TL;DR: Mental agility is the primary ingredient of top investors. Principles are timeless, tactics are time-bound.

I recently stumbled on an obscure book recommended by Naval. “Oddly enough, Bruce Lee wrote some great philosophy and Striking Thoughts is a good summary of some of his philosophy.”

This hidden gem made me ponder how I approach investing. When I think about how I developed core fundamentals, such as mental models, values, principles and tactics, I am unable to categorize my approach. I am not a value or growth or angel or any other type of investor. I designed my own approach and gladly borrow from all kinds of investment philosophies.

I steal inspiration from anywhere, I try to learn from all places in order to build my own authentic voice in investing. This is what this post is about, sort of.

Because investing is an infinite game, and the purpose is to keep playing, there are many ways to “win”. Buffet does value investing, Soros does macro investing and Jim Simmons does quant investing, and so on.

These legends all escaped competition, and achieved above-average returns, through authenticity (thanks again Naval for this idea). They became the most authentic expression of their selves. They aimed to be the best version of themselves. They learned non-stop in a way that facilitates their goal.For those who seek to become their authentic selves, investing becomes a vehicle to apply deep curiosity and mental agility.

So what exactly makes a great investor in an infinite game? What gives them super-compounding powers?

At a very basic level, great thinkers have unusual mental agility. They built a comprehensive range of skills and knowledge as their mental toolbox. They internalize key concepts and apply correct judgment on when to use a given tools, and when not. They remain flexible and adaptive, while also being mostly right .

“Use only that which works, and take it from any place you can find it.” - Bruce Lee.

It is possible to learn from any great investor. Early on, I learned from Warren Buffet and Charlie Munger. These are heroes. How much has the world evolved over the decades they have been in the game, given that markets are complex adaptive systems?

For example, the structure of the economy is changing fast. Manufacturing and distribution giants have been eclipsed by intellectual property giants. Copy-pasting the same tactics from one decade to the next has given poor results for traditional value investors. What I think might still be very relevant to study are principles, since the good ones, by definition, should stand the test of time.

“All fixed set patterns are incapable of adaptability or pliability. The truth is outside of all fixed patterns”. - Bruce Lee

By not labelling myself into a specific style, I get to pick the good parts of any approach and test what works for me. Value investing principles helped me build an authentic approach that feels right to me. The main ones for me are:

• Focus on fundamentals and inherent value. While technology stock or cryptocurrencies do no fit the requirement for a value investment, to say that these investment have zero value is not correct. The way to assess their fundamental value is different. The general principles of looking for good fundamentals, however these are assessed, still applies.
• Play the long game. Humans are not good at thinking in exponential terms. They tend to think in linear terms, and overvalue the short term and undervalue the long term. Both venture capitalists and value investors are super long term focused. I try and make sure that I invest in a space I want to learn for the rest of my career and hopefully can hold assets for 25+ years. There is immense advantage in being able to take a very long view and tuning out the short term noise. Good investing is not so much about timing the market as much as time-in-the-market. So it makes sense to exploit a human bias.
• Avoid stupidity. On the whole, most of the alpha I can hope for is likely to come from avoiding avoidable mistakes. When making a decision, I assume I am probably going to be wrong. I poke at it. I ask myself “how will I handle being wrong. What will happen then?“ The surest way to underperform the market is to assume I am smarter than the average. The reverse is true, the best way to do well is to assume I am dumber than the average. What I don’t know will always be much much larger than what I do know. Around 90% of people believe they are better drivers (or smarter) than the average. Well, 40% of these people are wrong. Overconfidence is a self-inflicted mistake and keeping a check on my confidence level (among other mental pitfalls) is crucial.

All in all, I believe that sound investment principles, such as the ones above, should be more or less timeless. It’s the real-life application of those principles, a.k.a. tactics, that should remain fluid based on the evolution of the markets and the economy. These tactics always change and a great investor is able to keep re-inventing their approach because of their mental agility.

“Notice that the stiffest tree is most easily cracked, while the bamboo or willow survives by bending with the wind.” - Bruce Lee

So wtf does Bruce Lee have to do with any of this? Fair question.

Bruce Lee was a true master at his own craft, martial arts. He became great because he internalized the fundamentals of his discipline to a degree that he wired them into his own being.

In a fight situation, Bruce Lee was completely present and ready to apply principles and tactics that best served the fight strategy at hand. He was not trying to apply frameworks, he simply emptied his mind and let the the right ones come to him. That was mental agility in practice.

“Obey the principles without being bound by them.” - Bruce Lee

I am not surprised that Bruce Lee eventually wrote some great philosophy. He was able to deeply absorb principles from martial arts and find apply them to broader aspects of life.

Bruce Lee inspires me internalize key principles. When the moment comes, I empty my mind and let the right frameworks come to me. And then I try to be fully present, and let the right decision come to me after I’ve forgotten everything I have learned.

Bruce Lee quotes

“Be like water making its way through cracks. Do not be assertive, but adjust to the object, and you shall find a way round or through it. If nothing within you stays rigid, outward things will disclose themselves. Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle and it becomes the bottle. You put it in a teapot it becomes the teapot. Now, water can flow or it can crash. Be water, my friend”.

“Empty your cup so that it may be filled; become devoid to gain totality”.

“The knowledge and skills you have achieved are meant to be forgotten so you can float comfortably in emptiness, without obstruction”.

“Do not be tense, just be ready, not thinking but not dreaming, not being set but being flexible. It is being “wholly” and quietly alive, aware and alert, ready for whatever may come”.

“Be self aware, rather than a repetitious robot”.

“The great mistake is to anticipate the outcome of the engagement; you ought not to be thinking of whether it ends in victory or defeat. Let nature take its course, and your tools will strike at the right moment”.