The Study of History Matters for Successful Investing

I truly believe it. I have heard, time and again, from the world’s top investors — the No.1 thing for investing is studying history. I am very lucky, because I have a passion for studying history.

Why is history important? It is because documented history is perhaps the only reliable source of knowledge for developing an accurate understanding of the present. Said differently: If we want to understand what is going on now, we must understand history.

To me, studying history is a process of acquiring two things at once: 1) great ideas from great minds, and 2) materials for me to form new ideas. Both are key ingredients that feed my thinking process, allowing me to see what drives time forward — i.e., what makes the world move. From there, I can acquire a more accurate understanding of the present and I can structure a sensible framework to anticipate what might happen in the future.

If most of the world that we know today was indeed created in the 20^th century, having some knowledge about what happened right before — i.e., during the 19^th century — would be helpful.  

Recently, I scanned through three books (more precisely, I read a few chapters of each book).  They all focus on 19^th century matters, ranging from economic growth to scientific developments.  

• Osterhammel, Jürgen. The Transformation of the World. Princeton University Press.
• Maier, Charles. Leviathan 2.0: Inventing Modern Statehood. Harvard University Press.
• Frieden, Jeffry. Global Capitalism. W. W. Norton & Company.

Reading history helps us understand what makes history move.  It also helps us gain foresight into what can happen next in our own times.

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.