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Latticework: The New Investing. R. Hagstrom. (Texere, 2000)

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Perusing the shelves of a typical bookstore, you can almost hear the teeming rows of finance and investment books screaming at you, promising easy riches with all the subtlety of late night cable TV infomercials. Get Rich Quick! Become a Millionaire! Ten Steps to Easy Wealth! On the other hand, Latticework: The New Investing by Robert Hagstrom offers a refreshingly calm and thoughtful alternative to the typical investing book.

Hagstrom, a successful mutual fund manager, based his book on the ideas of two star investors: Charlie Munger of Berkshire Hathaway (Warren Buffet’s chief deputy) and Bill Miller of Legg Mason. Make no mistake, though, the book is neither a how-to investment manual nor a story of how Munger and Miller invest. Instead, it’s an introduction to a new way of thinking that has served these investors well in their portfolios and, Hagstrom proposes, in life. It is also a wonderful proponent of Liberal Arts education and the benefits of lifelong learning.

The central idea is that learning as much as possible about multiple fields and widely divergent disciplines creates an overarching latticework of connected ideas that Munger calls worldly wisdom. That latticework, informed by myriad ideas and concepts, enhances decision-making and the thinking process, and leads to new insights.

Applied to the market, this learning can lead to better decisions and uncover patterns lost to most people. Munger and Miller espouse an investing theory that reaches well beyond the typical principles of finance that most MBAs and CFPs follow, and far surpasses the topics covered in business rulebooks like Fortune, Forbes, and the Wall Street Journal. Studying and understanding areas as diverse as physics, literature, biology, psychology, sociology, etc. creates that latticework of mental models, and shows where and how the various fields overlap, where and how different ideas relate back to each other, and uncovers insights into patterns that transverse all the disciplines. Studying multiple and diverse fields and then applying those insights in the market have helped Munger and Miller buck trends and conventional wisdom to create very successful portfolios with many unconventional assets.

The book is really an eclectic collection of introductions and summaries of Big Ideas. Hagstrom packs a head-spinning amount into slightly more than 200 pages, including introductions to, among others fields, biology, philosophy, physics, psychology, literature, and the ideas of such renowned thinkers as Benjamin Franklin, Charles Darwin, Isaac Newton, William James, Mortimer Adler, Doyne Farmer, and many others. He takes us from Benjamin Franklin’s theory of education to the St. John’s University Great Books program, and on to the cutting edge work of the Santa Fe Institute. While breadth is its greatest attribute, breadth is also the book’s greatest fault. The sheer amount of content can overwhelm. However, to be fair, Hagstrom states very clearly that the book is designed merely as an embarkation point from which readers can begin building their own latticeworks. He introduces the ideas and suggests resources where one can learn more.

This is a challenging theory in a business environment that places a very high premium on specialization and deep focus. After all, Liberal Arts graduates fresh off the learning farm typically don’t earn salaries that approach those of finance majors who can add the magic letters MBA after their names. However, two factors bolster the book’s credibility to those who might doubt it. First, the fact that such well-known and successful investors as Munger and Miller have achieved bottom-line success based on these theories is all the proof that many will need. Second, growing acceptance and evidence suggests that markets are not the efficient, Newtonian systems that operate in equilibrium as had been widely thought for many years. The multi-disciplinary work of the Santa Fe Institute, among others, is demonstrating that markets are dynamic, evolving entities, like biological systems. The more we understand about the behavior of other systems, the more we understand about the evolution of markets.

I loved this book, and my Liberal Arts-educated heart sings at the thought that lifelong learning can lead not only to better understanding of the world around us but also to fatter wallets. In a world focused on the proverbial bottom line, this is a great message. In fact, if I had to retitle the book to compete with its infomercial neighbors on the finance and investing bookshelves, I would call it Get Filthy, Dirty, Stinking Rich through Liberal Arts and Lifelong Learning!

Beth Garlington Scofield is Managing Editor of LiNE Zine. Share your favorite books with her at beth@linezine.com.

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