Dead Companies Walking is a book by successful hedge fund manager, Scott Fearon, about how and why he shorts companies (i.e. bets on their failure, or at the very least, dramatic drop in share-price). But as someone who has never, and likely will never short a stock, I was not reading it for its practical applications. Well, that’s not entirely true. I wasn’t reading it to learn how to short the stock market, but to learn about how humans think, the mistakes we commonly make, and how to stand against the thinking of the crowd. Those are the skills it takes to short the market. In that sense, it’s really a psychology book, somewhat like the wisdom of Charlie Munger, but eminently more readable.
The book is divided up into eight chapters, with each one looking at a different example of how humans deceive themselves, and in Fearon’s case, how he profited from that delusion. He discusses the way we are overly optimistic about what we’re invested in; how we get sucked up in fads; our reluctance to look at the world through the lens of others but stick only to our own perspectives; blame everyone but ourselves, and more. What makes the book readable and enjoyable, the ideas aside, is Fearon’s storytelling. Each chapter contains examples from his own experiences of each of these human shortcomings, and he tells them well.
He also gets into other interesting territory, like why it’s harder today than ever for money managers to beat the market, why even very smart people fall pretty to the fallacies he discusses (i.e. ‘smartness’ has limited value), and why knowing when to quit is incredibly important.
Separate from my own interest in finance, I found his descriptions of the common mistakes humans make very helpful. That said, I think the biggest thing I walked away with was trying to be a more independent thinker, and how incredibly hard that is. We’re wired to think like the herd and follow the norm. Doing otherwise is part character and park skill, but either way, a challenge worth meeting.
Just Because I Liked It:
- I was fascinated by this article about a Jewish, Algerian/French Olympic swimmer and Holocaust survivor. It’s an incredibly unique story.
- Sabbatianism is something I only know the outlines of, and this interview on 18forty with academic Pawel Mciejko was so much more. It’s about not only how we understand who Shabtai Zvi was, but the influence he continues to have today.