Wed Apr 20 2016
Live Index (1451 articles)

Is Faster Better at Investing?

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This weekend, an article in the New York Times stated that speed reading is not possible, according to scientific research. When we speed read, we lose a lot of the comprehension that is necessary to fully digest a text, The text mentions that the main reasons for which we are not able to speed read is that there is a small area in the retina that processes with great accuracy and whose area is very limited. More important is the fact that language processing takes time, and creates a bottleneck in terms of what we understand.

What do great investors think of this? During the 2011 Annual Meeting with shareholders, Buffett and Munger were asked a question about speed reading.

Question: Make the world a better place – continuous learning. You read a lot. What advice do you have for children who want to read faster?

Warren Buffett (Trades, Portfolio): I read lots of papers and 10-Ks and 10-Qs. I’m not as fast as I used to be. I don’t know how effective various speed‐reading classes can be. I wish I could read faster. It is a huge advantage to read fast. But it is like the old Woody Allen joke, “I read War and Peace last night in 20 minutes – it’s about Russia.” I don’t know the effectiveness of speed reading.

Charlie Munger (Trades, Portfolio): Speed is overestimated. I could do problems faster than my roommate in college could, but he never made a mistake. Don’t be discouraged from going slower.

  • Warren Buffett Stock Picks
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This answer is critical for us as investors.

  1. The only way to make up for our inability to speed read is to create the time to read (even at a normal pace). We know that many value investors allocate six hours or more to read per day. They free up their time to read and think, reaping all the benefits of cumulative knowledge.
  2. What Munger mentions is very important: It is not about being quick but about being right. The speed at which the market releases information increases exponentially. Trying to keep up gets harder and harder, but there is no need to play to the market’s tune. On the contrary, as investors, we need to create a framework in which the market plays to our favor, slowing its pace and making the right decisions.

As Munger said, “The turtles which outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you.”

It is all about incorporating the right knowledge by becoming learning machines to meet the opportunities the market provides us.

What do you think?

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