Chapter 3. Too Much Complexity, Not Enough Simplicity
For me, simplicity has always been the key to successful investing, and the time-honored wisdom of Occam's razor, set forth by the fourteenth-century philosopher and friar William of Occam, has stood me in good stead: When confronted with multiple solutions to a problem, choose the simplest one. My career has been a monument, not to brilliance or complexity, but to common sense and simplicity, "the uncanny ability," as one observer has said of me, "to recognize the obvious." (I'm not sure it was meant as a compliment!) So let's recognize some of the simple and obvious facts of our highly complex financial and investing life today, beginning with the role of innovation.
It is hard to argue against the value of innovation in general. Our laptop computers probably have enough calculating power to send a man to the moon. With tiny pocket versions, we can connect to Wi-Fi all over the world; keep in touch with our kids; and take, send, and store photographs. The Internet provides an infinite store of information available on demand. E-tailing has given consumers the benefit of previously unimaginable price competition. Medical technology (like my heart transplant) has enhanced and lengthened our life and its quality.
But in the financial sector innovation is different. Why? Because here there exists a sharp dichotomy between the value of innovation to the financial institution itself and the value of innovation to its clients. Financial ...