Why aren't more major-league investors blogging?

Here's a question you've probably wondered: why aren't more major-league investors out there blogging?

I'm talking about guys who successfully manage serious money, not just another wannabe (like yours truly).

I think an obvious reason that real pros don't blog now is that great investors are making scads of cash, and there's not much reason to divert time away from that activity if it's working.

But when it comes to investors, and I say this speaking from my own experience with this blog, I think another key reason that weighs on would-be professional investor-bloggers is that serious investors are reluctant to "give away" trade secrets.

From the worst to the best of the bunch, the thinking is generally this: "if I told you how I looked at companies, you would copy me and ultimately eliminate my advantage."

So here's the question I've found myself asking: Is it really possible to give away investing trade secrets?

Seriously! Think about it:

Warren Buffett has close to 30 years of his ideas available for free, on a publicly accessible site.

Joel Greenblatt recently noted in The Little Book that Beats the Market that there's no reason to think that sharing his "magic formula" would cause it to stop working because of the key to making it work is the discipline involved in sticking to the formula.

Richard Dennis said something very similar back in 1989, in Jack Schwager's Market Wizards, about his Turtle Trader experiment, where he taught 23 people how to trade, with great success, over the course of a few years:

JS: Didn't you have any reluctance about giving away trade secrets?

RD: Sure, but I don't think trading strategies are as vulnerable to not working if people know about them, as most traders believe. If what you are doing is right, it will work even if people have a general idea about it. 

I always say that you could publish trading rules in a newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as we taught our people. What they couldn't do is give them the confidence to stick to those rules even when things are going bad.

Taken together, I think these quotes point to the fact that your livelihood will not be negatively impacted because you take to writing publicly about professional decisions.

For professional, brand-name investors, the idea that one would be giving away trade secrets is valid - if you were the only one writing and you put everything single aspect of your process out there. But chances are, you're not going to get into the details about your screens, or how you tossed out the first forty-nine companies - you'll just focus on walking others through the story on the one company that you kept.

Given that the blogger chooses the level of disclosure about his means, pros should instead focus on three solid opportunities presented by a blog:

(1) Trying to communicate with others who may know nothing about your idea, by making the exposition "as simple as possible, but not simpler," will push you to state the thesis in such a way that you'll expose flaws and strengths in your thinking that you might not have been aware of.

(2) a blog is a great way to get ideas on companies heard by others, who may know more about the situation than you do. Chances are, if there's something you haven't heard, someone will find it and tell you what that was. However, if they like the idea, they just might buy alongside you.

(3) Along these lines, if you're really onto something in your analysis, the blog will dramatically increase the likelihood that your views will attract quality media attention to your idea, on your terms. That can't hurt investment returns, presuming your thinking is correct. Publicity shy investors can be consolled by the fact that their ideas get complete representation on their own terms. 

(4) The cheapest positive: writing for an audience is a a gratifying experience. Gaining attention for one's writings is addictive; if you're not careful, you get "hooked" on traffic, and start doing stupid things like neglecting your primary employment, significant other, friends, etc.

If a fund manager is on CNBC plugging their picks, there's absolutely no reason why they can't have the same logic written down on a blog. The blog offers the advantages of a having a substantially longer shelf life, and one is not constrained by artificial time and format limits of television.

Ultimately, putting one's own ideas out there is more honest than the alternatives - feeding a few quotes to a reporter. There's no way to accuse an investor of a hidden agenda if you state the facts as completely as needed to convey an idea.

In fact, when you think about what the angry-letter writing activist investors are doing to achieve their returns, it is almost laughable in comparison with the ability to state your case in as much detail as you like, potentially reaching a company's entire investor base and news media, for free, on the web.

Critical mass of investing readers is building. Why wait for Barron's to decide your ideas are ready to get published? You might as well get started publishing them yourself. Of course, if Barron's wants to hop along for the ride later, you're not going to stop them. Barron's would probably appreciate the fact that you helped flag their attention in the first place anyway. - Ed

Comments

[Equity Private]

Not sure if it qualifies, but my IRR is pure catharsis.

[cellardoor]

Call me a cynic, but I suspect that your cited cases are not true counterexamples.

a)Buffet makes the bulk of his money through private transactions that he gets first calls on -- and he probably gets lots of "advertising" edge through his disclosure, by getting even more private CEO's to call him first. He certainly doesn't go out of his way to predisclose public investments before SEC deadlines.
b)Greenblatt closed his fund before writing his first book, which seems to imply that on the margin, someone that wealthy has goals besides max'g asset management fees/performance fees. His 2nd book that you reference above, does not disclose hedge fund strategies, but instead discloses an asset class strategy (buy value stocks with high ROE), and historically, did not drive Gotham Capital's growth. In fact, if he put the bulk of his investors' money in s strategy that needs 3 years to reach fruition (timeframe he cites when discussing why this strategy will persist -- because most investors can't wait 3 years for the pain to end), I doubt he'd have much outside $ left.
c)I'm biased against Turtle Trading being hugely edge-possessing, so I won't comment on that.

I suspect there's a huge adverse selection issue -- most people write about investing because they can't invest, or else they're done w/active investing, or want fame as well as fortune.

Just my take..