I might have already read the book long ago, probably its Chinese translation copy when I was in college or in high school. I cannot exactly recall. Over the weekend, I finished reading the English copy of The Alchemy of Finance for the first time. To be frank, I was expecting more than what I ended up getting. But that does not stop me from saying that this book remains a unique investing book. If you have not read it, you should consider giving it a try.

I am not going to repeat what the book preaches but to share a few thoughts I had when reading through it.

Superinvestors, like George Soros, usually are self-taught investors. Many superinvestors do not have the “proper” pedigree or “enough” years of experience before striking out on their own. That is not to say education and training are unimportant — plenty of good investors had proper pedigree and received superb training. However, in investing, the brightest stars appear to have learned investing by themselves. Some examples:

• George Soros earned his bachelor and master degree in philosophy. He does not have a business degree.
• David Swensen had no portfolio management experience prior to managing the Yale Endowment.
• Hillhouse’s Lei Zhang had little if zero experience in portfolio management before launching Hillhouse.

Superinvestors develop their own investment philosophies: Soros’ Reflexivity, Swensen’s “Yale model.” These philosophies usually represent a step-function change against the contemporary belief systems and for this reason, these new philosophies were usually scorned or ignored in their early days. As the inventors of these new ideas achieved outsized successes, their philosophies started to gain traction, eventually reaching a stage where other investors started to blindly imitate them, without considering the two very important questions: 1) Do these philosophies still work today? 2) Do they fit me? Blindly copying other people’s strategies may help an investor survive but will not make him or her great. Then, a new generation of leading investors starts to mull new investment philosophies and the cycle repeats.

Superinvestors are first-principle thinkers. In Lei Zhang’s book Value (jia zhi), Lei repetitively mentioned the benefit of applying “first-principles thinking.” Soros, perhaps, is also a first-principle thinker. Let me quote one of my favorite sentences from Soros’ book:

[Economic theory] implies that investors base their decisions on the fundamentals, whereas the goal of market participants is to make money.

Very true. The ultimate purpose of the very existence of investors is not “to get the company fundamentals / macro picture right.” It is to make money.

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