Previously by Chris Mayer: The Most Common and Costly Investment Mistake
Todays topic is the news. Specifically, how consuming it can turn your brain into soft cheese and make you a lousy thinker and investor.
I think the message here is important and potentially life-changing. Does it sound like I am exaggerating? Hang in there and keep reading. You tell me what you think after youve read what Ive got here.
The impetus for this is an essay by Rolf Dobelli, a Swiss entrepreneur, titled Avoid News. Dobelli makes the case that news makes us distracted, wastes time, kills deeper thinking, fills us with anxiety and is toxic to our mental health. His analogy: News is to the mind what sugar is to the body.
I shared the essay with my wife Carol after I read it. It made an impact. Carol offered to cancel her electronic subscription to The New York Times if I would cancel my print subscriptions to The Wall Street Journal and The Financial Times. (We already ditched The Washington Post. I got tired of contributing to the salaries of Steven Pearlstein and Ezra Klein, who must be the worst writers on economics in America still getting paychecks.) Neither of us watches TV news.
I had to think about this offer. I love reading the newspapers every morning over breakfast and tea. I also passed on the letter to a buddy of mine who is in the business of advising institutional clients where to put their money. Dobelli had him convinced too, and the next day, he told me he left his WSJ and FT unread.
So what is Dobelli saying? Let me hit some high points.
Dobellis analogy with food is a good one. We know if you eat too much junk food, it makes us fat and can cause us all kinds of health problems. Dobelli makes a good case that the mind works the same way. News is brightly colored candy for the mind.
News is systematically misleading, reporting on the highly visible and ignoring the subtle and deeper stories. It is made to grab our attention, not report on the world. And thus, it gives us a false sense of how the world works, masking the truer probabilities of events.
News is mostly irrelevant. Dobelli says to think about the roughly 10,000 news stories youve read or heard over the past year. How many helped you make a better decision about something affecting your life? This one hit home.
Last year, I wrote 58 emails to my subscribers under the Capital & Crisis banner. I looked back and counted only five in which a news story was front and center. Even then, I used the news more to make what I was saying seem relevant and timely. But I couldve excised the news and nothing wouldve been lost.
We get swamped with news, but it is harder to filter out what is relevant which gets me to another point that hit home. Dobelli talks about the feeling of missing something. When traveling, I sometimes have this feeling. But as he says, if something really important happened, youd hear about it from your friends, family, neighbors and/or co-workers. They also serve as your filter. They wont tell you about the latest antics of Charlie Sheen because they know you wont care.
Further, news is not important, but the threads that link stories and give understanding are. Dobelli makes the case that reading news to understand the world is worse than not reading anything. In markets, I find this is true. The mainstream press has little understanding of how markets work. They constantly report on trivia and make links where none exist for the sake of a story, or just for the sake of having something that makes sense.
In markets, reporters try to explain the market every day. The market falls on Greek news is an example. Better to not read anything if youre going to take this kind of play-by-play seriously at all.
The fact is we dont know why lots of things happen. We cant know for sure why, exactly, things unfolded just as they did when they did. As Dobelli writes, We dont know why the stock market moves as it moves. Too many factors go into such shifts. Any journalist who writes, The market moved because of X is an idiot.
You contaminate your thinking if you accept the neat packages news provides for why things happen. And Dobelli has all kinds of good stuff about how consuming news makes you a shallow thinker and actually alters the structure of your brain for the worse.
News is also costly. As Dobelli points out, even checking the news for 15 minutes three times a day adds up to more than five hours a week. For what? He uses the example of the Mumbai terror attacks in 2008. If a billion people spent one hour of their attention on the tragedy by either reading about it in the news or watching it, youre talking about 1 billion hours. Thats more than 100,000 years. Using the global life expectancy of 66 years means the news consumed nearly 2,000 lives!
Pretty wild, right?
So what to do? Dobelli recommends swearing off newspapers, TV news and websites that provide news. Delete the news apps from your iPhone. No news feeds to your inbox. Instead, read long-form journalism and books. Dobelli likes magazines like Science and The New Yorker, for instance.
As an investor, Id add some of mine own:
- Ignore any news chatter that attempts to explain or predict what is happening in the stock market
- Stop checking your stock portfolio multiple times a day
- Dont try to find reasons for every dip and rise in the prices of your stocks. Instead, accept that the vast majority of the time, nothing important happens
- Ignore the drumbeat of economic news. If you must read news, try a perusal of the weekly Economist
- Ignore, especially, the drumbeat of economic data the unemployment report, GDP, the trade balance and all the rest. As Peter Lynch once wrote, If all the economists of the world were laid end to end, it wouldnt be a bad thing.
- Read the shareholder letters of successful investors. I like reading Steve Romick at FPA, for instance. I also enjoy the shareholder letters of the Third Avenue family of funds. There are many others. Read any research such investment houses share
- Spend little or no time trying to guess where you think the market and economy will go. Instead, focus on finding good deals and winning teams of entrepreneurs and investors that you can invest alongside
- Listen in on the conference calls of your favorite companies and investors
- Check the stories and prices on your stocks once a quarter
- Read books written by successful investors. Then read them again. Some of my favorite authors include Martin Whitman, Seth Klarman, Peter Lynch, Ralph Wanger, Benjamin Graham and Joel Greenblatt. Im sure Im leaving a bunch out, but you can put together a truly awesome library of successful investors for little money
Read books that deepen your understanding of markets and how they work. Read Louis Lowenstein and James Grant, for two of my favorites.
My fundamental problem with the news is that it makes it seem as if important things happen every day. The vast majority of the time, nothing of any significance happens whatsoever which is good for you. If you avoid a lot of the news, you will have a lot more time to dedicate to other things. Feed your brain good food and youll get better results. It seems that simple.
Dobelli himself has sworn off the news. And he reports he feels much better for it: less disruption, more time, less anxiety, deeper thinking and more insights. I cant do the whole idea justice here. If you want to read Dobelli, check out the full essay here.
Print it out. Turn off the smartphone. Stop checking email for 25 minutes. And just read it. Be forewarned: It might just change your life.
Chris Mayer is a veteran of the banking industry, specifically in the area of corporate lending. A financial writer since 1998, Mr. Mayer’s essays have appeared in a wide variety of publications, from the Mises.org Daily Article series to The Daily Reckoning. He is the editor of Mayer’s Special Situations and Capital and Crisis formerly the Fleet Street Letter.