More More Than You Know: Finding Financial Wisdom in Unconventional Places… (edition 2007)

Understanding modern financial markets is not a job for the faint of heart. For all of the intellectual firepower that has been brought to bear on the topic, it really is remarkable that there is still so much that remains unknown about the fundamentals of investing. The premise of this illuminating collection of essays is that lessons from disciplines as diverse as psychology, strategic management, fractal analysis, and even evolutionary biology can greatly aid our effort to understand how investors assess a company’s ability to create or destroy value.

Mauboussin is largely successful in making the case that investment analysis in the new millennium needs to be a multidisciplinary activity. The book is packed with examples of where advances in other areas find parallels in security valuation and portfolio management (e.g., complexity theory, the study of fruit fly life cycles). On the other hand, the author is content to simply point out these connections without also offering any insights as to how investors might exploit that knowledge; for instance, after noting that distributions of firm size and growth are comparable to how animal species develop, he concludes that “mindful investors should take these patterns into account.” Nevertheless, this is a thoughtful and original treatment that should stimulate further collaborative work in the area. ( )

Every once in a while, the Muses conspire to change the things you do.

For years, when asked for a recommendation of an investment book, I responded that “Reminiscences of a Stock Operator” provided insights each time I read it.

The list is now longer. “More than You Know” by Michael J. Mauboussin has been added.

The author, in 50 insightful essays, draws from the latest in behavior economics and cognitive sciences to give the reader invaluable insights into the concepts of risk and choice.

His investment strategies are sound. They draw from creative thinkers as diverse as Warren Buffett and Steven Christ; they borrow from activities and fields as diverse as casino gambling and evolutionary biology.

Mauboussin believes a multidisciplinary approach based on process and psychology offers the best opportunity for long-term investment success. He breaks his book into four sections: Investment Philosophy, Psychology of Investing, Investment and Competitive Strategy and Science and Complexity Theory. Although his essays are insightful, he provides a thorough bibliography to guide future study.

Why the Muses moved to place this book in my hands last week, I do not know. But I am grateful they did. This book is a trove of knowledge and ideas. It is a must-read for anyone who takes their investing seriously. ( )