The thinking investor's advantage

Recently, I was reading an essay by Paul Graham, the tech investor and co-founder of Y Combinator, where he makes a striking prediction about writing in the age of AI. Graham suggests that in a couple of decades, there won't be many people who can write well. With AI tools readily available to handle most writing tasks, he predicts a world divided into 'writes and write-nots' - those who choose to maintain and develop their writing abilities and those who completely delegate it to AI.

Graham, known for his incisive analysis of technology trends, makes a great observation: "Writing is thinking." He quotes computer scientist Leslie Lamport, who puts it even more bluntly: "If you're thinking without writing, you only think you're thinking." This means that the division Graham predicts isn't just about writing but thinking ability.

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This insight perfectly mirrors a fundamental truth about modern investing that many struggle to grasp. Just as AI tools can mask but not replace the need for clear thinking, investment apps and platforms can mask but not the need to understand basic financial concepts.

Consider someone just starting their investment journey. Today, they're immediately presented with an array of sophisticated-looking investment apps, each promising to make investing as easy as ordering food online. These apps offer beautiful charts, one-click investing, and AI-powered recommendations. The interface is slick, the execution is seamless, and the experience feels empowering.

However, just as using AI to write doesn't teach you how to think clearly, using investment apps doesn't teach you how to understand value, risk, or market behaviour. The tools can execute your decisions perfectly but can't help you make wise decisions.

I've seen countless investors make this mistake. They master the tools but not the principles. They can navigate complex trading platforms but can't explain why a company's stock price might be too high or too low. They can execute sophisticated options strategies but don't understand the fundamental risks they're taking.

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This insight is particularly relevant in today's market environment. With the markets having gone through a year of significant volatility, many investors are drawn to tools promising to help them 'optimise' their trading or 'time' their investments. Whether the market is near its peak or in a dip, there's always a new app or platform promising to make you a better investor. However, as Graham warns about the danger of outsourcing our thinking to AI, we should be wary of outsourcing our investment thinking to apps and platforms. The key to successful investing isn't about having the most sophisticated tools - it's about developing and maintaining a fundamental understanding of what you're doing with your money.

I'm saying this as someone who has spent decades building tools to help investors make better decisions. At Value Research, we've evolved from print magazines to websites to apps, always striving to make investment information more accessible and actionable. However, I've always maintained that these are tools for supporting investment thinking, not replacing it. The best users of our services are invariably those who use our data and analysis to enhance their understanding, not those looking for quick answers without comprehending the underlying principles.

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Like the most important aspects of writing, the biggest investment gains come from clear thinking. Understanding why and what you're investing in and how different investments behave under various conditions is crucial - these insights can't be delegated to an app.

My advice? Start with understanding the basics. Learn how businesses make money. Understand how different types of investments work. Know why markets go up and down. Then, by all means, use good tools to execute your strategy - but never let the tools do your thinking for you.

Keep your investments simple enough that you can understand and explain them. Review your portfolio regularly, not just using charts and graphs but carefully considering whether your investments still make sense for your goals. Make changes based on your understanding, not just because an app suggests them.

Remember, in both writing and investing, the tools should serve your thinking, not replace it. As Graham predicts, in a world of 'thinkers and think-nots,' successful investors will maintain their ability to think independently about their investments rather than simply delegating their decisions to increasingly sophisticated tools.

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