Are you curious to know what Sherlock Holmes has to do with investing and business ? Well I had the same thought until I read this wonderful book by Peter Bevelin . After reading my learning curve has been geometrically expanded exponentially – Well I didn’t guess to acquire so much wisdom in a 80 Page Book.
But let’s unfold and see how Sherlock Homes helps you to think like you have never done before (A London based fictional character in the Fiction Sherlock Holmes ) by Arthur Conan Doyle – A Scottish physician and writer of Sherlock Holmes
The character of Sherlock Holmes is that of a detective who is analytical and who is also a deep thinker . When I first started reading the book I started connecting the book from a business perspective That’s how things get cleared in your mind . When I read something that’s outside my reading zone I try connecting everything to what I’m doing which then stands in my mind .
Let’s see how Sherlock Holmes shapes our thinking as a investor, business person or a student or for the fact any professional. 
So this is the 1st thing to learn from Sherlock Holmes , Know where to look and what to ask ? Asking the correct question is a great skill you should develop ! I liked the book A MORE BEAUTIFUL QUESTION by Warren Berger which contains how questions shape a person’s thought process.
Pay attention to only that matters ( use our inversion Rule here ) and exclude all other things ! As a investor we need to look only where we get facts rather than looking at everything and trying to match with our theories ! – A case of Confirmation Bias where we tend to only look at informations that confirms our theories and stories and rejecting the other facts ( which may be important or different from previous facts )
1. To know what to do and what not , we need to genuinely understand reality , how things and people are and what works and what not “
“ I have a lot of special knowledge which I apply to the problem , and which facilitates matters wonderfully ( Holmes : A study in scarlet )
With the above what do you need as a thinker ? You need special knowledge which is important to apply to a problem to understand what works and what doesn’t !
2. But only what is useful – it can be dangerous to know too much
His ignorance was remarkable as his knowledge .. he said that he would acquire no knowledge which did not bear upon his object therefore all the knowledge which he possessed was such as would be useful to him ( DR WATSON : a study in scarlet )
Dr Watson gives a glimpse of Sherlock Holmes knowledge he possessed , all which he had was that which was useful – Relating this to our daily lives we are bombarded daily with so much information and facts we read them all along and our brain gets so engaged and tired that it doesn’t know which are facts and which is trivial ! And as an investor what I learn from here is that I will need and posses knowledge only that’s required for me to analyse companies and business , putting rest all to junk box .
This is my favourite of this topic 2
Let’s consider our brain as an attic and see what you do with that ? Think for yourself is your brain a attic that stores all lumber or do you posses it for only that’s required ? By answering this question be clear to put inside the brain only that will be useful and required for you to be productive ! This is a great lesson – This is exactly what’s happening with news and media and social media channels which crowds us with almost lumber which we take it in daily which are not able to differentiate if its good or required for what we do. So taking in information only that is required is again a Skill now in this modern world . You have to have a specialised knowledge to understand what you need and what is not required .
To an investor this is so essential that he should be able to know what’s the information required and what’s not ! Bottom line : Don’t crowd yourself with too many information. Avoid social media, What’s app etc … Use it as a platform rather than a reliable source !
3. Ask . What is in their interest to do ?
” well yes of course the pay is good – too good . That is what makes me uneasy . Why should they give you a 120 £ a year , when they could have their pick for 40 £ ? There must be some strong reason behind ( Holmes : The adventure of the copper beeches )
Another very important lesson , Always ask what’s in the interest of the other person to do something ? Well an example would be If you’re offered a free product at a sales showroom or a public place – First stop and thin what’s in the other persons interest to give me something free !
In FACEBOOK – THE Data were sold out without our permission , but you were enjoying a free networking account ! Nobody cared to ask something why is something coming free to me ? I read somewhere that “ if some product is for free then you are the product ”
Wearing Sherlock Holmes hat as a investor when a stock is cheap what should I ask ? Why is this company available in the market at such cheap valuations then peers ? Well most of the time if problem is temporary you invest or you gather facts ( As Sherlock said you need only what’s required ) and trade off all others and arrive at a reasoned decision based on only facts .
This is a marvellous lesson – Always get the facts then first and then construct the theory rather than typical confirmation bias getting the theory and trying to fit in the facts .
As we usually do we as soon as we hear something we start creating a good story and a theory around it and than as facts come in we try to fit it in which is a big folly that I understood shouldn’t we be doing it in reverse (inversion ) this is a endowment bias where we are too wedded to our ideas where even after fresh facts are obtained we don’t change our previous theories ( you need a Bayes reasoning )
Another human folly
” Being nice is hardly the evidence of innocence ”
Dismiss from your mind that anything which the maid or her mistress may have said must necessarily be true . The lady’s charming personality must not be permitted to wrap our judgment ( Holmes : The abbey Grange)
The above also the liking bias – ( From Influence books by Robert Cialdini – Highly recommend to read and memorise) We tend to believe facts or things said by people we like .
Usually salesman do this trick to sell products to you , they behave and make you like them by their mild mannered talk and their charm and soon you start liking the salesman – then the salesman pushes the product on to you after you have started to like him . Not means all salesman are tricky but being nice is no conformity to innocence.
A well smooth talking Stock broker can make you like him and lull you to do sort of things what you have never thought of doing just because you like him – I’ve been fooled here ! I used to believe all that is said by people whom I like and without rechecking facts and without reconciliation tend to believe it !
I have seen politicians handle this weapon very well – They always make you like them by their Imperturbable manner and speech and never being tense for anything even when they are been treated awkwardly (Imperturbable is a Weapon which was used successfully by buffett when he encountered hearings against Berkshire ) Slowly you start liking them and tend to be biased to vote for them or fall for their words even though you have a strong dislike and aversion to like them.
Sherlock Holmes The learning machine
“Education never ends Mr Watson , it is a series of lessons with the greatest for the last ( Holmes ; The red circle )
I was hearing a podcast by Tim Ferris with Naval Ravikant and in which he mentioned that
“Learning has given me a great edge over others . If you’re reading a book you are in the top 0.0002% of the crowd because for the fact that most of the people don’t read and those who do don’t complete”
This is the quintessential quality of a good investor and a business person . Not only by reading but also by applying ( use it or lose it tendency ) you are sure to have a great edge over the others !
This is what Charlie Munger has to say about life long learning practice
( Thanks : Value Walk ) A good blog to read
Another remarkable one ! Even without correct knowledge of matters you can make judgements ( But not advisable ) on the contrary no knowledge without judgement ! When I was writing this had a great thought on how this principle applies to our daily live ! It’s a paradox How many time have we done judgements about someone or something without any knowledge about that ? Most of us do ! But without judgment there’s no knowledge !
In the next article I will write about how Sherlock Holmes helps you think about Observation , gathering facts and biases which blinds us from making correct analysis of a case !
Master Moves 