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  • Writer's pictureChris Mayer

The Wisdom of K

One of the great things about investing is how it mirrors so many other things in life. All the world’s wisdom from all the world’s disciplines seems to apply. And so you have books about horse betting or archery or history or psychology or physics – and all can be full of lessons you can use as an investor.

I have been reading Søren Kierkegaard’s Either/Or, an unlikely candidate for this list. And yet I keep coming across passages that make me think of investing. Thus, the inspiration behind this post was born!

Kierkegaard is one of my favorite philosophers. I have all his works and his journals. I’ve not read everything, but I make my way through his oeuvre slowly over time.

I find a lot to like in Kierkegaard. At his best, he is an excellent writer, eminently quotable. (At his worst, he’s incomprehensible!) He makes me think, which is the best thing I can say about any writer.

My Kierkegaard books, sharing space with Thoreau, Emerson and William James

The Humor of K

Kierkegaard is also the funniest of all the classic philosophers. To wit, some examples from Either/Or:

“One ought to be a riddle not only to others but also to oneself. I examine myself; when I am tired of that, I smoke a cigar…”

“Marry, and you will regret it. Do not marry, and you will also regret it…”

“‘Never lose courage! When troubles pile up most appalling about you, you will see a helping hand in the clouds’ - so said His Reverence Jesper Morten at vespers recently. Well, I am accustomed to walking a great deal under the open sky, but I have never noticed such a thing…”

“My life is utterly meaningless. When I consider its various epochs, my life is like the word schnurr in the dictionary, which first of all means a string, and second a daughter-in-law. All that is lacking is that in third place the word schnurr means a camel, in the fourth a whisk broom.”

Okay so enough of that. He has a great sense of humor. When people say Kiekegaard is dour and brooding, I think they misread him. The key to enjoying Kierkegaard is to know when he is serious and when he is not. He also wrote under various pseudonyms and people constantly attribute ideas to him that he himself put in the mouths of various invented personae. (Note: Either/Or is written under pseudonyms).

Buy Right, Sit Tight

Kierkegaard didn’t take much interest in investing. Though his family did quite well. His father was a prosperous wool merchant. But Kierkegaard might've been a good buy right and sit tight investor:

"The most ludicrous of all ludicrous things, it seems to me, is to be busy in the world, to be a man who is brisk at his meals and brisk at his work... What, after all, do these busy bustlers achieve?"

It is ironic isn’t it? Investing is a pursuit that rewards seeming inactivity. Tons of research backs this up. I’ve never seen a study that showed people who turn over their portfolios a lot do better than those that sit on their hands. And yet so many keep trying. Thinking, somehow, they are going to be the one to buck the trend, to make the great moves in avoiding the next crash and trading their way to glory.

I have a friend who told me he took his whole 401K to cash before the debt ceiling crisis. The conversation went like this:

Me: You know, market timing doesn’t work. You’d be better off just leaving that money alone and not thinking about it.

Him: It’s not market timing. I’m just waiting for this crisis to blow over. Then I’ll go back in.

I am not making this up. Everyone thinks they are special. I was having lunch with another good friend of mine who prefaced his comments by saying “I know you won’t like this” and then began to ask me what I thought about various macro concerns related to interest rates and bank runs, etc. “I get the idea of buying and holding great companies,” he said, “but –” No buts!

There is no way to get those wonderful 100 baggers without holding on for a good long time; 20-25 years was the fat part of the bell curve in the study I did for my book. And if you let the worries of the moment get to you, you won’t ever hold for that long.

Doing nothing is often best. But it’s a deceptive kind of ‘doing nothing.’ I’m not trading, but that doesn’t mean I’m literally not doing anything. I keep a watchful eye on my companies – the underlying businesses, not the stock prices.

The reasons I own any stock come back to a knot of ideas: talented insiders with skin in the game, a clean balance sheet, high returns on capital, plentiful reinvestment opportunities, among other criteria. So I keep on eye on those things and when they are no longer true, then it is time for the sloth to awaken, remember how to log on to my account and sell.

You’ll notice I didn’t say anything about valuation. Valuation is important when buying. After that, you have to give it a long leash. If you own great businesses for 10 or 20 years, you’re going to own them when they look expensive. You have to get comfortable with that, or you risk giving away a great winner. In fact, most of the time, the best businesses will look expensive and trade near 52-week highs. (This is a point of logic many forget. The best performing stocks of any decade are the ones that spent a lot of time at, and near, 52-week highs).

I also enjoy researching new opportunities and businesses, though they almost never result in me buying the stock. It’s critical to be able to spend a lot of time on a business and be comfortable not buying it. You can't feel like you wasted your time.

This can sometimes go to extremes for me. I have traveled to foreign cities, meeting CEOs, and then… done nothing. But you never know when such research could pay off. Maybe years. Maybe never - which is why it’s a big advantage to enjoy the process of studying businesses for its own sake.

