Mark Higgins, CFA, CFP®

Think Like a 200-Year-Old ****** The most common mistake during economic downturns is to assume that it signals a linear, downward trend. the reality is that downturns are normal and almost always reverse more quickly than people anticipate. The key is to have enough short term resources to weather the downturn and the courage to rebalance your portfolio despite your instinctual fears not to. I found that gaining a deep understanding of financial history is the most powerful enabler of these abilities. Of all the things I’ve done for the past 15 years, this has been by far the most valuable.

Never Disparage the Power of Self-Education ******* "All the genius I have lives in this: when I have a subject in hand, I study it profoundly. Day and night it is before me. My mind becomes pervaded with it. Then the effort that I've made is what people are pleased to call the fruit of genius. It is the fruit of labor and thought." -ALEXANDER HAMILTON ******* Alexander Hamilton was arguably the greatest economic mind in U.S. history. He repaired the nation's credit and foresaw its economic potential well before his peers and many of his successors. Hamilton was also almost completely self taught, and he attributed his genius to relentless "thought and labor." Many possess similar potential energy that only requires belief to be released.

Find a Glaring Research Void and Muster the Courage to Fill It ********* “To simplify somewhat: historians don’t do economics, and economists don’t do history.” ROBERT J. SAMUELSON ********* Soon after I began researching the 234-year financial and economic history of the U.S. in 2020, I was shocked that nobody had already written a book on this topic. I suspect the reason is no more complex than the quote offered by Robert J. Samuelson. When you see glaring gaps in the field of research, have the courage to fill it. Typically, these gaps are found in places that neither practitioners nor academics have incentives to fill. Such was the case with “Investing in US Financial History.” Many more opportunities like this remain unaddressed.

Never Underestimate the Role of Financial Memory ********* Economists often over invest in quantitative analysis and underinvest in evaluating the relevant financial memories upon which decisions of key actors are based. COVID-19 was a great example. The speed of monetary and fiscal stimulus surprised almost everybody in 2020. But if one considered that policymakers remembered the effectiveness of similar efforts to stop the GFC from spiraling into a great depression level event in 2008-2009, it makes sense that they were able to enact them so swiftly only 11 years later. It is the memories of key actors that often disproportionately shapes their reactions to crises, and this is only possible to comprehend by studying financial history.

Understand the Motives Underlying Their Objections ************ “A business model that relies on trickery is doomed to fail.” -CHARLIE MUNGER *********** A big challenge in the financial industry—one that becomes glaringly obvious when you think in terms of decades rather than years—is that people routinely cling to disproven beliefs to preserve their market position. In extreme cases they may even resort to misrepresenting facts. The cause is often a visceral fear of obsolescence. Sadly, it is the people they serve who pay the price. When encountering such people, the best option may be to find a new group of people who are open-minded. As Charlie Munger cautioned, firms that embrace practices that offer no value will ultimately fail.

Resist the Gravity of the Present ************ "“The delusion lies in the conception of time. The great stock-market bull seeks to condense the future into a few days, to discount the long march of history, and capture the present value of all future riches. It is [their] strident demand for everything right now — to own the future in money right now — that cannot tolerate even the notion of futurity.” ************ Most investors fall victim to their emotions because they are caught in the gravity of the present. The best investors anchor their minds in the future. They are comforted by their knowledge that investment success requires the passage of many years, which is a mentality that runs counter to our instincts as humans.