Weekend Reads for Finance Pros: Meditation, Munger, and Moneyball

Not long ago, I wrote about one of my favorite pastimes: sitting quietly on a park bench in New York City’s Central Park. These moments of solitude, if not silence, are becoming increasingly rare in this era of “fetishistic connectivity.”

Lately I’ve been wondering what it would be like to do a silent retreat. Would the noise in my head drive me to distraction? Would I want to burst forth yelling and screaming in rebellion? Or would I find clarity and calm amid the meditation and silence?

The benefits of meditation are well-known and have been espoused by some of the world’s most successful investors and innovators. Indeed, even business schools are starting to include meditation in their curricula. Last year, my colleague Jason Voss, CFA, wrote about “a watershed event in business school education,” the news that Georgetown would teach meditation to its business school students in a semester-long course. And last week, NYU’s Stern School of Business announced that MBAs will be offered meditation this fall as part of the NYU Mindfulness in Business Initiative. (Voss also recently blogged about how meditators can overcome behavioral biases.)

It’s even catching on elsewhere in the blogosphere. Shane Parrish, a prodigious and discerning reader who blogs at Farnam Street, recently wrote that after “putting it off for years,” the time had come to write about meditation (his post, “What Is Meditation?” was the most popular article that week). And another prodigious reader, Maria Popova of Brain Pickings, recently penned a blog post titled “How to Be Alone.”

This is all a long way of teeing up one of my favorite articles from recent weeks: “This Is Your Brain On Silence,” published by Nautilus. It tells the tale of Finland’s quest for a compelling national identity or, in marketing-speak, a new national brand. The problem was that Finland was known as a rather quiet country. But when the Country Brand Delegation gathered one evening, someone suggested that perhaps quiet wasn’t such a bad thing after all. <Lightbulb moment!> And as the reporter then tells us, “a few months later, the delegation issued a slick ‘Country Brand Report.’ It highlighted a host of marketable themes, including Finland’s renowned educational system and school of functional design. One key theme was brand new: silence.”

The story about Finland’s brand campaign is the springboard for a wider discussion about what science has to say about silence and noise. I thought it was fascinating.

Here are some other articles you may enjoy:

Investing and Advice for Investors

• GMO’s James Montier, who combines vivid imagery with blunt commentary on investor behavior, has a lot to say about central banks that are force-feeding risk assets to investors, resulting in “foie gras markets.” (CFA Institute)
• Jason Zweig recently sat down with Charlie Munger, “the laconic foil” to the “voluble Warren Buffett,” and discussed a wide range of topics, including Benjamin Graham, “the circle of your competence,” and the rapid trading of derivatives and stocks by institutions and individuals. It’s a wonderful read, packed with nuggets of wisdom: “A Fireside Chat With Charlie Munger.” (Wall Street Journal)
• Ever wondered if your personality affected your investment choices? Apparently neuroticism and extraversion are the most influential traits. (Morningstar)
• In a recent blog post, Bob Seawright, of Above the Market, cautioned investors to always be on the lookout for “disconfirming evidence” or “proof negative.”

When building your investment process, always be on the look-out for 'disconfirming evidence' http://t.co/dE9WttBUid pic.twitter.com/SdqnRyGA8Q

— Lauren Foster (@laurenfosternyc) September 12, 2014

• In his column for The Wall Street Journal, Morgan Housel, of The Motley Fool, notes that investors have no control over what the market will do next, but they do have complete control over how to react. He outlines “Three Mistakes Investors Keep Making Again and Again” (and again!).
• “The New Wolves of Wall Street” (The Felder Report). And the Twitter debate it unleashed:

The New Wolves Of Wall Street: fat fees for no service http://t.co/i1dwb37Z4o #MoneyForNothing #WSJ

— Jason Zweig (@jasonzweigwsj) September 14, 2014

• Some investors are pouring money into alternative investments. Others, like the California Public Employees’ Retirement System, or Calpers, are getting out of hedge funds. (See also: Calpers Has Lost Interest in Hedge Funds, BloombergView.)

