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Simple Ideas to Help You Become A Smarter Investor

My Most Powerful Tool for Thinking and Decision Making
02 Sep 2015 09:30 am

Note: This is an updated version of the article that was part of the May 2015 issue of our premium newsletter, Value Investing Almanack.

When historian Charles Weiner looked over a pile of Richard Feynman’s notebooks, he called them a wonderful ‘record of his day-to-day work’.

“No, no!”, Feynman objected strongly. [1]

“They aren’t a record of my thinking process. They are my thinking process. I actually did the work on the paper.”

“Well,” Weiner said, “The work was done in your head, but the record of it is still here.”

“No, it’s not a record, not really. It’s working. You have to work on paper and this is the paper. Okay?”, Feynman explained.

Richard Feynman, who won the Nobel prize for Physics, understood that writing his equations and ideas on paper was crucial to his thought.

I think this should give you some clue about what I am going to write about today.

Let me ask you this – how many times it has happened that, after reading a book, you thought you understood the idea but found it difficult to explain it to others? The idea seemed pretty clear in your head but the moment you had to verbalise it you discovered that either you didn’t have a proper grasp on the idea at the first place or you were unable to explain it in a logical coherent way to a third person.

As far as I am concerned, this is the kind of reaction people gave me, “You’re telling me that you just finished reading a compelling book but can’t explain the central idea in few sentences?”


Reading something passively creates an illusion of knowledge. It creates a confusion between  ‘mere familiarity with the concepts’ in the book and an actual understanding of them. Only by testing ourselves can we actually determine whether or not we really understand.

This is when the Feynman Technique [2] came to my rescue. It says that the mere action of writing something down allows for a more effective integration of the learning. Feynman’s discovery lead me to a tremendously useful tool which I call Journaling. It was a Eureka moment.

If the word Journaling sounds like a jargon, let me simplify it by providing you a definition.

Journaling is simply an activity of writing in plain language about what’s going on around you and what are your thoughts about them. It can include things like your future goals, plans, dreams, reminders to yourself, comments on ideas/people or any unrelated thing that crosses your mind. It’s a conversation that you have with yourself.

Today Journaling features in my personal list of top 10 big ideas for life.

Our Brain On Journaling

One fine day, while experimenting with journaling, it dawned on me that it’s almost impossible to write one thing and think something else at the same time. Just like it’s not possible to inhale through your nose and exhale through your mouth at the same time. It’s the way nature has built us.

The practical implication of this insight was that when I forced my hand to write something, it channeled my thoughts also in the same direction. I discovered that my unchained-thought-monkey could finally be put on a leash. I did, after all, have some control over my thoughts.

Journaling turns out to be not just a tool for thinking but a powerful weapon for focusing thoughts. The more your write, the more precision of thought you build. It allows you to take fuzzy thinking and distill it into precise line of thought. If you want to think better you have to start writing your thoughts.

Writing is a thinking exercise and it acts as a shield against the mental rust. I wonder when majority of the old people in their 80s and 90s can barely remember their family member’s names, how come Warren Buffett who is 85 and Charlie Munger who is 91 are still mentally so sharp? Perhaps a lifetime devotion to reading, writing and learning has something to do with it.

It’s not a common knowledge that writing, apart from being a communication tool, is a thinking tool too. Famous author, Dan Pink, in a commencement speech [3], further validated my belief in this powerful tool. He recommends – “write things to figure out your thoughts”.

For that matter, writing is terribly useful tool for retaining what you read. You have to intersperse your reading with independent thinking to really understand the concepts. Writing introduces that element of thinking hence deepens the understanding.

Problem Solving

Many creative people use writing as problem solving tool.

On getting stuck they write down their question and listen for the answer to come. Sounds creepy right? Neale Donald Walsch, author of best selling book series called Conversations With God [4], claims that his books were not written by him, but they happened through him.

Can it happen to you? You won’t know until you give it a try.

Maria Konnikova, in her book Mastermind [5], writes –

The act of writing and speaking out loud your thesis forces you to slow down and catch those error that are invisible to your eyes.. Your ear notes them when your eye doesn’t.

Julia Cameron, in her book The Artist’s Way [6], talks about a similar idea called ‘morning pages’. She says that every artist should journal for least twenty minutes every morning to unleash their creativity.

I believe everybody is an artist. It’s just that some have already discovered their art and the rest are on their way.

Decision Making and Investing

The most serious disease that plagues decision making is Narrative Fallacy (also known as Hindsight Bias), the tendency to find a cause and effect relationship in historical events even if there is none. And the best cure for this disease is maintaining a decision journal.

When Michael Mauboussin posed the question to Daniel Kahneman, what is a single thing an investor can do to improve his or her performance, he said –

..go down to a local drugstore and buy a very cheap notebook and start keeping track of your decisions. And the specific idea is whenever you’re making a consequential decision, something going in or out of the portfolio, just take a moment to think, write down what you expect to happen, why you expect it to happen and then actually, and this is optional, but probably a great idea, is write down how you feel about the situation, both physically and even emotionally. Just, how do you feel? I feel tired. I feel good, or this stock is really draining me. Whatever you think…When you’ve got a decision-making journal, it gives you accurate and honest feedback of what you were thinking at that time.

