Thank you for visiting the Fundamental Finance Playbook.
Due to the almost non-existent switching costs, people’s attention spans tend to be quite short when they read content on the internet. Therefore, it is good practice, when writing online content, to start at the end.
Hence, here is a short summary and conclusion about the Fundamental Finance Playbook:
- My name is Gisli Eyland and I am principal of this website.
- I publish thoughts and opinions on topics relating to investing and fundamental finance.
- These will primarily be stock write-ups or case studies on business and investing. My aim is that the write-ups can easily be consumed by both professionals as well as laymen, I try to refer to posts with primers on basic investing related topics for readers who do not have a background in finance.
- I’ve been making stupid decisions all my life, so you should not consider anything I write to be neither investment advice nor a recommendation (caveat emptor).
- If you think I’m wrong, I’d love to know. So, get in touch or reach out on my Twitter account.
The Salvation of Doubt
I think the main element that drew me the most to active investing is the element of uncertainty.
In the book Out of the Gobi, Weijian Shan tells the story of his experiences during the cultural revolution in China. During the revolution, rebels would be so sure in their conviction, that lack of facts or evidence where not let get in the way of the correct cause. The effect of high conviction extends itself far beyond political ideology.
When you invest as a minority shareholder into public stock, your thesis or opinion really does not matter. Nobody gives a shit. It has no impact on reality. This is the core difference between investing in a business and running a business. Entrepreneurs, just like cultural revolutionaries, must have conviction in what they are doing. Their actions will have an impact on the outcome.
As a minority investor, you are either right or you are wrong. You can build up and validate your theories and beliefs, but your conviction will have no impact on the outcome of your investment. If anything, a strong conviction in your investment idea will amplify cognitive biases that could end up hurting you. The only thing the investor has is doubt and uncertainty. They only thing you can do is to make sure it won’t wipe you out to be wrong.
One of my favourite quotes comes from the great Richard Feynman: “When you doubt and ask it gets a little harder to believe. You see, I can live with doubt and uncertainty and not knowing. I think it’s much more interesting to live not knowing than to have answers which might be wrong. I have approximate answers and possible beliefs and different degrees of certainty about different things but I’m not absolutely sure of anything and then many things I don’t know anything about.”
Proof me wrong
In light of this, I guess you could say that the reason I started the Fundamental Finance Playbook is partly because of some purely masochistic tendency. Obviously, whether I think some stock will do great over some period of time will not make it so. And prognosticating so online for anyone to see, will only expose me to looking ridiculous and stupid when I am wrong.
I recently read Jeff Bezos’ 2019 letter to Amazon shareholders. In it, Bezos talks about 6-page memos that Amazon team members are required to write when pitching new projects. He says:
“We don’t do PowerPoint (or any other slide-oriented) presentations at Amazon. Instead, we write narratively structured six-page memos. We silently read one at the beginning of each meeting in a kind of “study hall.” Not surprisingly, the quality of these memos varies widely. Some have the clarity of angels singing. They are brilliant and thoughtful and set up the meeting for high-quality discussion. Sometimes they come in at the other end of the spectrum.
In the handstand example, it’s pretty straightforward to recognize high standards. It wouldn’t be difficult to lay out in detail the requirements of a well-executed handstand, and then you’re either doing it or you’re not. The writing example is very different. The difference between a great memo and an average one is much squishier. It would be extremely hard to write down the detailed requirements that make up a great memo. Nevertheless, I find that much of the time, readers react to great memos very similarly. They know it when they see it. The standard is there, and it is real, even if it’s not easily describable.”
After reading this, I decided to retroactively – just about a century after I acquired the Fundamental Finance Playbook domain – change the stated purpose of this website. My objective with the Fundamental Finance Playbook is to publish out narrative memos on whatever investment ideas that I have been thinking about. But instead of sharing it with a team, I’ll share it with anyone who happens to wander into this online study hall.
To reiterate, just because I think something, it won’t make it so. I’m not selling anything and whether you are sold on an idea or not will not have any impact on my financially or impact the outcome of the investment thesis. But if you disagree and would like to prove me wrong, I would love to hear it. You can use the comment section, contact me by email, or through my twitter account.
I recently read a funny fintwit exchange the other day, between Jim O’Shaughnessy and Dan McMurty. Jim posted that “if you don’t know the right answer to something, simply post the wrong answer on Twitter”, to which McMurty replied: “My favourite research technique when needing highly technical expertise is to find the appropriate online community (usually reddit) and post the most wrong answer with very cocky wording. People will write you a PhD paper explaining how wrong you are + right answer, with citations.”
So, dear reader, I thank you again for venturing onto this website and invite you to read and disagree.