In addition to writing his Forbes column and running Fisher Investments, Ken Fisher has also written four books. The most recent–The Only Three Questions That Count–was published by Wiley earlier this year and has spent quality time on the best-seller lists.
For Fisher, investing must be seen as both art and science, and he suggests in the book that asking the right questions in a Socratic manner–scientific inquiry–will provide opportunities to investors.
He argues that despite all the respected investing theories that have been developed, “Most of what there is to know about investing doesn’t exist yet and is subject to scientific inquiry and discovery. . . We know more about how capital markets work than we did 50 years ago, but little compared to what we can know in 10, 30, and 50 years.”
Thus his three questions, the answers to which will provide investors with the knowledge that others do not have, and allow them to profit from that unique knowledge. That knowledge includes understanding what others, and you, believe to be true and yet is false; being able to think in an unconventional manner, allowing you to fathom what “others find unfathomable;” and overcoming the limitations of your own brain so it doesn’t mislead or misguide you.
The three questions are:
- What do I believe that is actually wrong?
This is the process that allows you to separate false investing mythology from fact, and is tied to Fisher’s assertion that if everyone believes X causes Y, chances are good that something totally different is causing Y.
- What can I fathom that others do not?
This question encourages you to look for correlations “between two or more variables people generally think are wholly unrelated,” and also look for a pattern other people acknowledge but disregard.
- What is my brain doing to mess me up right now?
This question uses the discoveries of behavioral finance–”Your biggest investment enemy is your brain”–to allow you to “better control yourself so you can begin avoiding many of the typical mistakes investors make and begin lowering your error rate.”