"Within an investment team might not be the first place one would expect to find a thriving book club, but our team has one. We call the approach “Critical Thinking Advocacy” and it encourages us to explore a broad array of topics, be they related to investments or not, and to then share relevant insights from those books with the entire team.
We are not just encouraged to read books, but to find and share insights that may hold value to our team, our way of thinking, and even the investment process itself. Some books may complement our current approach while others may contradict it.
An example of one topic that enhanced our investment process addressed game theory, several tenets of which we subsequently incorporated into our investment process.
We have been recently drawn to books about quantitative investing, risk parity, and similar topics, all of which involve investment approaches that are different from how we manage our portfolios.
While rules-based processes like these represent completely different approaches than our discretionary process, it is important for us to understand these types of processes for a number of reasons; chief among them is that so we can most appropriately distinguish our approach as being different and distinct for investors.
As previously referenced, the books we read do not have to be directly related to investing. In fact, we often look for ones that are not.
Much in same way Leonardo Da Vinci drew on a level of knowledge of various fields of study to create his masterpieces, we too hope to find valuable insights from other fields. Our team will delve into books on leadership, medicine, and even art.
Doing so may lead to a better understanding of the competition and how other investors who are very successful in their own way have an approach that differs from ours. Or it may help us glean something from an unusual source that we can bring to bear within our team. Good ideas often come from unexpected places.
But reading the book is not enough. Once we have completed a book, we write a “book report,” which summarizes the important points (and not so valuable points, as the case may be) within it.
Then, the report is added to a central repository so that the team can keep track of what books have already been read and the analysis of each. We also rank the book. Was it valuable or not? Perhaps it was only marginal but did contain one or two interesting aspects.
Lastly, Critical Thinking Advocacy helps us maintain, if not improve, our cognitive diversity. Continually reading from external sources and understanding viewpoints outside of our team keeps us at the frontier of new ideas and thought.
Recent Highlights from Our Book List
- The Checklist Manifesto by Atul Gawande
- Every Nation for Itself: Winners and Losers in a G-Zero World by Ian Bremmer
- Rationality: From AI to Zombies by Eliezer Yudkowsky"
John Simmons, CFA
Senior Investment Strategist, Dynamic Allocation Strategies Team
William Blair
