Have you ever stopped to consider the difference between science and art? How some things fall rather naturally into one or other of the categories, (like the ‘science of engineering’ or the ‘art of film production’), yet many other things remain difficult to categorise. They may even belong to both.
Part of the distinction between the two is that if something is a ‘science’, then it will naturally follow formulae and rules and can typically be proved or practiced via logical methods. ‘Art’ on the other hand is a form of expression, and invariably involves some level of creativity or innovation. If you think of music as an example, it can be successfully argued that it is both a science and an art at the same time: if a musician follows the ‘science of music’, then they will practice classical methodology and you can expect that their performances will be clinically perfect yet potentially lacking in ‘soul’. Followers of the ‘art of music’ by comparison might be more innovative, and typically can improvise and express a wider range of emotions and unique qualities in their playing.
I’ve always considered investing more ‘Art’ than ‘Science’. If there was a formula for success the world’s greatest investors would all be mathematicians. They’re not. Successful investing requires more than just analysing numbers, it too requires creativity and innovation.
When it comes to Investing ‘Artisans’, Francois Rochon is one. Francois has a passion for both investing and art, he even named his fund Giverny Capital after the city where the famous Impressionist artist, Claude Monet lived. Over the last two-plus decades Giverny Capital has ranked in the top 1% of investors delivering returns c6.7%pa above its benchmark annually. Since 1993 the firm has clocked up a total return of 3,080% versus 686% for the benchmark.
Over the years I’ve always looked forward to reading the Giverny Capital annual letters. Not only is Francois an Investment Master he’s also a master wordsmith.
Francois recently gave an enlightening presentation titled ‘The Art of Investing – Analysing Numbers and Going Beyond’ as part of the Talks at Google series.
While Francois trained as an engineer, he found the rigidity and precision of engineering to be a handicap to successful investing. Engineering and investing are almost diametrically opposed; there is no precision in investing. As an investor you can be considered successful even when wrong 40% of the time. As an engineer, if you’re wrong 0.4% of the time, you’re toast. Notwithstanding, at times engineering calls for more than just numbers – be it for a new design or solution to a problem. To emphasise this, Francois draws on a quote by one of the world’s greatest engineers, Nikola Tesla:
“Instinct is something which transcends knowledge. We have, undoubtably, certain finer fibers that enable us to perceive truths when logical deduction, or any other willful effort of the brain, is futile.”