"You can have comfort, or you can have value. You cannot
have both." — Jim Grant, on CNBC
It is very comfortable and enjoyable to own a company
everyone loves. You can brag about it to your neighbor, bring
it up at social gatherings. But there is usually a significant
price to pay for that comfort — the stock is fully
valued. This is why value (cheap) stocks have historically
beaten the bejesus out of growth stocks. The reason is very
simple: Both love and discomfort are priced into stocks. Love
is priced into fancy valuations, and the hated ones are
This instinctive comfort-seeking doesn’t stop
with stocks; it spills over to the people we choose to share
ideas with. As investors,
we tend to look for people who share our views, but we should
do the opposite. During the 2012 Berkshire Hathaway annual
meeting, Warren Buffett said something that really resonated
with me while answering a question about his political
views’ impact on Berkshire: "If you are going to
choose your friends and your investments by if they agree with
you, you are going to have a very peculiar life."
Let me tell you a true story (as opposed to just lying to
you). I have a dentist friend who was born in Russia and lived
in Israel and Germany before moving to Denver about 13 years
ago. He is extremely smart, very well-read and a thoughtful
person. However, I have yet to meet anyone with whom I have
disagreed more about politics. His arguments with me are
passionate but also well thought-out and backed up with facts
and his own theories. In the past, I used to get angry at him.
After one of our regular debates, I’d sometimes go
into avoidance mode for several months.
Three years ago my friend invited me to go skiing. Overall,
he is a pleasant person, but I was a bit hesitant. It is a
two-hour drive each direction from Denver to the mountains, and
I did not think I could take four hours of arguing. But that
day I felt extra masochistic, and I went along.
Instead of debating with him, I started to listen. I made an
effort to keep emotions to a minimum; I tried to identify the
specifics of our disagreements, what assumptions both of us
were making. And then I attempted to focus the discussion on
these more precise points of difference. In the end, we each
learned from the other. Our views have not changed much
(political views, like religious beliefs, are nearly impossible
to shift). But we’ve been skiing almost every
winter weekend since, and in the summer we bicycle together.
Now I always look forward to our disagreements — and
we are much closer friends than ever.