Source: Barron's Chinese
Author: William Green
Beating the market is a game that favors intelligent eccentrics.
As investors, most of us may envy the remarkable performance of investment gurus, but we might not necessarily envy their lifestyles. For instance, Buffett, despite being the richest person in the world, has lived in an old house for decades and does not indulge in material pleasures. What if these two aspects are inseparable?
William Green, author of 'Richer, Wiser, Happier: How the World's Greatest Investors Win in Markets and Life,' observed that these exceptional investors often differ in their thinking and lifestyle as well, allowing them to enjoy financial success while inevitably paying the price of solitude. This excerpt is from Chapter Two of the book, titled 'The Willingness to Be Alone.'
Over two decades ago, while strolling on a beach in the Bahamas, I happened to catch sight of a peculiar scene: an elderly man wearing a long-sleeved shirt, a comical hat, a face mask, earmuffs, with seawater up to his neck, and thick layers of sunscreen smeared across his face. I hid behind a palm tree to avoid being noticed while observing him. After several minutes of watching him move his arms and legs back and forth, struggling against the water’s resistance, I later learned that he did this every day for 45 minutes.
This elderly man was none other than the renowned Sir John Templeton, arguably the greatest international investor of the 20th century. I had flown from New York to the Bahamas to interview him at his home in Lyford Cay, an exclusive community whose residents included Prince Rainier III of Monaco, the Aga Khan, and Sean Connery. If memory serves me right, we met the following day. It was a dream assignment for any journalist—interviewing a legendary figure in a foreign land, with all expenses covered by a wealthy magazine publisher.
Templeton's investment record was extraordinary. Founded in 1954, the Templeton Growth Fund achieved an average annual return of 14.5% over 38 years, meaning an initial investment of $100,000 would have grown to over $17 million. Born in 1912 in a small town in Tennessee, Templeton started from humble beginnings and became a billionaire. I wanted to understand how he achieved this, and what others could learn from his experience.
When I met him at the age of 85, he was already considered the elder statesman of the investment community. I had expected him to look saintly, but instead, I found myself captivated by the image of him marching through the waves wearing that absurd hat—it was truly unbelievable! However, I eventually realized that my glimpse into his fitness routine offered valuable insight into his greatness. Templeton devised an effective method of exercising freely while dressed in elaborate gear, and while everyone thought he looked odd, it didn’t affect him. Ignoring others’ opinions was crucial to his success.
Michael Lipper, president of Lipper Advisory Services, once told me that Templeton, George Soros, and Warren Buffett all shared a precious trait: 'They are willing to be alone, willing to take positions others don’t favor. They hold steadfast to beliefs that many lack.'
For years, the phrase 'willing to be alone' lingered in my mind, vividly capturing this important concept: the best investors are always different. They are unconventional, independent, and eccentric; their perspectives on the world diverge from the norm, and their unique paths manifest not only in their investment strategies but also in their thinking and lifestyles.
François Rochon, a fund manager based in Canada who has significantly outperformed the market over the past 25 years, proposed an intriguing theory. As widely known, the human genetic code evolved over hundreds of thousands of years to prioritize survival. One lesson learned at least 200,000 years ago was that belonging to a tribe was safer. Rochon explained that when threatened, this unconscious instinct will surface—for example, during a stock market crash, ordinary investors, seeing others panic-selling, instinctively follow the crowd and sell their stocks, seeking refuge in cash. These followers fail to recognize the counterintuitive reality: with stocks being dumped at low prices, it may actually be the best time to buy.
"But I think some people lack this tribal gene," Rosen said. "So they don't have the impulse to follow the group. Their ability to think independently is precisely why they become excellent investors." Rosen uses his stock-picking talent to fund his passion for art collection, and he suspects that many artists, writers, and entrepreneurs also lack the tribal gene.
Rosen’s theory cannot be proven, but there is substantial individual evidence suggesting that the behavior of top investors may improve their financial outcomes in unconventional ways. A well-known investor who wished to remain anonymous told me that many successful peers exhibit symptoms of Asperger's syndrome and are "not easily emotional." He noted that being "not easily emotional" is an advantage when making unconventional bets that others might consider foolish. He added that individuals with developmental conditions like Asperger’s syndrome often "excel in other areas, mostly computational abilities... Being unemotional and having strong computational skills form the most advantageous combination for investing."
