For the last eighteen months, I’ve been learning to play the piano. It’s been a humbling experience, with many skills to master. I was chatting about this to a friend a few days ago and happened to reflect on how in many ways there are similarities with investing.
When you’re playing the piano you can’t get too focused on one thing, a piece of music is comprised of notes, rhythm, pace, duration, dynamics, and much more. If you focus on one aspect without considering the wider context, you’ll never deliver a competent performance. When you’re assessing a company for a potential investment, it’s advisable to look at the whole context they’re operating in – do they have a strategic vision and is there a quality leadership team to deliver that vision; how big is their total addressable market, and what penetration do they have today; how strong is their brand, do they have intellectual property or other aspects of a moat. At Telescope Investing, we look at companies through these and many other lenses, and just like with performing a piece of music, if you focus on one aspect to the exclusion of all others, you’re bound to miss something crucial that may inform your investing thesis.
To become truly adept at playing an instrument, you have to learn to read a whole new language, with strange hieroglyphics and a notation that’s baffling to a novice. There are even ratios that tell you how fast you should perform, and when you should rest. The investing world is similarly littered with technical terms that help you understand a company’s financial performance and forecasts. Both world also almost share a common language – many musical directions are notated in Italian, and Latin can be common in financial ratios!
Listening skills are critical to both music and investing – you can understand a piece of music better by hearing others perform it and you can analyse a company by soliciting a range of views, ensuring you understand both the bull and the bear case.
But above all, in both fields, you need perseverance, discipline, and patience to succeed. If you allow yourself to become frustrated, or push too hard and too fast, you’ll develop incorrect muscle memory, and will grow in ways that limit your long-term results. Investing is exactly the same. If you don’t have a plan, you’re reacting rather than responding to market events. You’ll allow your emotions to guide your investment decisions, and you’ll learn the wrong lessons from your trades.
I’m a long way from being a competent pianist, and I’m very inconsistent when I sit down in front of the instrument. Some days are terrible and nothing comes together, and other days I almost get a compliment from the wife. I’m sixteen years further ahead on my investing journey, but every day in the markets can be just as surprising and volatile. Just when you think you have an investment figured out, something unexpected can wildly disrupt the thesis, for better or for worse, and you’re granted an opportunity to learn more, and hopefully to improve your future decisions.
By approaching the piano and investing with a learning mindset, over the long-term I know I’m improving – the songs gradually become more recognisable, the portfolio value erratically rises – and in both fields there’s less swearing! Day by day, month by month, year by year, I’ll get there eventually.
