Book Review: The Tao Jones Averages – A Guide To Whole-Brained Investing by Bennett Goodspeed

This book is available for $4 on Amazon.  It is by far the best purchase a value investor will ever make. If your background is accounting, statistics, science, mathematics, or any other “hard” discipline I beg and plead with you to read this book. Below we also have a good summary of Goodspeed’s ideas in a review of the article ” TheWorld’s Smartest Man Syndrome”. The article used to be in the CFA curriculum, but it was replaced by an article on underwater Zambian currency swaps.

If you have ever built a financial model more than 50 lines long, I beg and plead with you to read this book.  If you background is philosophy, literature, or the fine arts you should read the book to reinforce what you might already understand.

My background was accounting and finance. This book influences my investment thinking every single day.  The author was a psychologist by training, but he later became a significant advisor to institutional investors through his research service Inferential Focus.  He was not a wild-eyed Eastern mystic, he was a serious advisor to professional investors.

The book is filled with great quotes and interesting anecdotes.  A funny story is that I once worked with a guy who pretended to be an expert on Eastern philosophy, in fact he was just pulling unattributed quotes from this book.

If you cannot read the book there are two critical takeaways.

  1. Really good investing is just as much about creativity, as it is about number-crunching.  Goodspeed explains the bicameral (two hemispheres) theory of the brain. This is not pop science.  The bicameral theory of brain is accepted fact.  Goodspeed’s point is that the great investors he has met combine both left-brained analysis, and right-brained creativity.
  2. Keep it simple.  When I hear about algorithims and complex models I immediately revert to what I learned from this book. There are many great quotes, but I will leave with the two that headline the first chapter.

Nature’s way is simple and easy, but men prefer the intricate and artificial – Lao Tsu. (the leading Taoist philosopher)

If you do not know who you are, the stock market in an expensive place to find out.  – Adam Smith (a pseudonym for a well known institutional investor)

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About Gregg Jahnke