Beyond The Headlines
Selective Ignorance
As the news of the implosion of one of the crypto exchanges hit the headlines recently, I have been thinking about how I was completely unaware of who Sam Bankman-Fried is, what FTX does, or anything related. Apparently, this $32 billion venture had the backing of some serious seasoned investors. Its executive was patted on the back by legends of the world of politics and business. Its product was endorsed by star athletes, all while he was giving outsized political contributions. I must have very successfully exercised selective ignorance since I wasn’t abreast of any of it. I honestly don’t think I really missed anything, though. Let me explain.
When I started out in investing, I wanted to know everything. I read every possible book I could find, order, and borrow. Peter Lynch’s “One Up on Wall Street” was the first, but hundreds followed. I read books about Warren Buffett and then Benjamin Graham, the classics, but I also read about traders, speculators, technical analysis, momentum investing, and trend following.
It usually took a single publication on each topic only to retrace my steps and go back to the broadly defined value investing school of thought. Value, not in the sense of buying simply “cheap” stocks, but value as a treasure hunt for deals available at big discounts to their value. I quickly rejected a lot of books and ideas. I unearthed some older publications in my search for the source.
Physical bookstores are a rarity these days, but their “investment and money” aisle contains such a wide variety of topics that it takes a lot of deliberate research to find what’s worth reading and what sells well but might prove to be unhelpful and even disorienting.
The same logic applies to the news. The other day, I looked at the headlines, and Sam Bankman-Fried stories were everywhere, from all angles. Then I used a news source that’s much more filtered, tailored to serious investors, a service we pay for extra, and Sam was in the top 5 headlines as well. The news was no longer flooding the media outlets but clogging them while leaving no room for anything relevant.
For years, we wrote on a few rare occasions that we have no interest in anything crypto. We saw it as yet another bubble of madness and euphoria. We learned that not everything that trades has value. It’s such a powerful statement when you think about it. You can spend $10,000 to buy shares of a major consumer goods company like Colgate-Palmolive, or you can spend it to buy cryptocurrencies. Both are purchases done with real money, but what you have at the end of the transaction is dramatically different.
In the first case, you hold shares, small pieces of a real business with products, employees, manufacturing, marketing, distribution, and, most of all, what we believe is a profit-making company that pays dividends. In the second case, you own nothing of value, a line of code. Its price depends on the second willing buyer.
It was one of the evenings last fall when I received messages from a few friends asking if I was following “the fallout of SBF.” To their great disappointment, I had to ask what SBF was. They said, not what, but who! I’m curious; if it’s something that matters to them, I thought I’d do a little search. I have never heard his name before, and if I have, I must have exercised a very deliberate selective ignorance. I did hear about FTX on one or two occasions before. That’s about it.
You may ask how that is possible. The same as with books, especially investment books, I choose more carefully than ever what I care to know. Last year, we all experienced peak crypto madness, some called it a “crypto onslaught.” I shared with a group of fellow investors last year my experience. I told them that almost everyone in any social interaction would bring up crypto across most ages and a broad range of professional pursuits, from a waiter at a restaurant to a major real estate developer with whom I crossed paths. The last one got all enthused when I said I’m an investor. He insisted on introducing me to his son, who was an avid crypto trader at the time. We even had executives from one of the crypto exchanges rent a room next to us on one of our trips, and we couldn’t help but overhear the constant crypto chatter.
My contrarian reaction was to tune it out completely. I must have gone so far that I almost experienced the Rip Van Winkle moment. This character in Washington Irving’s book falls asleep in the woods and wakes up twenty years later, having missed the American Revolutionary War.
I admit I completely (and gladly!) missed the crypto phenomenon.
Being a successful investor is not about knowing all; it’s about choosing what to know and what to know very well, acting on investment ideas, buying, selling, and even ignoring some takes conviction.
It’s not about being better or worse informed but about a discipline of what you let in and what you leave out of your sphere of attention. Attention is precious and limited and serves us better if it’s not scattered but focused.
We often share that when you look at our investment portfolio, you see not just what we decided to buy but a whole variety of choices we deliberately passed on and will continue to pass on. Crypto remains on our no-go list; hence, my time is better spent elsewhere rather than following the SBF and FTX saga.
Happy Investing!
Bogumil Baranowski
Published: 1/19/2022
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