I mentioned this concept to another highly successful fund manager, who is mathematically gifted but feels extremely uncomfortable in social settings. He revealed, "When I was a child, my parents worried that I might have autism or Asperger’s syndrome. I think they eventually concluded that I didn’t have these conditions, or at least the symptoms weren’t severe enough to matter, so perhaps I was on the borderline." He then recalled a traumatic childhood experience that had a devastating impact on him, leading him to stop expressing his emotions freely. "So, if you think I’m eccentric, you might be right."
Christopher Davis has the most authoritative voice on this issue. He manages approximately $25 billion in assets at Davis Advisors, a firm his father founded in 1969. He is friends with renowned investors such as Buffett, Munger, Mason Hawkins, and Bill Miller, and is highly skilled at observing the traits of the most successful investors. Moreover, his grandfather Shelby Cullom Davis and his father Shelby M. C. Davis are legendary figures in the investment world, having amassed vast wealth through stock investments.
Davis said, "One essential characteristic of great investors is that they are not swayed by others’ opinions." The simplest way to avoid being influenced by others’ ideas is to disregard them entirely. Davis remarked, "If you don’t pay attention to or care about what others think, you are more likely to become a great investor."
Most outstanding investors have relatively low emotional intelligence. He observed that many top investors struggle to 'connect with others' and 'maintain warm family relationships.' In contrast, many CEOs exhibit a completely different psychological profile; they need high emotional intelligence to empathize with others, understand their thoughts, and influence them. However, for a contrarian investor, 'when your decisions are constantly swayed by others’ opinions, the result will be catastrophic.'
Many CEOs participate in team sports, serve as captains, or lead clubs, but what about the best investors? "Generally speaking," Davis said, "they prefer individual sports like running, tennis, golf, or swimming. They don’t favor team sports like football or hockey."
His father, Shelby Davis, an investment titan in his eighties, grew a $100,000 investment into approximately $3.8 million during his 28-year tenure as the manager of the New York Venture Fund. So, does his psychological profile align with his son’s description? "My father was a very solitary person," Davis said. "I can’t imagine him participating in team sports, becoming the president of a club, or leading a nonprofit organization. He was constantly searching for information, questioning subordinates, and reading annual reports. It was lonely work. I mean, he was always on the phone or reading stacks of annual and quarterly reports by himself."
His description reminded me of Buffett’s polite response to Mohnish Pabrai, who offered to work for him for free. Buffett replied, "I can make the best decisions on my own." In fact, Buffett often spends time alone in his Omaha office reading annual reports, with the curtains drawn. He enjoys the tranquility of solitude.
Beyond these commonalities, there are many exceptions and nuances. I’m not suggesting that all great investors have developmental disorders or lead lonely lives destined for divorce (although many divorced investment giants include Munger, Miller, Pabrai, Bill Ackman, Carl Icahn, David Einhorn, and others), as that would be an exaggeration. Additionally, labeling every quirk or unusual behavior as a disorder is foolish.
Nevertheless, despite such warnings and disclaimers, I still believe it is an undeniable fact that all the investors introduced in this book are independent free thinkers. They possess the rare ability to challenge conventional wisdom, and they care more about making correct judgments and achieving success than gaining societal approval.
Matthew McLennan, who manages over 100 billion US dollars at First Eagle Investment Management, described his work as follows: "Every day you are trying to understand how the world works from both the bottom-up and top-down perspectives, and every day you try to look at the world in a way that goes against conventional thinking... In the end, we get to observe the world from a different perspective."
The only way to outperform the market is to deviate from it, a task best suited for individuals with extraordinary intellect and character. Thus, it is a game that favors smart eccentrics. From my experience, no one was smarter or more unconventional than Sir John Templeton. A pioneer of global value investing, he had his own set of principles and practices which, to this day, can greatly benefit any investor.
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Editor/Rice