At an investing conference a couple of years ago, I was asked to talk about how my first career as a business journalist prepared me for life in investing.
My answer, half jokingly, was that the best reporters and the best investors have a lot in common: a high threshold for pain, anti-social behavior, and a strong BS detector.
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A more serious answer goes something like this: I think business reporting is a fantastic starting place for an aspiring investor. It teaches you how to ask good questions, how to write and layer information, and ultimately how to think critically. It revealed to me that the reality we perceive around us—the stories we tell ourselves about the past, present, and future— are constructed by subjective viewpoints that are constantly evolving—and inherently flawed.
Ask 10 investors what they think of a business, and you’ll get 10 different answers. Stock prices fluctuate far more rapidly than the intrinsic value of the businesses they represent. In other words, stock prices—like a news article—offer an incomplete version of reality. Good reporters (and good investors) realize that going deep is the only way to get to the truth.
Of course, doing so requires an immense amount of independent work and toil. There are no shortcuts—no relying on someone else’s work. You must use primary sources. This is true in investigative journalism, but even more important in investing. Fact-checking is essential. Detective work is table stakes. Skepticism ensures survival. My favorite journalism credo is this: “If your mother says she loves you, check it out.”
The conviction afforded by intensive primary research has a specific goal. It allows you the fortitude to defend your position when times get tough, or when it’s challenged. For reporters, having a bullet-proof story is necessary to withstand challenges from upset sources. For investors, this type of research is necessary to withstand the inevitable drops in stock price.
Truth is the common denominator. If the truth is on your side, you win. And so the link between reporting and investing boils down to one simple idea: Getting the story right. It may seem hackneyed, but over the long-term, success in both fields hinges on truth. That’s what good reporters—and good investors—strive for over the course of their careers.
If I learned anything from journalism that I apply to investing and investment research today, it’s a few nuggets of potential wisdom—and potentially some advice—I picked up along the way:
The inverted pyramid of importance
The inverted pyramid of news reporting will be familiar to any cub reporter.
Source: Wiki
The basic idea is that a well-written news story correctly layers the most important information at the top of the story.
Writing business news stories repeatedly—I’ve written hundreds—forces your mind to think in a particular way. Specifically, whenever you’re encountering an event, you begin to process information in an attempt to “layer” details in order of importance. You’re asking what is actually important here, versus what is secondary. “Writing is thinking,” the historian David McCullough once said. “To write well is to think clearly. That’s why it’s so hard.”
As an investor, writing clearly is a remarkably important skillset, especially in an environment that has increasingly high velocity of information thrown at you. To be able to clearly identify the “most important” elements of any given story, event, or scenario is a deeply important component to managing information flow and making good decisions.
An understanding of what drives news and information
Watching CNBC or even reading the WSJ does not make you a better investor. In fact, it most likely makes you a worse investor over time. Want to improve your investing results? Spend more time reading technical trade publications, talking to suppliers and customers, and going out to trade shows.
Business reporters are like Wall Street analysts—overworked, stressed, and continuously coming out with output to “feed the beast.” The forced nature of the 24/7 news cycle means that many headline-driven events are often immaterial to a company’s fundamental long-term value.
Learning to filter noise vs. signal
The only way to effectively discriminate between noise and signal and get down to the fundamental truth on any given subject is to become a world-class expert in that particular domain.
If you are investing in a highly visible asset class, you will see a constant news flow of information. Being able to curate noise from signal is incredibly important, but only made possible by a deep understanding of the industry you are studying.
The ability to read people and ask tough questions
Sometimes simple conversations with a company’s customers reveal a more complete picture that you can’t pick up in a financial statement. The same goes with speaking with company management or investor relations: the ability to ask good questions is a remarkably under-rated skillset as an investor.
Very often, finding the question that management seeks to avoid is, itself, the best form of company research.
Avoiding opinion while maintaining a perspective
This is a harder lesson to teach, but investigative reporting teaches the importance of beginning each story with a perspective, but not necessarily an opinion.
As an investor, you want to approach every company with an unbiased perspective, but with a point of view about the future you imagine to be the most likely scenario.
Being skeptical—but not cynical—and always curious
Listening to company management on earnings calls, shareholder events, and other industry conferences are important—to an extent.
As a reporter, it’s imperative to be skeptical of what people say, but not so skeptical that you discount the possibility of something being entirely truthful. Above all, to remain successful over the course of a career, one must need almost dogmatically curious.
As Warren Buffett once said about investing but similarly applies to journalism: “You need a lot of curiosity for a long, long time.”
**Disclosures:** This has been prepared for information purposes only. This information is confidential and for the use of the intended recipients only. It may not be reproduced, redistributed, or copied in whole or in part for any purpose without the prior written consent of Nightview Capital. The information contained in this article is distributed for informational purposes only and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Certain economic and market information contained herein has been obtained from published sources prepared by other parties. While such sources are believed to be reliable for the purposes used herein, Nigthview Capital does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Nigthview Capital considers to be reasonable.
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What Investigative Journalism Taught Me About Investing
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By: Eric Markowitz
@EricMarkowitz
At an investing conference a couple of years ago, I was asked to talk about how my first career as a business journalist prepared me for life in investing.
