Thursday, August 28, 2008 Exclusive: Interview with Ken Fisher – Part 4

The Great Humiliator, plus What Warren Buffett has which No One Else Does had the pleasure of recently interviewing Ken Fisher, head of the $45 billion Fisher Asset Management, a very long time Forbes columnist, and author of the books Super Stocks, The Wall Street Waltz, 100 Minds That Made the Market, and The Only Three Questions That Count: Investing by Knowing What Others Don't.

He is also coming out with a new book in the Fall, The Ten Roads to Riches: The Way the Wealthy Got There (And How You Can Too!), published by Wiley.

If you missed Part 1 of the interview, you can see it here, and if you missed Part 2, you can see it here, and Part 3 is here. I really liked the humor in the book, The Only Three Questions That Count, especially your definition of 'politics'. Can I reprint that definition?

Fisher: Of course.

If you don't know the origin of the word 'politics', let me enlighten you. The word politics comes from the Greek 'poli' meaning 'many' and 'tics' meaning 'small blood-sucking creatures.' Can you talk real briefly about the stock market being The Great Humiliator [TGH]?

Fisher: I just made it up out of thin air. To my thinking, there is a human tendency for people to want to think they're smart, and because they think their smart, they think they can do well in the market, and this cuts across a broad swath of society. Then they forget what they're up against, which is something which is not a requirement, like that you're smarter than me or I'm smarter than you, but are either one of us smart enough to be smarter than the market. Most of the smartest people I've known are not smart enough to be smarter than the market, and they don't restrict themselves to know something that other people don't know, trying to be smarter about the same things everybody else does, and they forget that the market will just do them in. That's that part about how you're not smarter than the market so you've got to be more humble, and what the market knows how to do is deliver that humbleness to you.

Another way to see that is, in a different part of the book [Only Three Questions that Count], I talk at length about how the more people attempt to beat the market the fewer there are people that actually accomplish that. Most people don't beat the market, only a tiny percent beat the market by more than a few percent in the very long term.

The most legendary people in the industry are still wrong a lot, and if you are right seventy percent of the time in a very long term, that implies you're wrong thirty percent of the time. So that means even if you are a legend, you better be pretty comfortable with being wrong a lot. Forget about being left of the legend, somebody who is legendary was wrong a lot and they better have been comfortable with being wrong a lot.

This is a part that our society today doesn't understand because as soon as someone makes a mistake in public, there's a whole world of people who want to pounce on you. This would apply to whoever it is.

The only person that escapes that, and I never fully understood why, is Warren Buffett. He has this quality where when he makes a mistake, no one gives him any flack for it at all. He is the only person that I've seen who appears to be completely Teflon.

But anybody else, if you make a mistake, they jump on you. Everybody makes mistakes. Take baseball batting where the best batters still strike out a lot, and they have to be comfortable striking out a lot. They're still the best batters but part of the key is striking out a lot. With investing, the odds and the numbers are a little different from the odds and the numbers on the baseball batter, but the same principle applies. So that's the part about being up against The Great Humiliator, because The Great Humiliator is going to deliver a wrongness to you with a vengeance.

End of Part 4 of the Interview – Stay tuned for future segments of the interview over the next several days, where Fisher discusses stock market myths, favorable sectors and much more.

Fisher obviously didn't provide any stock recommendations for the interview, but many can be found in his Forbes column. For example, in the September 1 issue, he favors Anglo American (AAUK), Hewlett-Packard (HPQ), ENI (E), CF Industries (CF), and CNH Global (CHN).

His book, <The Only Three Questions That Count: Investing by Knowing What Others Don't, which would make a great gift for any investor, is available at Amazon.

Author does not own any of the above mentioned stocks.

Interview by Fred Fuld at

Copyright 2008, All rights reserved. Reprinting without permission is prohibited.

No comments: