When I was 17, I dropped out of college to become an auto mechanic.

I was dabbling in Eastern philosophy, and was disenchanted with reading “nonsense” in college and then having to write nonsense in response to the nonsense I was reading. 

So I’d follow Lao Tzu. I’d fix cars and rock climb on weekends. 

The first day, I realized I’d made a mistake. Not wanting to seem flaky, I toughed it out for several months before returning to the nonsense. 

Anyway, during some mechanic training, we were shown a safety video billing the screwdriver as “the most misused tool.” Built to drive screws, it’s misused as a pry bar, a hole punch, a chisel, a scraper, and other things I’m forgetting. 

The human brain is the screwdriver of investing. 

Our brains are built for a cave man-y world where confidence equates to competence. A stochastic, recursive, ground-is-moving, social science like investing throws us for a loop. Investing doesn’t have screws to tighten, but our most accessible tool is a screwdriver, so we pull it out and misuse it.

We hide in the false precision of numbers. We outsource the discomfort of ambiguity to confident gurus. We misapply cave man thinking to investing. 

It doesn’t work, statistically speaking. 

But over the years I’ve become more sympathetic to this self-soothing. Even in situations where investors are being sold a bag of goods – and I doubt the investing industry adds value in aggregate – it’s mostly the blind leading the blind: A confident, self-delusional blowhard selling investors a fantasy both sides want to believe in. 

I feel less sympathy toward blowhards who are in on the act. 

If you’ve been reading my stuff, this motif won’t shock you. Even if not, most of us, with the rational parts of our brains, are capable of sitting with the fact that human behavior can be wildly irrational. We’re contradictions, and we know it.

Plus, this irrationality is the source of profit opportunity. 

And humans don’t always fail at investing. About 6% of large cap managers do beat the market over long time periods. My own research service outperformed the S&P 500 for each of the 10 years I ran it, though I don’t have data on how my individual subscribers performed. Dalbar Research runs a recurring study that repeatedly finds that while the S&P 500 has risen by about 10% annually, the average US mutual fund investor only earns about 4% annually, due to buying at highs and selling at lows. 

Since there have been humans, human resourcefulness had added value – slowly at first, and then faster and faster in recent decades as that resourcefulness has compounded on top of  itself. Equity investing is the practice of making bets on how much value will be added, and when.

James, just tell me what stock to buy. 

I’m not against this request. Finding stocks has been the bedrock of my career. (And stay tuned on that front.)

Not everyone has a philosophical bent, and that’s also fine. Mine is probably too strong, and has become my own screwdriver to overuse. Now I spout nonsense. I took some solace when I heard Patrick Byrne, family friend of Warren Buffett, describe Buffett as “a philosopher who understands investing,” though even on my best day, I’m rounding error to Buffett’s talent. 

But the inconvenient truth about investing is this: The abstract is more tangible than it appears, and the tangible is more illusory than it appears. 

This off my chest, I’ll get into some numbers in my next piece.