My answer, half jokingly, was that the best reporters and the best investors have a lot in common: a high threshold for pain, anti-social behavior, and a strong BS detector.
Sign up below to receive The Nightcrawler, a weekly investing newsletter by our Director of Research, Eric Markowitz.
Error: Contact form not found.
A more serious answer goes something like this: I think business reporting is a fantastic starting place for an aspiring investor. It teaches you how to ask good questions, how to write and layer information, and ultimately how to think critically. It revealed to me that the reality we perceive around us—the stories we tell ourselves about the past, present, and future— are constructed by subjective viewpoints that are constantly evolving—and inherently flawed.
Ask 10 investors what they think of a business, and you’ll get 10 different answers. Stock prices fluctuate far more rapidly than the intrinsic value of the businesses they represent. In other words, stock prices—like a news article—offer an incomplete version of reality. Good reporters (and good investors) realize that going deep is the only way to get to the truth.
Of course, doing so requires an immense amount of independent work and toil. There are no shortcuts—no relying on someone else’s work. You must use primary sources. This is true in investigative journalism, but even more important in investing. Fact-checking is essential. Detective work is table stakes. Skepticism ensures survival. My favorite journalism credo is this: “If your mother says she loves you, check it out.”
The conviction afforded by intensive primary research has a specific goal. It allows you the fortitude to defend your position when times get tough, or when it’s challenged. For reporters, having a bullet-proof story is necessary to withstand challenges from upset sources. For investors, this type of research is necessary to withstand the inevitable drops in stock price.
Truth is the common denominator. If the truth is on your side, you win. And so the link between reporting and investing boils down to one simple idea: Getting the story right. It may seem hackneyed, but over the long-term, success in both fields hinges on truth. That’s what good reporters—and good investors—strive for over the course of their careers.
If I learned anything from journalism that I apply to investing and investment research today, it’s a few nuggets of potential wisdom—and potentially some advice—I picked up along the way:
The inverted pyramid of importance
The inverted pyramid of news reporting will be familiar to any cub reporter.
The basic idea is that a well-written news story correctly layers the most important information at the top of the story.
Writing business news stories repeatedly—I’ve written hundreds—forces your mind to think in a particular way. Specifically, whenever you’re encountering an event, you begin to process information in an attempt to “layer” details in order of importance. You’re asking what is actually important here, versus what is secondary. “Writing is thinking,” the historian David McCullough once said. “To write well is to think clearly. That’s why it’s so hard.”
As an investor, writing clearly is a remarkably important skillset, especially in an environment that has increasingly high velocity of information thrown at you. To be able to clearly identify the “most important” elements of any given story, event, or scenario is a deeply important component to managing information flow and making good decisions.
An understanding of what drives news and information
Watching CNBC or even reading the WSJ does not make you a better investor. In fact, it most likely makes you a worse investor over time. Want to improve your investing results? Spend more time reading technical trade publications, talking to suppliers and customers, and going out to trade shows.
Business reporters are like Wall Street analysts—overworked, stressed, and continuously coming out with output to “feed the beast.” The forced nature of the 24/7 news cycle means that many headline-driven events are often immaterial to a company’s fundamental long-term value.
Learning to filter noise vs. signal
The only way to effectively discriminate between noise and signal and get down to the fundamental truth on any given subject is to become a world-class expert in that particular domain.
If you are investing in a highly visible asset class, you will see a constant news flow of information. Being able to curate noise from signal is incredibly important, but only made possible by a deep understanding of the industry you are studying.
The ability to read people and ask tough questions
Sometimes simple conversations with a company’s customers reveal a more complete picture that you can’t pick up in a financial statement. The same goes with speaking with company management or investor relations: the ability to ask good questions is a remarkably under-rated skillset as an investor.
Very often, finding the question that management seeks to avoid is, itself, the best form of company research.
Avoiding opinion while maintaining a perspective
This is a harder lesson to teach, but investigative reporting teaches the importance of beginning each story with a perspective, but not necessarily an opinion.
As an investor, you want to approach every company with an unbiased perspective, but with a point of view about the future you imagine to be the most likely scenario.
Being skeptical—but not cynical—and always curious
Listening to company management on earnings calls, shareholder events, and other industry conferences are important—to an extent.
As a reporter, it’s imperative to be skeptical of what people say, but not so skeptical that you discount the possibility of something being entirely truthful. Above all, to remain successful over the course of a career, one must need almost dogmatically curious.
As Warren Buffett once said about investing but similarly applies to journalism: “You need a lot of curiosity for a long, long time.”
**Disclosures:**
This has been prepared for information purposes only. This information is confidential and for the use of the intended recipients only. It may not be reproduced, redistributed, or copied in whole or in part for any purpose without the prior written consent of Nightview Capital. The information contained in this article is distributed for informational purposes only and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Certain economic and market information contained herein has been obtained from published sources prepared by other parties. While such sources are believed to be reliable for the purposes used herein, Nigthview Capital does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Nigthview Capital considers to be reasonable.
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