More from K:

“It also seems to me that with cause and effect the relation does not hold together properly. Sometimes enormous and powerful causes produce very small and insignificant effects, sometimes none at all; sometimes a nimble little cause produces a colossal effect.”

This happens all the time in markets. You would think the ten-year t-rate going from under 1% in July of 2020 to nearly 4% today would be a powerful cause of… something. But the market is up more than 40% since. Rates did cause a lot of stuff to happen. But as a holder of great businesses, you did best to sit still during the whole thing.

And on the flip side, seemingly little things sometimes have a huge impact over time. The best example that comes immediately to mind is the power of compounding itself. I think of Chuck Akre’s often-used example of a penny doubling every day. At the end of 30 days? Well, if you don’t know I won’t deprive you of the pleasure (and shock) of finding how much you have.

More from K:

“Boredom is the root of all evil.”

I wrote about boredom in my book 100 Baggers. I think one of the reasons people can’t hold on to their stocks longer is they get bored. They need a shiny new thing to get excited about. Holding a stock that hasn’t gone anywhere in a long while gets old.

I would recommend finding your excitement elsewhere. Or maybe have a small account where you indulge in trading, but leave most of your money alone.

For me, this is not so much a problem because I’m interested in the businesses I own. I enjoy following them, learning more about them and watching them progress. As a long-term investor, you make it harder if you invest in businesses you don’t particularly like. Ideally, you’d invest in the best opportunities regardless. In the real world, I think it wise to make some concessions to human psychology. Know thyself.

For example, I find it hard to work up any interest in medical stuff, like drug companies. I don't know why. I can't remember medical terms very well. I feel like I don't really get it. Does this blind spot mean I miss great opportunities? Of course. But the world is a big place. You can't watch everything and you don't have to.

More from K:

“A person’s resiliency can actually be measured by his powers to forget. He who cannot forget will never amount to much.”

I thought a lot about this one, because as an investor you want to learn from your mistakes, but then you want to forget the mistake and just retain what you learned. It’s kind of hard to describe.

An analogy from golf might help. If you hit a bad shot in the water, you can’t have that thought when you take your next shot over the water. You have to forget it ever happened, stay present and hit a good shot. Investing is kind of like that; if you dwell on all those times you lost money, you just make it hard to pull the trigger on anything.

Or, just because you lost money in a certain sector doesn’t mean you should never go there again. I have had bad experiences in retail. It’s a sector I approach with sweaty palms and heavy breathing. But then I’ve had a very good experience owning Dino Polska so far - a retail business that checked all my boxes.

“Most of what is written is nothing more than asserta [assertions] on plain paper - I, however, write on a stamped paper.”

A reminder that most of what people write is not really proven and perhaps impossible to prove. (And note K showing off his sense of humor again). Most everything we hold to be true is really a kind of inference, and some are better than others.

This line of thought always makes me think of Irving Lee, a teacher of general semantics, who I wrote about in my book Dear Fellow Time-Binder. Lee liked to say facts stay with what you observed, whereas inferences went beyond that. He tells a great little story about Charles Eliot, who was a long-time president of Harvard:

Eliot entered a crowded NY restaurant and handed his hat to the doorman. After lunch, he goes to leave. As he came out he was astonished to see the doorman promptly pick out his hat from the hundreds that were there and hand it to him.

“How did you know that hat was my hat?” Eliot asked.

“I didn’t know it was your hat, sir,” said the doorman.

“Why, then, did you hand it to me?”

And the doorman very courteously replied, “Because, sir, you handed it to me.”

President Eliot was delighted with this precise delimitation of what the doorman saw and what he assumed.

Be humble and careful about what you think you know and what you assume.

One more, because this post is getting long: Wishing is an art, Kierkegaard says somewhere. And in Either/Or he has a great passage where he dreams he is before the gods and they grant him a wish. “What do you want?” Mercury asks. “Do you want youth, or beauty, or power, or a long life, or any of the other glorious things we have in the treasure chest? Choose - but only one thing.”

Now, think about this for yourself before I give you Kierkegaard’s answer. What would you wish for?

Here is what Kierkegaard wrote:

“For a moment I was bewildered; then I addressed the gods, saying: My esteemed contemporaries, I choose one thing - that I may always have the laughter on my side. Not one of the gods said a word; instead, all of them began to laugh. From that I concluded my wish had been granted and decided the gods know how to express themselves with good taste, for it would indeed have been inappropriate to reply solemnly: It is granted to you.”

Kierkegaard often mentions laughter. The ability to see the funny side of life, to laugh, is a great gift. I love Kierkegaard’s wish. And this seems like a good place to end today’s post. I hope you enjoyed reading a bit of Kierkegaard and my riffs on his words. Thank you for reading!

Published June 16, 2023

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