Once the outcome of your decision is known revisit your decision journal. Odds are you’re going to discover some surprises. It won’t be uncommon to find that in spite of the favorable outcomes, the reasoning wasn’t always right. Outcomes distort your thinking a lot. It’s very counterintuitive to honestly recall how exactly the events unfolded after the result has come.

As an aside, Shane Parrish’s wonderful post [7] on journaling and decision making needs to be read at least twice.

Carol Loomis, who has been editing Warren Buffett’s letters since last 40 years, writes [8]

Writing itself makes you realize where there are holes in things. I’m never sure what I think until I see what I write. And so I believe that, even though you’re an optimist, the analysis part of you kicks in when you sit down to construct a story or a paragraph or a sentence. You think, ‘Oh, that can’t be right.’ And you have to go back, and you have to rethink it all.

Even Warren Buffett observed – “Good writing clarifies your own thinking and that of your fellow shareholders.” A profound thought from the Oracle.

Sir Richard Branson, founder of Virgin group, once said “my most essential possession is a standard-sized school notebook,” which he uses for regular writing. If he says so I am sure there must be some merit to the idea of journaling.

It’s A Therapy

While I don’t claim to be a psychic, I reckon that almost everybody has some thoughts which they are scared to share with others, even with people who are very close to them. These thoughts create unfelt emotions which remain suppressed in your subconscious. They need a vent.

Writing about your thoughts in a private journal can have great cathartic effects. Journaling gives an avenue for your unfelt emotions to process themselves. This release allows you to find freedom from the latent emotional baggage.

When you jot down a thought, two things can happen. If it’s a negative thought it’s toxicity will get diluted and it will die out. If it’s a positive thought, it will grow stronger and more refined.

It’s interesting that some thoughts have their own personality and the threat of getting exposed may produce a subconscious resistance. This resistance can make you feel that this activity (writing) is boring and pointless. So it’s very crucial that you journal regularly to be able to discover the therapeutic value of Journaling.

Another psychological benefit created by journaling is that it deepens commitment. The very act of writing things down deepens your resolve to make good things happen in your life. It’s like a declaration to yourself.

Journaling is no less than a therapy.

What and How

Now that I have convinced you about the importance of Journaling, let me share some ideas about ‘what to write’ and ‘how to write’.

First thing that you need to keep in mind is that you aren’t doing this to become a professional writer. The purpose here is to discover yourself. However let me warn you that as an unintentional side effect you will anyway slowly become an effective writer.

So what do you write about? Pour your heart out. Don’t bother too much about forming coherent sentences, incorrect grammar or bad handwriting. Write without fearing that somebody might see it. You can always destroy the paper later.

What do I write about? I express my gratitude for all the blessing in my life. I wonder about the beauty and mystery of life.

Sometimes, you will sit there holding your pen, staring at the blank paper and nothing would seem to appear in your thought screen. Then how about pondering over a question similar to what Steve Jobs regularly asked himself – “If I had only 30 days to live, what would I do?”

In this digital era of smartphones and tablets it’s not an overstatement that coming generation will hardly be using a pen to write. Why should they? Pen is going to pretty much look like a stone age tool to them.

Now as far as journaling is concerned you could always use a digital device (using a keyboard) to write. It’s definitely better than not writing at all. But in my experience there is some magic in grabbing a pen and scribbling in your own handwriting. It generates a unique vibration and a different part of your brain is activated when you write the good old way.

Clive Thompson has some useful insights about pen vs keyboard. He mentions [9]

Writing with a pencil is very effective for structuring your thoughts. The flow of ideas and clarity of thought comes better when you use a pencil.

…However when you want to get your thoughts out on paper for an audience, it needs to flow as fast as possible, i.e., your writing speed should match with your thoughts else you will lose the train of thought. This is where typing is a better medium.

…Keep a pencil and a notebook to take notes and capture the flash of insights whereas use a keyboard to communicate your ideas.

According to Thompson, blogging is a great way to refine your ideas and thinking. In his book, Smarter Than You Think [10], he writes –

Blogging forces you to write down your arguments and assumptions. This is the single biggest reason to do it, and I think it alone makes it worth it. You have a lot of opinions. I’m sure some of them you hold strongly. Pick one and write it up in a post—I’m sure your opinion will change somewhat, or at least become more nuanced. When you move from your head to “paper,” a lot of the hand-waveyness goes away and you are left to really defend your position to yourself.


One of the disciples of Gautam Buddha once asked him, “Master! what’s the highest form of knowledge?”

Buddha replied, “Self knowledge is the greatest knowledge. Know thyself.”

I am speculating that self knowledge starts with self awareness. And in this journey of self awareness pen is definitely mightier than sword.

The point really is this – “Do you think your life is worth journaling about?” If not then make it worth and then write about it. Or even better, start writing about it and you’ll discover that your experiences are indeed worth journaling about.

If you carve out few hours every week for journaling, you will start discovering its value very soon. So I say, pen is your friend, my friend! Pick up the pen and journal on.

And what could be a better way to start the practice of journaling than the Comments section of this post. 😉

The post My Most Powerful Tool for Thinking and Decision Making appeared first on Safal Niveshak.


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