Opinion: To be a better investor, read more good novels

Northwestern Now: Summaries

To be a successful investor, it helps to understand people. And nothing does a better job than great literature in providing insight into how individuals act — what motivates them, what unnerves them and what inspires them. We bet you can find a number of classics on the bookshelves of many investors, books by Burt Malkiel, Peter Lynch, Warren Buffett and Robert Shiller, among others. Here are some other authors who might also improve your investment returns: Jane Austen, Anton Chekhov, Leo Tolstoy and Fyodor Dostoevsky. Why should you look to literature for investment guidance? Because culture matters. People aren’t organisms that are made and then dipped in some culture, like Achilles in the river Styx. They are cultural from the outset. To know them, read their stories. There is no way to grasp most of what individuals and groups do by deductive logic. Given identical economic opportunities and advice, various cultures respond differently. Human lives don’t just unfold in a purely predictable fashion the way Mars orbits the sun. Contingency, traditions, idiosyncrasy and unforeseeable choices — all of which allow for alternatives — play an indispensable role. Novels offer a distinct way of knowing. The very shape of the stories they tell, the sorts of events they represent as plausible, effective or important, convey vital, if elusive information. What’s more, reading great literature involves constant practice in empathy. If one hasn’t identified with Anna Karenina, one has not really read “Anna Karenina.” Reading a great novel, you identify with its characters and spend countless hours feeling from within what it is like to be someone else. You experience the world as someone of a different social class, gender, religion, sexuality, moral understanding or countless other factors that differentiate human experience. And if you are going to bet on how markets will act, you sure better have an appreciation …

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