Suggested reading for investors

By DAVID MOON, Moon Capital Management, LLC
July 21, 2013

At a recent meeting with a small group of investors, Berkshire Hathaway vice-chairman and Warren Buffet partner Charlie Munger was asked what books he was reading. This is a question I am also often asked – particularly as it relates to investment-type books.

Thus ends the similarities between Mr. Munger and me.

People are usually looking for some sort of investment how-to book. Benjamin Graham’s “Security Analysis” is and should be on most people’s list, but very few people actually read it.

One of the best investment books of the past several years is “The Most Important Thing: Uncommon Sense for the Thoughtful Investor,” by Howard Marks. The book is an edited compilation of years of Marks’ client memos, covering topics such as “second-level thinking,” the relationship between price and value, market psychology and defensive investing.

In 1979, I read the first investment book that made understandable sense to me: Martin Whitman’s “The Aggressive Conservative Investor.” It presents a timeless framework for equity investing while simultaneously lowering risk.

Many outstanding investment-ish texts stress the importance of avoiding a herd mentality. William Thorndike’s “The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success” notes that independent thinking is essential to long-term success.

Many of the most useful investment books aren’t found in the business section.

Dr. Atul Gawande is a general and endocrine surgeon in Boston and a professor of surgery at Harvard Medical School. His book, “The Checklist Manifesto: How to Get Things Right” examines the dangers of placing too much faith in your own intuition and the causes of failure in various fields. It offers great lessons on the importance of learning both from your own failures and those of others.

The late Edwin Friedman was a rabbi and family therapist. In his posthumously published “A Failure of Nerve: Leadership in the Age of the Quick Fix,” Friedman offers warnings about short-term thinking and following the path of least resistance. Friedman, like Margaret Thatcher, suggests that consensus is the absence of leadership.

It’s also a bad investment philosophy.

“Thinking, Fast and Slow” is Daniel Kahneman’s explanation of why most of us are hard-wired to make poor decisions – including about investments. The book demonstrates how people rely on unconscious biases and rules of thumb to make decisions in uncertain conditions.

Geoff Colvin’s “Talent Is Overrated” is a study of the habits and qualities of the most highly accomplished individuals in a variety of endeavors, including music, athletics, and business. Colvin agrees with the lessons taught by many athletic coaches: the desire to prepare to win is infinitely more important than the desire to win.

A couple of more traditional financial books are “Rich Dad, Poor Dad” and “The Millionaire Next Door.” These use both research and anecdotes to describe examples of healthy relationships between people and their money.

A much earlier book of this genre is “The Common Sense of Money and Investments,” first published in 1924. The author, Merryle Stanley Rukeyser, is the father of Knoxvillian Bill Rukeyser.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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