available to everyone, you can be a
successful investor and person.
Although everyone would like to complicate investing, it is
actually profoundly simple. It
just requires something few people are willing to give: effort and
patience.
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