When I watch experienced investors doing interviews on a Zoom call from home, I at all times hope to catch a glimpse of the books on the shelves behind them. I’ll pause the video and check out to decipher the tracks of their personal libraries. Maybe, just possibly, reading what they read will help me (and also you) think slightly more like them.
Recently, I spoke with outstanding investors and asked them an easy query: What books should someone read in the event that they wish to grow to be a greater investor? Their answers were far-reaching and practical. What follows are their recommendations, edited for clarity.
Start with the fundamentals: numbers and clear pondering
David Abrams, founding father of Abrams Capital, recommends a brief book by John Allen Paulos. “People don’t understand how numbers work,” he says. For Abrams, the “first step” in investing is becoming more comfortable with numbers. Without that, he argues, “you won’t make much progress in finance.” You don’t should be a “brilliant mathematician,” but you do need to grasp “something about numbers and how math works.” On this basis, he adds, “financial things then become easier.”
He also recommends by Matthew Syed. The title refers back to the black box in airplanes. What Abrams is saying is that the airline industry records and investigates its mistakes, unlike many industries that bury them, comparable to medicine. For those all in favour of self-improvement, he believes it’s a priceless idea to think about. The book also argues that sometimes it’s as necessary or much more necessary to have a look at the information that just isn’t obvious than the information that is clear.
Think about human behavior
William Bernstein, co-founder of Efficient Frontier Advisors, recommends two books. One of them is Joe Henrich. “It’s about people – how we function, how our brains work and how different societies function.”
The other isby Philip Tetlock, who examines what separates good forecasters from bad ones. “What you really learn is that there are almost no good forecasters,” he notes.
Wisdom from the “Oracle” himself
Abrams and Tobias Carlisle, founders of Acquirers Funds, recommend reading Warren Buffett . They’re available without cost online and reading them is like getting an MBA, Carlisle says.
“I think a lot of the things they teach in the MBA are silly – and I got a business degree,” he jokes. “They taught me a lot of silly stuff that kind of led me down the wrong path. But I was lucky enough to have read Buffett’s letters when I was about 17.”
Ric Dillon, founding father of Vela Investment Management, also recommends Buffett’s letters, but in a curated version. “For people who find themselves really all in favour of investing is the perfect book” he notes. Lawrence Cunningham, the book’s creator, has compiled many years of Buffett’s letters right into a coherent roadmap for sound investing and robust corporate governance.
“It’s invaluable,” he says, adding that while he did, “you don’t have to read it cover to cover.” At one point, he went to the Barnes & Noble bookstore, bought all of the copies, and gave them to his board members and executives. “It is by far the best book I have ever read on finance in general and investing in particular.”
Adapt to complex, changing markets
Bernard Horn, founding father of Polaris Capital Management, suggests Andrew Los’s book . Investing is like sailing, and the wind is continuously changing, he says. “The conditions and environment in which you invest are constantly changing and becoming more demanding over time. We live in a world where things change very quickly.” He points out that advances in technology and science are occurring in a short time.
“If you don’t continue to learn throughout your career, someone else may take advantage of you. It’s a competition. You have to keep evolving.”
About cognitive behavior, discipline and strategy
Barry Ritholtz, founding father of Ritholtz Wealth Management, says Daniel Kahnemanis the primary book he recommends to anyone asking for a book on investing. “You realize that your brain is part of the problem. It’s not the Federal Reserve, it’s not the secret cows that control the market. It’s your brain. You weren’t designed for this – you were designed to survive in the Savannah.”
A second advice, that of Charlie Elliscompares investing to playing tennis. 99.9 percent of tennis players are amateurs; only a tiny fraction are professionals, he says. “And pros win in a very specific way – they serve aces, hit with power, draw the lines and take elegant drop shots.”
This is in contrast to how amateurs play and win, he notes. “We double-fault. We hit the ball into the net. We try a fancy shot and miss. Most amateur games aren’t won by scoring points – they’re lost by unforced errors.”
If you deal with staying inside your limits, returning the ball, and avoiding mistakes, you will achieve success in tennis – and even higher in investing. Problems arise when investors imagine they will at all times select winning stocks or superior fund managers. Most people cannot.
Warnings every investor should know
Roger Lowenstein is an interesting book, says Tom Sosnoff, founder, thinkorswim and tastetrade. “It’s about long-term capital management and the Nobel Prize winners who wrote the Black-Scholes model and then almost blew up the markets.”
He also recommends by Fred Swede. Essentially, it is a tour of Merrill Lynch’s old offices in Battery Park overlooking the Hudson River. A Merrill guy shows a visitor all the Wall Street guys’ yachts. The visitor looks out and asks: “Well, where are the customers’ yachts?” The Merrill guy replies, “Yeah… there’s none of that here.”
It’s a reminder that intelligence, role models and prestige cannot protect you from reality. It’s an absolute Wall Street classic.
Stay curious, humble and agile
Taken together, the recommendations point to an easy idea: Becoming a greater investor requires stronger judgment, mental curiosity, humility, and a willingness to learn from history.
