I have noticed that most of us put ourselves in categories of intellectual strengths and assume that means that certain abilities or fields are out of our reach. When I was little I was artsy fartsy. I loved to draw, write, dance, read novels and hated math and science classes. My mom started homeschooling us when I was in fourth grade as a result of my disaster of a third grade. I learned nothing the entire third grade year. I had four different home room teachers who left big gaps where the previous teacher left off. Math was the worst of the classes – and as any teacher knows, third grade is an important year for math. If I actually learned something in that year I learned it wrong. My mother, thankfully, made me repeat all of the third grade math before I could move on to fourth grade math.
I had already decided that I was a right brained, creative type and that math was never going to be strong for me.
My mother, a formidable character who loves to study, did not find this acceptable. Draw, read, write, dance – that was all great, but math (and science) was going to be a part of the tools in my toolbox. During this and all of the math education that followed that year I realized that I could use my learning style, and strengths to learn my weak subjects. I parsed all math (not just word problems) as is it were a narrative. For a creative kid long division just looks like boring data that has no personality – no Mr. Darcy to get to know, no Gandalf to show me my inner strength – just cold numbers, that represented nothing.
Dollar signs made my math problem a narrative. (Use whatever tricks your brain into being interested in the subject – cakes, shoes, butterflies. For me it was dollars.)
At the end of it I could imagine Mr. Darcy’s “10,000 a year!” or the mountain of gold under Bilbo’s dragon. The numbers became relevant info. It didn’t change the actual math I was learning, but it made me interested enough to find the answers. I was good at math from that point on. If it hadn’t been for my Mom seeing to my educational gaps I would, even now, assume that anything heavy in numbers was out of my reach.
This is how I approach the companies I want to invest in. I am still artsy and right brained, so I find the story of the company (which does include numbers). Does the company do something that interests me? Do I understand it? Does it improve the world? Individuals’ lives? Is it responsible with resources? If those answers are favorable I consider it worth more story development. Next, move on to the company’s leadership.
Is the CEO a collosal douchebag? (See my last blog post for more on this.) Does the CEO use plain, understandable speech when she’s describing the future of the company? Does he seem over his head? Does he take ownership and responsibility when the company falls short of growth goals? I watch him/her in YouTube interviews and imagine that he/she is chatting up my sweet, vulnerable, unlucky in love friend. Is my instinct to get my friend away from him/her or did she finally meet someone nice? (Use your own experiences to read the person in charge. It has the added benefit of turning all the douchebag encounters you’ve ever had into something useful.)
If those first two stages of inquiry turn out pretty favorably then you look at the numbers. Look at annual reports (creative types, keep this in the narrative space so it stays interesting). Can they pay off their debt in three years or less? Have they grown steadily over the last ten years? Read Phil Town’s book, Rule #1 and use his checklist. In that book you learn how to determine the value of the shares. Once you’ve done that determine if the price is more or less than that value.
Stories are easier to remember than a series of data points. Once you’ve told the whole story and decided how much it is worth wait until the share price is half that. If it is a good company it will grow to its value and probably beyond. Keep up with the narrative of your company. Make sure it stays the nice guy you’d like to see with your friend and if it doesn’t boot it to the curb.
The whole story is necessary to be a responsible investor. As a “right brained thinker” or “creative” or whatever you’d call it you are in an excellent position to see beyond the numbers to the whole story. It is an advantage, not an obstacle.
Investing books for “words not numbers” types:
The Rebel Allocatorby Jacob Taylor. This is actually a novel that has a mentor/mentee relationship as the central plot. You accidentally learn how business works while you are watching the story unfold.
Investedby Danielle and Phil Town. Danielle Town is a lawyer who has learned to invest from her father. She is a “words” person, not a “numbers” person. Her journey through investing is the perfect read for the creative who wants to invest.
The Education of a Value Investorby Guy Spier. This is a great book to be inspired by the positive impact that investing in great companies can have. It is the strongest way of voting with your money and keeping your companies responsible. I’ve read it several times and get inspired every time.
*btw if you purchase via these links I will get a tiny commission.
Also, watch the YouTube video of Charlie Munger explaining the 4 rules of investing.