In one sentence: In the second half of the interview, Vitaliy Katsenelson describes how he found finance, why writing is his main way of thinking about investments, and why sleep and health feed the creativity he sees as an investor's real edge.
Key ideas
- A lucky entry. He took a computer-support job at a Golden, Colorado investment firm, then found the idea of discounted cash flows "clicked" and changed his major to finance. He earned undergraduate and graduate degrees and the CFA while working. (A note on the picture of investing from Russia: he imagined the shouting trading floor.) [02:00–06:30]
- Teaching, then writing. He taught finance part time, partly to impress his father who thought investing was like gambling. He got bored and started writing for TheStreet.com. [06:30–10:00]
- Writing as thinking. He says he thinks best by writing and that a topic he hasn't written about gives a 50-50 chance of an incoherent answer. Writing shows the holes in an argument because skipped logic is obvious on the page. He writes largely for an audience of one, himself. [10:00–14:00]
- Example: a 37-page Tesla piece. Katsenelson describes researching and writing a long article on Tesla; Danielle remembers talking it through with him. (No view on Tesla's value is given in the episode.) [11:30–13:30]
- Sleep as a lesson learned the hard way. After about two months of writing late and rising early, he felt awful and his memory slipped. He points to Matthew Walker's Why We Sleep and shares his routines: no caffeine late (decaf after nine in the morning), dim lights and cut blue light in the evening, a cool room, and a target of eight hours. These are his personal habits, not investing advice. [14:00–26:30]
- Rules instead of willpower. As with budgeting, he says a few conscious rules are enough; he even "geo-fenced" his diet to Denver and relaxes it while travelling. [18:30–22:30]
- Creativity is the edge. He argues investing is a creative process, so output is not proportional to hours worked. A 15-hour day is an "assembly line mentality" that suits standardized output more than creative work. [17:30, 30:00–32:30]
- The Dalai Lama story. To tell a boy to stop eating sugar, the Dalai Lama first stopped eating sugar himself. Katsenelson's forthcoming book, The Intellectual Investor, is his way of becoming a better investor before advising others. [32:00–34:30]
- Happiness and investing are not separate. He says he'd do investing even if he won the lottery, and that looking for happiness in the process of creating works better than in material things. [34:00–36:00]
How it maps to RuleOne
- Nothing in the screen depends on this episode. The link is to the U (Understand) step: writing a short thesis on each company, in your own words, is a good check on whether you understand it. The site's stock page is a place to start the notes.
- The L step: mood and sleep affect decisions; set rules for when you will and won't trade.
Buffett, Munger and Graham links
- Graham's The Intelligent Investor is Katsenelson's explicit starting point for his new book, and he jokes that his book is the "new testament" to its "old testament".
- Munger's checklist and writing habits (see the decision journal and pre-mortem in 213) are close cousins of "write it down to find the holes".
- Buffett has said he reads and thinks for much of the day (a frequent theme in Berkshire meetings); I am not tying this to a letter.
Words to know
- Discounted cash flow (DCF): valuing a business by the present value of its future cash.
- CFA: Chartered Financial Analyst, a three-level professional exam.
- Non-linear output: more hours do not buy proportionally better ideas.
Try this
Pick a company from /stocks/ and open its page at /stock/TICKER/. Without looking at the page again, write 200 words on how it makes money and why it might still be worth more in ten years. Mark every place you got stuck: those are the gaps to research.
Check yourself
- Why does Katsenelson say he writes?
Answer
To think. Writing exposes gaps in logic, so it forces him to learn a subject properly. He writes mainly for himself. - What does he think is an investor's edge?
Answer
Creativity, which depends on rest and a sound mind, not on hours worked. - What is the point of the Dalai Lama story?
Answer
You should improve yourself before telling others to change. His book is about becoming a better investor first.
Short quotes
"I think investing is a very creative process." (Katsenelson, ~17:45, auto-transcribed)