The Most Important Thing

What Would You Say?

“The generation of random numbers is too important to be left to chance.” Robert Covey. Well that is funny, but it isn’t really the topic I will discuss. The answer to what is “most important” depends on one’s perspective about life, the view of life’s purpose, and (at times) to the topic being discussed. I would argue that one’s soul is of first importance. Perhaps one might say, “my health” or something like “family.” Others might have vastly different things on their minds such as finding enough cash to buy groceries for today.

Jesus said something about priorities in most of what he said. For example, he said, “For what does it profit a man to gain the whole world and forfeit his soul?” Mark 8:36

In the broadest sense then, Jesus wants us to see our eternal destiny and relationship with God as most important. He wanted his listener to consider the risks associated with setting things at a higher importance than what they should be.

In the world of thoughtful investing, Howard Marks wrote a helpful book with the title THE MOST IMPORTANT THING.

The Most Important Thing

You might be surprised to discover that Mr. Marks lists twenty different things that are “most important” to a thoughtful investor. This should not come as a surprise. Even Jesus taught that there were many things to consider as more important than other things. He rebuked the Pharisees for putting higher importance on things that didn’t matter while they neglected things of even greater importance.

While I won’t discuss everything that Howard Marks says, I think his book can be of help in right thinking about how to invest in a world filled with multiple uncertainties. Therefore, I hope to make this a series where I hope to share what I thought was “most important” as I read each chapter.

Chapter One: The Most Important Thing is Second-Level Thinking

The first thing he reminds us of is that, in the world of investing (and parenting, and communication, and most other areas of life), no rule always works. The reason should be obvious. Things change over time, and we cannot know the future. The environment changes, psychology distorts our thinking and emotions drive us to do things in ways that are not logical.

Investing is not just a science of numbers and charts; it is also an art. Marks thinks it is more art than science. This means we must think differently about how we think. This also means that we don’t want to follow the herd. We must be perceptive in our thinking. This is second-level thinking. The herd often has only first-level thinking that doesn’t involve much thinking.

I often write posts that are focused on my Easy Income Strategy. However, the truth is there are elements of my strategy that are not easy. I have to think carefully about complex factors that cannot be distilled into a formula. In other words, it isn’t like baking a cake from a recipe.

What Are an Investor’s Choices?

We all face choices, or we ignore them to our peril. For example, one choice is to expect and accept average investment results. Brokerage firms want you to think that you can invest on your own by providing you with tools and research. That won’t really work for the average investor. Mutual funds want you to believe that they can do better than you can do on your own, and they are willing to charge you for their advice and the management of your portfolio.

Who Wins?

The second-level thinker has the better chance of winning. The second-level thinker has to take many different things into account when building a strategy, setting goals, and buying investments. I think this quote may help: “All investors can’t beat the market since, collectively, they are the market.” For every investor that makes a killing on crypto currency speculation, there are many who get destroyed. So you cannot do what everyone else is doing and expect to have results better than the herd.

The Next Chapter

The second “most important thing” is “Understanding Market Efficiency (and Its Limitations). Howard Marks says there is grave danger in wrong thinking about the efficiency of the market. Of course, I might decide something else is more important before I craft that post.

All scripture passages are from the English Standard Version except as otherwise noted.