INVESTMENT PHILOSOPHY

Decisions, responsibility and common sense

“Welcome to the world of having to think long and hard before doing anything”

02 . 10 . 2020
JUAN RAMÓN Rosado Martín

Investor


3 minutes

Not long ago I watched one of the first Value School conferences again, the presentation of the book “Common Sense on Mutual Funds”, by John C. Bogle. I liked the conference even more this time than when I first saw it. During that presentation, we also had the privilege of seeing two leading figures in their field, chatting about experiences and reflections from various areas of life, including investment, finance, economics and ethics. Professor Pablo Fernández, one of the most renowned academics in the field of companies’ valuation, expressed his scepticism regarding the effectiveness of certain mental frameworks that cause us to reach conclusions that are too quick and simple, often wrong, and in most situations hasty to say the least.  

Although much of the conversation centred on the benefits, however accurate, of indexing in comparison with the results obtained by most of the players involved in active management, it gradually shifted. It couldn’t be any other way considering the stature of the two participants who spoke about many other topics during the talk. And one of these, which I believe was certainly a digression from the original conversation, and that in itself is a good reason to watch it, was the reflection they made on the importance of our decisions, each from a different perspective.   

Pay attention to this topic, which is always relevant for anyone who wants to reflect on the quality of their choices, and is crucial to achieving the best results in each and every aspect of life in the long term.  

“Welcome to the world of having to think long and hard before doing anything,” said Francisco García Paramés in one of his speeches. And it’s just that, whether we want to see it or not. The combination of our decisions, those we make every day, those that in turn end up shaping our reality.  

The first meaning of business offered by the RAE tells us that its an “action or task that entails difficulty and that requires determination and effort to execute.”   

Our life is our main business. In it we‘re the entrepreneur who runs it.  

By seeing ourselves as the entrepreneur we are, we venture into the tempestuous river of personal responsibility. We enter the world of making each of our decisions.

Capacity of reflection

Its clear that this responsibility requires reflection, among many other things, and as Professor Pablo Fernández points out, its conspicuous by its absence in a world where noise  

dominates most of the pseudoinformation that reaches us. Pablo Fernández spoke ironically and said that at any time and from any place and device, we can know the “number of people who drowned in Madagascar in the last quarter of an hour”. This fact can be very important for those affected by such a tragic event and those closest to them, but this information overload doesn’t really leave us room to think, to reflect. This isn’t unique to the average person. Most people considered successful in terms of some of the most commonly accepted social standards, people who experience interesting situations, don’t spend much time thinking about their successes and mistakes.  

Pablo Fernández alluded to a few words by the writer José María Pereda: “the experience doesn’t consist in what has been lived, but in what has been reflected,” and duly absorbed.  

At another point in the talk, the professor shared with the audience that theres a conversation he regularly has with his wife about the future that awaits their children in their lives. As she was concerned about her children, she asked her husband about the education they were to give them, about the languages their children would speak and how they could, as parents, ensure the best future for their offspring. She also asked whether people who have children can constantly develop.  

The professor’s answer couldn’t have been more succinct, lucid and accurate: “it’s reflection, our children must be able to reflect. If our children are sensible and think a little, they’ll be very successful”. In the society we live in, “thinking about what to do and then deciding what to do, is conspicuous by its absence”. In other words, we should equip ourselves and those who follow us with critical judgement. It is as well known as it is scarce.  

Critical judgement is closely related to many qualities of common sense and is synonymous with “reasonable, sensible, and wise”. This is opposed to the definition of the widespread and not recommended “way of thinking and proceeding as the majority of people would”.  

 As a corollary then, we should know that we are responsible for our actions, that they all have their consequences and that it is these actions and our decisions that will collectively shape our lives over time.   

We should take this into account, and act accordingly whenever possible. We should pay attention to our decisions and the processes that lead us to make them, because the better they are, the closer we will get to our desired goals.