Q & A with Ken Fisher, author of The Only Three Questions that Still Count
The Only Three Questions That Count really resonated with investors when it first published in 2006. What made you decide to update?
|Ken Fisher |
As I wrote in my 2011 book, Markets Never Forget
, particularly following big bear markets, investors tend think "now" is different somehow. That problems we face are unique and insurmountable somehow. But folks always think that, and they're always wrong--we just forget.
Following the 2008 credit crisis and bear market and the huge 2009-2010 boom off the bottom, I thought I could revisit the questions to show, first, details change, but human behavior doesn't--not fast enough. And second, to show that if you have a good strategy aimed at knowing what others don't, that can work no matter what the market environment, what just happened or how much people think the world has changed. Nothing works 100% of the time, and things that worked once stop working then start working again later. But if you have a good, scientific method aimed at knowing what others don't--that should serve you well, always. And in updating the book, it was amazing how well the questions and all the examples I used held up. The financial world has changed quite a bit since 2007--new laws and regulations. How do the three questions still matter in the new financial landscape?
I'd argue the financial world is always changing. Sometimes new regulations are big, sometimes small. There are new innovations constantly. The three questions hold up because they aren't static. They don't rely on rules of thumb that maybe worked a long time ago but now are worthless. They are flexible and form a scientific method helping you see the world more clearly, no matter how much regulations change or new innovations are introduced. Why would someone who bought the original book need this updated edition?
I've updated nearly every chart and table in the book and most all the data. Plus, there's some updated commentary based on the most recent market cycle that obviously wasn't in the first edition. I've edited it to be a tighter read and a better tool, so readers of the first edition might find something more useful or more powerful in this one. What do you mean when you say that the only way to beat the market is by knowing what others don't know?
I mean exactly what finance theory says is true, and what is taught in every classroom and in every professional internship but most people seem to forget when faced with the real world. The only way to bet and win more often than not is knowing something others don't. If you don't know something others don't and make a market bet, you might be lucky sometimes and right but probably more often unlucky and wrong. That's not a strategy for long-term investing success. The world is more interconnected now than ever before. How has this changed the way people approach investment decisions?
In my mind, this is part of a long innovation evolution and in many ways is good. It means there's more information moving faster, which can add to transparency.
But for many investors, the non-stop interconnectedness results in nonstop noise--most of it nonsense. But much of the nonsensical noise looks to many like wisdom--it can be hard for folks to weed through the nonsense to find something useful. If you can do that--ignore the noise--there's so much more you can know now that others don't. But ignoring the noise is a hard skill and most don't try developing it.
My sense is if most folks ignored their TVs and computers for a solid year, they'd have much better investing results than they would have otherwise. They'd be less tempted to make investing moves just for the sake of moving, and that alone can improve results.