My husband is a fisherman.

My husband is a fisherman (in his spare time).  If you have a fisherman husband or are a fisherman/woman then you will understand what this means.  It means very early starts in the morning, long days away, smelly clothes on return and sunburnt necks (I still don’t understand that one).

My two boys who are 4 and 6 are now obsessed too.  Much of the weekend in our house and discussions during the week are about fishing and fish.  I never knew that children could know so much about fish.  Last weekend I was treated to a ‘lure test’ which involved my 4 year-old taking every lure out his lure box and testing me on what it was for catching (as long as I mostly said barracuda I seemed to be winning).

I like it though.  I think fishing is a great life lesson.  It teaches patience, discipline and delayed gratification.  These are great things for kids to learn (for life and investing).

Last weekend when Al got home the boys were questioning him about what he caught.  The answer this time was nothing.  “But Daddy, last weekend you caught loads of fish, how come you didn’t catch anything today?”.

His answer was “Well, a technique that works one day might not work the next”. “Why not Daddy?”. “There are lots of reasons”, he said. “The moon phase could be different, the tide could be different, the current could be different, the bait species could be different, the barometric pressure could be different – all these things impact the fish.”  (yes really, those are the sorts of conversations we have in our house).

Will fishing 2.jpg

This is exactly how investing works.  The fish’s behavior is totally unpredictable and random. Their location is totally unpredictable and random.  Even if you had perfect information about the state of the ocean and the environment, you still wouldn’t be able to predict where they would be and if they would take your bait.  You can follow exactly the same winning strategy that caught you ten fish one weekend and catch none the next weekend.

The world of investing is subject to the same randomness.  There is no rule that works in all situations.  It can work, work, work, and then suddenly boom, it doesn’t work anymore. 

This is what makes fishing really hard, and why it’s called fishing and not catching.  It’s also what makes investing really hard, and why it’s called investing and not ‘making money’. 

My husband keeps a fishing log.  He tracks what he catches, when he catches it and the conditions and environment on the day.  This gives him some idea of the likelihood of it being a good day for catching fish.  It increases his chances.  But if the fish are simply somewhere else, he won’t catch them.  You can never actually know.

And the same thing applies to investing.  Tim Ferris recently interviewed Howard Marks on his podcast.  Howards Marks is a legend in the investing world, and Co-Chairman of Oaktree Capital, a firm with over $120 billion of assets under management.  In the podcast Marks said:

The future is a distribution of possibilities and some days we don’t even know what the possibilities are.  That is the world we have to work in.  If you can accept and inhale the unpredictability, variability and randomness of the world I think you are likely to do a lot better in it.  Now, that doesn’t mean you can’t invest, you can’t invest even boldly, but it means you have to assume that things are not always going to work out right away.  You have to have patience, you have to have staying power, you have to have fortitude.

The randomness, uncertainty and changeability in the world is crucial to understand because all too often when it comes to investing, people want certainty.  And we can never have certainty because, to quote Peter Bernstein (another investing legend), “a big and overwhelming idea about life is that we walk every moment into the unknown”.

As investors, we can deal with the uncertainty by building solid financial foundations.  We can keep our debt levels low, we can always keep sufficient cash to protect against the unknowns, we can maintain sensible diversified global portfolios, we can make sure we never own enough of one thing to get killed by it, we can live within our means.  Perhaps most importantly though, we can maintain the patience and discipline of a fisherman.

Georgina Loxton