As director of portfolio strategy and managing director of Goldman Sachs, Winter has surely faced a fair number of challenging choices. He believes binaries simplify the decision-making process: If you can whittle your options to two, you can begin to gather the necessary information and assess that data. “I realized that smart people approach problems as dichotomies — either/or decisions,” he explains in the preface. “If this, then not that. If yes, if no, then what?”
Great investing is really about understanding how to evaluate facts, Winter continues — “how to make reasonable suppositions about the things you don’t know, how to account for the uncertainties that impede decision-making, and finally how to do all that rapidly enough so that you can gain an advantage over competitors and thus the market.” At 27 pages the introduction might be longer than many book chapters, but it’s more illuminating than many, too. I found it very compelling reading and one of my favorite parts of the book.
Winter didn’t want to write yet another tome about investing but instead one about sound decision-making, with investing as the object, not the subject. Winter’s purpose is to “link the two skill sets, investing and decision-making.” Though he assesses markets using hundreds of binaries, he focuses here on the 21 he says can explain just about all investment thinking.
Most chapters in The Either/Or Investor
are based on these dichotomies, with their titles identifying the decision-making lesson you’ll discover: “Here Versus There,” “The Developed World Versus the Developing World,” “Preservation Versus Growth,” “Fad Versus Trend,” “Conventional Wisdom Versus Anomalies” — you get the idea.
“In investing, the first and most important binary is fear or greed,” Winter says, and sure enough you can learn why by reading Chapter 7, called — of course — “Fear Versus Greed.” You might read his chapters hoping for universal right or wrong answers, but Winter wants you to learn to ask what the available information tells you to do. And although he can’t answer that question, he does give a firm enough push in the direction of information gathering and analysis to help you build some momentum in your process. The Either/Or Investor
disputes the popular belief that all the average inves-tor needs to achieve the returns of a spectacularly successful investor is to follow that master’s strategy. Winter even takes on books that model famous investors’ methods (ones you’ve probably read about right here, in fact). His beef isn’t so much with these experts but with what he considers the misapplication of perfect math (assuming, for example, the reader will achieve an average annual return of 11 percent) and readers’ inability to accept the idea that they won’t ever match the very best money managers’ returns. Winter is determined to promote this daring, provocative position even though it’s a hard reality for most investors — not to mention the publishers of all those investment books — to acknowledge.
The subprime mortgage crisis hit full force after Winter submitted The Either/Or Investor
to Random House but before the book was published. He seized the opportunity to update his manuscript and address more directly the problems of easy credit. This revision makes the book feel even more relevant, especially for investors concerned about today’s economic uncertainties.
Can you endure a few final binaries? Plausible vs. forgettable: My answer? Highly plausible — quite convincing, too. Read it vs. skip it: Read it, definitely.
Here’s one more piece of information, if it will help your assessment: The Either/Or Investor
is high on my list of the most thought-provoking, assumption-challenging, instructive books of 2008. And that’s one determination I didn’t have a bit of trouble making.
Have a question about this month’s book? Want to share your own recent financial favorites? Write to Angele at firstname.lastname@example.org