The Quest for a Robust Philosophy of Investing

I’ve recently been writing a post on how the physical structure of a house can positively or negatively affect the overall cost of the house. In the process, I started wondering what exactly the mechanism of growth is for real estate, and off the top of my head, it occurred to me that an increasing population must be this primary driving force, aside of course from the blanket understanding of “demand”. It’s well known that in small communities, when large employers either shut down or move, leading people to move away to find work, thus simulating a drop in population, house values in that town often drop or even plummet. It’s also my understanding that housing as an investment is an iffy proposition in Japan, which has a stagnating population. This is only speculation – I haven’t done any further digging on the subject – but it also made me wonder what the primary driving force behind stock values is. It would be easy to say that economic growth is the primary driving force over the past century, but what exactly does “economic growth” mean, specifically? I have a vague idea in my mind, but I don’t know that it would stand up to scrutiny. So now I’m really curious: going even further beyond the stock market and real estate, what is the philosophy behind the increasing value of things in general?

When I go on Amazon and search for “philosophy of investing”, all I find are books about “investment philosophy”, basically just books on various stock investing strategies. Snore. But thus far I haven’t found much that seems to dive deep on this issue of why something should go up in value at all. When I search for books on “philosophy of housing”, all I find are books about getting rich quick using investment property, or various, naturally biased books on how to buy your first house. There is where my INTJ rage comes out – why is society so stupid?! Why is it so difficult to get to the core of an issue? This is also why Jacob Fisker’s “Early Retirement Extreme” book is one of my absolute favorite books – it dives deep. It makes you think. In the world of books, this is rare.

In the United State, the primary investment vehicles are stocks, bonds, real estate, and to a lesser extent, commodities, gold, and even crytpocurrencies. In very rare corners, you have certain collectibles, antiques, and even art (did you know you can invest in art?)

Now, I’m very pro-equities, and somewhat anti-real estate. It’s not that buying a house is necessarily a bad decision, I just think it comes with higher risks and lower returns than people expect, and most importantly, it’s not very conducive to my goals in life right now. It annoys me to no end when people shill real estate because “houses always go up”. Do people even understand why, or is that just a mantra that gets repeated? But the EXACT same question could be applied to people who shill the stock market, citing how the stock market always goes up. What exactly is the mechanism of growth? And this can be applied to ANY investment that is mindlessly shilled. Why? These common vehicles of investment will often work to some extent. You don’t need a PhD in Economics or Finance to know that having some money in a 401(k) is better than a closet full of Funko-Pop dolls. But my inner analyst simply isn’t content. I must understand more!

Conversations with people can draw out some plausible arguments. I like talking things out with people. But, you can only expect to cover so much ground that way. If it’s a question I really want to understand, it isn’t going to be as straightforward as a conversation, or even a book, or even two. It will be the synthesis of multiple, potentially disparate subjects. And forming this could require a lot of searching.

All of this leads me back to Anthropology. Many non-Western ways of life have been dying over the past century. This isn’t all bad – there’s no point to recovering your heritage for it’s own sake, if it isn’t doing you any good – but what we’re losing is perspective on the human condition and human behavior. The great danger of fields like Sociology and Economics is that they so often make conclusions from a strictly Western perspective, and what might be defined as “Western” culture (though there is significant variability within this) is undeniably skewed, and lacks a perspective of the wider world and the wider range of human cultures. So we end up with books about how to buy your first house rather than books about why a house is superior to a wigwam, for example, when there are actually compelling arguments for both. There’s simply no larger perspective, just assumptions and arguments from predefined cultural values.

Maybe this is why I have a degree in Anthropology: to pique my interest in the broader questions and to set about finding answers. I don’t know. But robusticity is inherently built on principles – if you can’t find those principles, there’s nothing robust about your opinions. But it’s difficult to find principles if you don’t understand the full range of behavior. Only then could you hope to draw general conclusions based on those findings, and although they won’t be absolute, you’ll have a broad exposure to help inform your opinions, and that’s about the best you can really hope for, not just with investments, but with other areas of life, too.

Not all countries have a stable stock market, or a stable housing market, or a stable currency. So what makes you think one of these would be superior to the other on a universal scale? Why is that in some countries, owning cattle is the primary form of wealth, especially when cattle are subject to disease and require constant maintenance? I don’t know. I think it’s a good question. Or is it just that the cattle are a symbol of wealth, but the means of procuring them come from somewhere else? What if a man’s cattle are tended by his family, and so having a large family is the driving force behind the ownership of cattle? Or is it perhaps that having lots of cattle inclines families to want their daughters to marry into that family? Big questions. Fascinating questions, in my opinion. A person would therefore do well to understand the true mechanisms of growth, and not merely its symptoms, if they have some goal which wealth would allow them to reach.

If you search hard enough, sometimes you can find the books that tell you what you’re really looking for, or at least a part of it that can form a piece of the pie you are trying to create. I found one, a sub-200 page analysis of wealth in a small African village. It could not arrive soon enough. I’ve also re-purchased a book I once owned that covers a few dozen cultures in shallow detail, but enough to use as a short reference for further digging. Another about core principles of modern financial markets. Buying books is always dangerous for me, as they often become focal distractions and can sometimes increase my stress levels when I take on too much. Plus, I don’t always know how far I want to go into a subject, but so many other subjects that interest me keep going back to Anthropology. Fortunately, all of these books are relatively short, so that’s encouraging. Curiosity continues to endure. So the quest begins, I guess.