Bruce Lee and Investing
One of the books that impacted me profoundly was the Art of Learning by Josh Waitzkin. It was recommended by a friend, and was one of the first books that I read when I began investing full time. The book stood out because it was at the same time both very different from investing, but in an interesting way, its lessons resonated heavily with investing.
Josh Waitzkin can be best described as a lifelong learner. He was a national Chess champion, who then eventually pivoted to Tai-chi where he eventually became the world champion.
At the first glance, Chess and Tai-chi seem very different sports - one a logical, calculating mental game, and the other a physical sport with a lot of movement. But in the book, Waitzkin argues (and proves successfully) that in its very essence, every art form - tennis, tai-chi, chess, tea making, kung fu - is the same. Each is, in the end, a spiritual pursuit.
The book has one of my all-time favourite quotes which encapsulates the idea well-
“One has to investigate the principle in one thing or event exhaustively…Things and the self are governed by the same principle. If you understand one, you understand the other, for the truth within and truth without are identical.”
In the end, every pursuit of mastery is at the same time, a pursuit of the discovery of the self.
I was reminded of the book and its lessons by a Bruce Lee video I happened to see recently. The video has some beautiful nuggets about mastery in kung fu, and I think the lessons have applications for mastery in other art forms as well.
I want to try to interpret this conversation in the context of investing. The format of learning via a dialogue between master and student is quite effective, and thus one of the most common forms of instruction.
The focus would be only on the first 1min 20 seconds of the video.
Let us explore parts of the conversation:
What is the highest technique you hope to achieve?
To have no technique
No one embodies this principle in investing more than Buffett. Munger and Buffett, both have have consistently encouraged their followers to adopt the punchcard style of investing - buy a great business at a fair price and hold on forever. There is no denying that this is the primarily approach by which they deploy capital and created wealth. But they are not averse to using other techniques to deploy their capital.
Some recent examples include the investment in Activision (which was a special situation), in Occidental (an oil and gas company very different from the investment in Apple), among others. Even in Apple, Buffett has pared down his position materially despite calling it a franchise comparable (or stronger) to American Express and Coca Cola. Munger, in a recent interaction, referred to Belridge Oil as his one big mistake - an investment which was different from the approach of buying right and sitting tight. In Snowball, there is also reference to a risk arb situation in Canada where Munger invested more than 100% of his capital.
The approach of buying a good quality business run by trustworthy management at the right price and holding on is perhaps the approach that creates the largest wealth adjusted for the least number of errors and with the least risk of going broke. But that does not mean other techniques do not have a place. As Buffett and Munger’s actions have proved - using the appropriate technique / tool at the appropriate time is a valid approach to navigating the investing world.
When the opponent expands, I contract; when he contracts, I expand
To my mind, the parallel in the investing context is best articulated by Buffett himself -
Be greedy when others are fearful; be fearful when others are greedy.
When the market is hot and expansive, one contracts and become conservative in capital deployment. When the market is going through a steep sell-off, the duty is to expand and deploy capital aggressively.
This advice works on multiple levels - it is the perfect way to invest in a cyclical industry or company. If an industry or company is going through deep correction, it might make sense for us to expand and deploy capital, and vice versa.
What are your thoughts when facing your opponent?
There is no opponent.
Why is that?
Because the word ‘I’ does not exist.
And when there is an opportunity, I do not hit, it hits itself.
My thoughts on this snippet is still evolving. I think this is perhaps the most difficult to implement and the most profound in terms of its meaning.
I speak for myself here - there is a lot of self / ego that comes in when I invest in the market. At any point in time, when I work on a company, I have a clear idea of what I would like to happen. There is an intent with which I begin and do the work. Generally, the only reason I work on a company is with the intent of (hopefully) investing in it. (Observe all the ‘I’s; observe also the ‘hope’ to deploy capital, which is not advisable)
When the work is begun and done with a strong specific intent, our minds are not open enough. When we have a sharp focus on a specific question - ‘whether to invest or not?’, our view becomes quite narrow. We close ourselves to possibilities and options - those that can become visible with a wider view. We become blind to the fact that learning about one thing can lead to conclusions about something entirely different. Conclusions can evolve to - ‘not right now’ or ‘not ripe enough’ or ‘exit a different position’.
Seeking without intent
The goal in investing, and in most other art forms, is to find the truth / reality. When we seek / search the truth, it has to be without an intent to find one specific thing. Perhaps, the attitude must be that of an observer or a seeker - someone who wishes to learn without making any judgment or having any intent.
The attitude of being purely an observer allows us to act without intent and takes us towards the truth - as our vision is not obstructed by the ego / self. This is what is perhaps meant by ‘Because the word ‘I’ does not exist’. When the ‘I’ does not exist, the action is automatic - ‘it hits itself’.
It is my guess that this is how the best investors operate. They operate subconsciously - they keep reading with the only goal being to understand the world. And when things align, their decision to invest is almost subconscious and automatic. There is no detailed thesis written with intrinsic value calculation - things come together and ‘it hits itself’.
The correct attitude then is of constant learning with relaxed readiness. Readiness here is not akin to the tensed readiness before the beginning of a race - your body and mind taut, your ears peeled, waiting for the whistle.
The best analogy I could think of is that of someone who enjoys driving, going on a long drive. After a while, the conscious takes the back seat while driving. The subconscious has taken over, and the act of driving itself is ‘automatic’. When there are obstacles on the road, the limbs act on their own - shifting gears, applying brakes, turning the steering. Sportspersons refer to this state as the ‘flow’, where shots and angles flow effortlessly. There is no thought, there is pure action.
Investing at its purest is perhaps something like this. You are relaxed and ready, letting information and patterns flow to you, resting, until suddenly things click and you act decisively!