I just finished a ten-page quarterly letter to clients and am taking refuge here to write about anything other than stocks. This scribble will be about a topic that I have been thinking about the last six months. I am somewhat embarrassed about it, because it’s a bit “me”-centered, and I am going to go into areas that (I am acutely aware) lie far outside of my circle of competence, but that is how we grow. I promise to write about the stock market, stocks, and the economy in the future. Just not today.
I Don’t Eat Desserts
As I got into my mid-forties I landed in my own version of a midlife crisis. Instead of getting a 20-year-old girlfriend or a red convertible, I started paying attention to my health. When you’re young you think your future health will be simply a linear extrapolation from the past, and for good reason: Up to that point you have had a lot of data points to draw a straight line through. Well, as you get older your body, as an older engine, starts to require higher-quality fuel (no more junk food) to run and requires more tuning up (exercise) just to maintain the same output of energy.
I realized that to feel good mentally I had to work on feeling good physically. That meant I had to change my habits: Drop the bad ones and acquire good ones. There are two ways to give up bad habits: First, change your environment, and second, make a half binary decision (more on this one later).
Let’s start with changing your environment. Dan Ariely, a behavioral psychologist, said in an interview (I am paraphrasing): “If you are trying to lose weight you probably don’t want to have dozens of donuts lying on your desk. Not eating donuts would consume a lot of your willpower and thus energy. If you think of energy as being a finite resource, an environment that requires you to use a lot of willpower will rob you of energy that could be used for something else – thinking creatively, for example.
Here is an example: I used to be addicted to checking stock prices dozens of times a day. This is not healthy for a long-term investor as it tends to shrink your time horizon. I removed the shortcut to the site where I track my stocks from my browser, and when I’m done checking I always sign out. Now checking stock prices is an effort (I have to type a url and sign in), and so I check them only once a day.
The other approach to dropping a bad habit is to make it a half-binary decision, which is basically a non-decision decision. In December, after I read a wonderful book by Rolf Dobelli, The Art of the Good Life, I quit eating desserts (no more cakes, cookies, candy, ice cream). I told myself “I don’t eat dessert.” Bear with me here. If I eat dessert sometimes, let’s say 2% of the time, despite that 2% being a miniscule number, it makes eating or not eating dessert a decision. But if you have a firm “I don’t eat dessert” mindset, then every single time it’s a non-decision decision. I call it a half-binary decision: full-binary would be “Yes” or “No”; half-binary is just “No.”
As I’ve been working on my new book, I’ve spent a lot of time thinking and reading about the relationship between the conscious and subconscious minds. The subconscious mind is an incredibly powerful computer that is running all of our bodily functions (breathing, pumping blood, digesting food, etc.). Think of the subconscious mind as having the processing capacity of a giant mainframe vs. the conscious mind being an iPhone. The subconscious receives instructions from the conscious mind, and it obeys them. The subconscious mind takes all instructions literally and doesn’t understand irony. Therefore, if you consciously give the clear instruction “I don’t eat dessert” to your subconscious mind, then your subconscious blindly and faithfully follows the instruction.
I am very aware of how this sounds, but willpower was never one of my greatest strengths. And sugar (desserts) was for me a substantial addiction. But since December I’ve gone to birthday parties and dinners where people around me were eating desserts, and my wife still bakes cookies for the kids. None for me, thanks! And not eating dessert consumes zero willpower or energy. None! I also don’t feel any less happy than I was before December. Except that I just did a blood test, and my cholesterol numbers showed a staggering improvement: My triglycerides are down from 400 to 200 (150 is the ideal number).
Conquering dessert gave me the self-confidence to change my diet completely. I’ve been on ketogenic (keto) diet for four weeks. I basically eat as much as I want of protein, vegetables, and berries and don’t eat carbs (bread, rice, potatoes, and fruits). What I love about this diet is that I don’t feel deprived of food and never feel hungry. For some reason giving up desserts, though it helped to improve my cholesterol, did nothing for my weight. But I’ve lost ten pounds in four weeks of keto.
