To better understand the financial wisdom of John Templeton, we are discussing some of his twenty-one steps detailed in The Templeton Plan and pairing them with financial news. We are currently discussing Step 14: Controlling Your Thoughts for Effective Action.
Scott Phillips, coauthor of Investing the Templeton Way, weighs in on this concept:
Just as Sir John mentioned, the term “thought control” can produce a negative connotation. However, the inherent irony of this negative response is that its practice as Sir John describes it produces deeply positive effects and outcomes.
There is probably no easier way for an observer to measure the benefits of Sir John’s thought control program than by viewing his record as an investor. Sir John’s investment behavior truly is the stuff of legend, and what makes his record as an investor particularly unique was his special ability to step into what appeared to be a dire situation, ranging from events such as the beginning of US involvement in World War II in the late 1930s to the Asian Financial Crisis in the late 1990s and somehow see positive outcomes on the horizon. The burden of creating this vision relies less on intellect, and more on a willingness to apply a different perspective, in these instances, a positive perspective. A better question is not whether he was the only one capable of seeing these outcomes, but rather, and just as the earlier parables suggested – was he the only one looking?
The lesson from Sir John’s practice of thought control as it regards to investing is that you often see whatever it is you desire to see in a potential investment. If you only look for reasons to avoid an investment, you will surely find them, and conversely if you only look for reasons to make an investment you can discover them as well. The practice as it relates to making an investment rests on the ability to block out all the distracting opinions and emotional stimuli and focus one’s thoughts solely on the question, is this stock a bargain? Otherwise, allowing one’s thoughts to sway along with the vagaries, emotions, and myopic nature of the crowd’s opinion will lead to a manic state and ultimately investing mediocrity. However, if an investor can focus solely on the available facts through careful study then they may create what we refer to as a “psychological fortress” through which no irrelevant or destructive opinion can penetrate. Controlling one’s thoughts is a key attribute to maintaining the conviction to act contrary to the crowd, which is a character trait that all successful investors demonstrate over time.
