Hi John,

Good questions all. I am going to answer you in a way you probably did not expect. I sense in your story and questions too great a movement away from your innate skills. I have an exercise in my book, The Intuitive Investor, entitled, "Your Cousin Vinny." The exercise goes like this: imagine your iffy cousin Vinny approaches you to invest $50,000-$100,000 in a coffee shop he wants to manage; you provide the monied equity and he provides the sweat equity. What questions do you want answers to before investing with your cousin Vincent? I have done this exercise with hundreds of people over the years and you know what (?), they never fail to list out the relevant questions. Because you grew up in a capitalist society - I am guessing either North America or Europe based on your English - you already know what it takes to understand businesses. The reason that you read, read, read, read is to begin to develop an understanding of how individual mosaic tiles (GDP of Spain, price of rubber, demand for cacao, unemployment in the US, and so forth) contribute to form one big narrative picture, as well as many smaller images within the big picture. It is from your view of the mosaic that pictures begin to emerge; i.e. investment ideas worth pursuing. Then, and only then, do you apply your tools.

When I was an investment manager I spent 90% of my time reading, 5% on administrative stuff, and 5% on analysis. Though, in earnings seasons, the time spent listening to conference calls was a high percentage of my time. Maybe, 6 times a year did I ever go to the trouble of developing a model for a company. My goal was that if a picture emerged from the mosaic - i.e. a possible business worth investing my shareholders' capital in - I wanted to wage intellectual war on the idea. That is, I put myself in the shoes of a competitor company. If I could not imagine a way to 'defeat' the company then, and only then, did I break out the company's 10-K and/or annual report to learn more about the business. In your questions above it seems that you have forgotten your innate capitalist instincts which is what frequently happens when the words and ideas stock and stock-market enter into your mind. Those two words are distractions. Your focus should be to understand the business and how it is vulnerable to competition, economic head/tailwinds and so forth. You go to the trouble of doing financial statement analysis to see if your understanding and vision of the company is reflected in its financial statements and as a check on the authenticity, candor, and honesty of management. If the company makes it past that gantlet then you go to the trouble of valuing the business. The only thing standing between a great business and a great stock is price. If you overpay for a great business you likely have a lousy investment.

How did I do all of the stuff you ask about? I spent almost all of my time working doing something. To me it did not feel like work most days as I was singularly interested in elevating my future, my future pay, and opening up my life to bigger possibilities. The most important thing here is not to just blindly read, read, read, read, but to build a permanent context into your consciousness: How does this relate to the world of investing? Then any activity, including taking a break to watch a TV show, or watch a movie, or read a leisure book, or going for a walk, or going out to dinner with a loved one, becomes related to investing. Example: after changing my world context/lens to that of an investor, I remember going to the grocery store and buying tortilla chips. I noticed that for the first time in my life there was more than just Doritos available. This meant to me that consumer tastes had permanently changed, that the Hispanic population finally was catching the attention of food manufacturers, and so forth. Each of these observations, in turn, had relevancy for other parts of the mosaic.

When I used to give talks to undergraduate and graduate students a common question was: how much time do you spend working? What most of them meant by the question was: how much time are you in the office 'doing?' I would always answer, "I work all of the hours of the week, but only 45 in the office." This is a true statement. By the time I retired, I was only working 45 hours in the office, but even a casual night out dining was an opportunity to build my mosaic. If you eat at a hotel restaurant, what is the traffic like in the lobby? What does this say about occupancy rates at hotels? Are those trafficking the lobby in suits? What does this say about business travel? What does this say about the state of business and of the economy? Is your waiter an unemployed PhD? If so, what does that say about the labor market? And on, and on, and on.

All of this to say: you need to begin thinking actively with all of that knowledge you are accumulating.

My last words to you: forgive yourself for not being perfect or for not walking on water. You are a human being with emotional needs, including time for rejuvenation, reflection, and creativity. So relax a bit, and you will be surprised how much better you become at all of the tasks you are trying to master. I promise.

With smiles,

Jason