I’ve found that it is easier for me to give up bad habits than to acquire good ones. To start working out I needed external pressure, so I hired a trainer. My trainer, Sergey, is a Ukrainian-born world champion in weightlifting. Just imagine a Hollywood version of the stereotypical Russian “muscle” mob enforcer; that is exactly what Sergey looks like. He speaks slowly and very quietly, but when he tells you to do something, you do it. He trains my brother Alex and me twice a week.
Last time, at the beginning of our session, he was kind of thinking out loud: “Okay, so I am going to torture you for an hour, and then I have to return my car rental”. Torture he does. I can barely walk out of the gym, and for an hour after our session I lose my ability to speak. I never thought I’d actually enjoy lifting weights, but strangely I do. Focus on each exercise, and pain redirects your thoughts from the stock market and kids – the outside world disappears for an hour.
I am not sure I have enough willpower to do weightlifting without Sergey. I know that I wouldn’t push myself enough. So Sergey it is. In addition to feeling a bit more manly as my fat gradually turns into muscle, I also feel calmer.
So far my cardio workouts have been limited to riding my road bike to work a few times a week (seven miles each way) and walking. Recently, when I was in London, one of my meetings was canceled and I suddenly found that I had four hours till my next meeting, which was six miles away. So I put my AirPods on and I walked. I loved it. When I got to the meeting, which was with Gary Channon (one of my favorite UK value investors), as soon as I saw Gary, he said “Let’s go!” We walked another four miles and talked. Last time I met Gary, two years ago, we had breakfast that lasted well into lunch. But this walking meeting had a much livelier and more dynamic rhythm to it. Gary turns most of his meetings into walking meetings. I love this idea and will try to do the same. There is actually a lot of research that shows that walking and talking induces creativity. My goal is to do talking walks a few times a week.
I’ve been thinking a lot lately about happiness. What does it mean to me? What makes me happy? I’ve found that the answer is not simple. I derive most of my happiness from doing things I love and doing things I don’t like as little as possible. I outsourced doing some things I don’t like in 2017. But that’s just the beginning. I find that I am happiest when I am the most creative, when my conscious mind learns from my subconscious mind – and that happens to me when I write. I learn a lot from my subconscious supercomputer, and in fact, big part of creativity is accessing your subconscious. So you see, my ultimate reason for writing about investing is so I can learn from my subconscious!
Relationships are another source of happiness. At the beginning of my investing career I could see a clear line between my personal and investing friends. Today this line has been washed away, and a lot of my investing friends are close personal friends. One of the joys of travelling is meeting and talking to friends. Probably the best part of my recent trip to London was that I got to spend time with friends.
So recently I started thinking about surrounding myself only with people who add to my happiness (not subtract from it). I realized that I have been practicing this with VALUEx Vail for years: No matter how brilliant they are, only nice people are invited back. I looked at my relationships and asked myself, do the people around me add to my happiness or subtract from it? Then I simply start adding and subtracting to maximize my circle of happiness. End relationships that make you unhappy and embrace relationships that add happiness to your life.
And then there is the stoic definition of happiness: It’s reality less expectations. Expect very little and reality will likely surprise you. This sounds a bit like value investing: When you buy stocks that are significantly undervalued, not much is expected from them and a lot of versions of reality will bring happy surprises. I am still trying to figure out what this means to me… but I guess this will be a topic for a future scribble when I again get exhausted writing about stocks.
I am the CEO at IMA, which is anything but your average investment firm. (Why? Get our company brochure here, or simply visit our website).
In a brief moment of senility, Forbes magazine called me “the new Benjamin Graham.”
I’ve written two books on investing, which were published by John Wiley & Sons and have been translated into eight languages. (I’m working on a third - you can read a chapter from it, titled “The 6 Commandments of Value Investing” here).
And if you prefer listening, audio versions of my articles are published weekly at investor.fm.