Why We Write - Anecdote from Davis Dynasty Book

There is a great anecdote in The Davis Dynasty that I think resonates well with anyone who writes. As I mentioned in my full review of The Davis Dynasty book, this is a different kind of investing book. There are tons of business books about how one person or another climbed the ladder, found a way to make a fortune. Those are great, but the Davis Dynasty shows more of the effects on the personal side through three generations, which is pretty unique.

Towards the end of the book, the third generation Andrew Davis and Chris Davis are establishing themselves in the investment world. Chris Davis is working for Shelby Davis the patriarch, then in his 80s, who is at the tail end of his career. Shelby Davis specialized in investing in insurance companies, and he had published a weekly insurance newsletter. One of Chris (his grandson's) jobs was to help with publishing the newsletter, which in the age of computers was not really read by anyone outside their family office any more:

"Why do we bother this?" [Chris] asked Davis, "when nobody reads it."

"It's not for the readers," Davis said. "It's for us. We write it for ourselves. Putting ideas on paper forces you think things through." 

That's an excellent insight and applies well beyond investing. In the realm of investing, I have followed Jason Zweig's guidance in Your Money and Your Brain, where he advises that investors write out an Investment Policy Statement (IPS). Zweig says "The best way to prevent yourself from being knocked off track by your emotions is spell out your investment policies and procedures in advance in an IPS"

From Zweig's book and IPS should include:

"Purpose of Portfolio

Return Expectations

Time Horizon

Diversification

Rebalancing

Benchmarks and Review

Frequency of Evaluation

Adding and Subtracting

We Will Never..."

I think the last category is the most vital, because the IPS is essentially a mistake avoidance tool. The We Will Never rules to avoid act as guardrails. And writing them down is the first step.