Beware expensive alternative #beta strategies, warns James Osborne @BasonAsset #investing http://t.co/Hxn4rVzSR3

— Robin Powell (@RobinJPowell) September 11, 2014

• Tom Brakke, of The Research Puzzle, on the perils of relying on others for due diligence and implementation: “Everywhere you look, understanding is being delegated,” he says. “Individuals hope and expect that the advisors that they use have the investment chops to make good decisions and the ethical fiber to deal honestly with any potential conflicts of interest. But the clients don’t normally understand the details of their investments — and can’t really assess the competency of the advisor either.”

posting: Eames said "never delegate understanding," but it happens all over the investment worldhttp://t.co/HtmbelFhdn

— The Investment Ecosystem (@Inv_Ecosystem) September 9, 2014

Here We Go Again . . . Active vs. Passive

• Is active management a dying practice? “I’m not saying active is doomed to fail, but from a business perspective they appear to be losing the battle — and I don’t see that changing,” says John Rekenthaler, vice president of research at Morningstar. (Wealthmanagement.com)
• “New Twists to the Active vs. Passive Investing Debate” (Enterprising Investor)
• “Why the Active vs. Passive Debate Is the Most Important Debate in Finance” (Pragmatic Capitalism)
• Cullen Roche, tells us how he really feels about the efficient market hypothesis: “I Really Want to Crush the Efficient Market Hypothesis. . . . ” and a related post: “We Are All Active Investors — Part 2” (Pragmatic Capitalism)
• So does a chief investment officer: “Passive vs. Active: A Chief Investment Officers View: Part 1” (The Adviser Lounge)

Social Security/Retirement

• Think about this for a moment: What’s the biggest retirement risk your clients face? Is it the risk of losing money? (i.e. do they say: “We just can’t afford to lose money”?) Eric D. Nelson, CFA, says that assuming the client has saved about 25 times the amount of annual income he or she will need to live on from the investment portfolio, this is NOT the biggest risk — “As a matter of fact, it’s not even close.” So what are the biggest risks retirees face? “Excessive portfolio concentration, or taking too little risk and not earning enough return,” which he says, “exposes retirees to significant long-term purchasing power erosion.” (Servo Wealth Management)
• Target-date funds take center stage in retirement plans: “Target-Date Funds Reveal Shift in Retirement Adviser Value Proposition” (Employee Benefit Adviser)
• Morningstar’s Christine Benz tested a blended approach to retirement income. (Morningstar)
• Deciding when to file for Social Security is one of the most consequential financial decisions most Americans will make about their retirement.

https://twitter.com/jerrykerns/status/509702191050137601

The Ultimate Financial Lexicon

• Jason Zweig has compiled a deliciously subversive glossary of financial terms, aptly titled “The Devil’s Financial Dictionary.” Example:  “ALPHA, n. Luck.” (JasonZweig.com)

The Future of Finance

• How can we transform the global financial system to ensure that it supports a sustainable economy? To answer that question, the New Economics Foundation (NEF), a United Kingdom-based think tank promoting social, economic, and environmental justice, considered the potential impact of disruptive innovations such as bitcoin and other crypto-currencies on the present financial system — and how policy must change to keep up. It identified five main trends, detailed in their new report, “Financial System Impact of Disruptive Innovation | NEF” (NEF)
• “Compared with a scored, rated, ranked baseball world, the world of financial predictions is in a Dark Age.” So says David Gardner in this 2011 article, “Moneyballing the Financial World” (The Motley Fool)

And Now for Something Completely Different

• Can neuroscience help us rewrite our most traumatic memories? “Partial Recall” (The New Yorker)
• For the volcanists among you, a mesmerizing short video of Iceland’s massive volcanic eruption, filmed 4 September 2014. (Vimeo)
• “The most creative ideas aren’t going to come while sitting in front of your monitor.” “Workspaces That Move People” (Harvard Business Review)
• A thought-provoking cover image following Apple’s (NASDAQ: AAPL) product launch last week:

https://twitter.com/ReformedBroker/status/509766797395234816

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

Photo credit: ©iStockphoto.com/JLGutierrez