Book publishers love their “backlist” – the books that sell year after year because they are loved, important or both.
The Reality of Book Publishing
Such books are rare. A few figures should give you an idea. While estimates vary, somewhere between 500,000 and 1 million new book titles are published every year. The number goes up to 3 to 4 million when you include the tsunami wave of self-published books.
Most of the self-published books languish in obscurity. They are read by a few caring relatives. New titles from book publishers float into bookstores like flood tides in winter, summer and fall. Like children heedlessly given the sink or swim test, most books disappear when the next tide of new titles arrives.
That reality makes the second edition of William Bernstein’s 2002 book, “The Four Pillars of Investing,” important. It is one of a handful of investing titles published over the last two decades that is a true “backlist” book.
It’s a “keeper.”
More columns about William Bernstein
Scott Burns, “It’s Twilight for Managed Mutual Funds,” 05/18/2014, https://scottburns.com/invest-for-your-future/
Scott Burns, “How to Invest for your Future… in only 13 pages,” 05/11/2014, https://scottburns.com/invest-for-your-future/
Scott Burns, “Why Indexing Succeeds,” 12/05/2000, https://scottburns.com/why-indexing-succeeds/
Scott Burns, “The Couch Potato Portfolio, Plus,” 12/03/2000, https://scottburns.com/the-couch-potato-portfolio-plus/
While the four pillars are unchanged, the context in which he discusses them has been updated in two ways. The first is what you’d expect: History didn’t end in 2002, so the new edition reflects recent financial history and research. The second is a broad deepening. As a student of history, Bernstein has infused the new edition with a far deeper sense of markets and financial history. While the book still has enough numbers in it to entertain an engineer, I think a lot more history majors will enjoy reading the book, too.
Goodbye, Hollerith
Here’s a subtle example of change in the new edition. In the original edition, Bernstein makes reference to Hollerith, Inc., the card punch company that later changed its name to IBM and became synonymous with computing. The Hollerith reference is gone from the new edition. Bernstein knows that very few people today have ever seen a Hollerith card. They were becoming an anachronism by 1970. And, by the way, Microsoft and Apple are shorthand for computing today. Not IBM. As a reference, the Hollerith card has “aged out.”
Things change.
Something similar happens with new references to contemporary culture. Introducing the shortcomings of hedge funds, Bernstein has a great, pithy subtitle:
“A Hedge Fund Is the Investment World’s Birkin Bag”
That almost says it all, but Bernstein fills in the details. Hedge funds are status symbols, not investments, because they are so ridiculously expensive.
The good news in this book is that the four pillars of investing continue to bear the weight of evidence and experience. They allow us to invest our savings and enjoy a return that will be higher than the vast majority of stock and bond pickers ever experience. The same pillars, while they may never result in the purchase of a Birkin, will carry the responsibility we all bear for funding our retirements, our emergencies and the many good times we enjoy between birth and death.
Here, as an introduction, are the four pillars:
- Investment Theory. This covers the impact of market ups and downs for stocks and bonds. In the new edition, Bernstein writes more about the “burn rate” of retirement portfolios and how it should influence the mix between stocks and bonds.
- Investment History. Without it, you’re likely to repeat the investment disasters of the past. With it, you’ll have a healthy skepticism toward brilliant managers who are sharing their brilliance for a hefty fee.
- Investment Psychology. Although he feels that behavioral finance may finally have exceeded its absolute importance, the more aware we are of our perceptual bad habits, the more likely we are to succeed as investors.
- The Business of Investment: Here Bernstein details how Wall Street makes its living from our money. He is harsher than I’ve been about the excessive and unearned costs of brokers and money managers, witness this paragraph. “… you won’t go far wrong by treating the entire financial services industry as a battlefield – certainly any stockbroker or full-service brokerage firm, any newsletter, any advisor who purchases individual securities, and any hedge fund. It’s not too much of an exaggeration to say that the average stockbroker services his clients in the same way that Baby Faced Nelson serviced banks.”
So Long, Baby Face!
Fortunately for us, we now have great alternatives to Baby Faced Nelson. The last 20 years has seen an explosion of low-cost index investing through mutual funds and exchange-traded funds. Today it is possible to do that low-cost investing on virtually any investing platform and in a multitude of 401(k) plans.
Read this book and you’ll understand both the “how” and the “why.”
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Related columns:
Columns mentioning William Bernstein:
Scott Burns, “It’s Twilight for Managed Mutual Funds,” 05/18/2014, https://scottburns.com/invest-for-your-future/
Scott Burns, “How to Invest for your Future… in only 13 pages,” 05/11/2014, https://scottburns.com/invest-for-your-future/
Scott Burns, “The Couch Potato Portfolio, Plus,” 12/03/2000, https://scottburns.com/the-couch-potato-portfolio-plus/
Scott Burns, “Why Indexing Succeeds,” 12/05/20000, https://scottburns.com/why-indexing-succeeds/
Sources and References:
Dean Talbot, “Number of Books Published Per Year,” 02/02/2022 https://wordsrated.com/number-of-books-published-per-year-2021/
William Bernstein history books:
“The Birth of Plenty: How the Prosperity of the Modern World Was Created,” https://www.amazon.com/Birth-Plenty-Prosperity-Modern-Created/dp/B09C115162/ref=sr_1_16?crid=3ABR3PL0LD6CM&keywords=william+bernstein+books&qid=1689023669&s=books&sprefix=William+Bernstein%2Cstripbooks%2C135&sr=1-16
“A Splendid Exchange: How Trade Shaped the World,” https://www.amazon.com/Birth-Plenty-Prosperity-Modern-Created/dp/B09C115162/ref=sr_1_16?crid=3ABR3PL0LD6CM&keywords=william+bernstein+books&qid=1689023669&s=books&sprefix=William+Bernstein%2Cstripbooks%2C135&sr=1-16
“The Delusions of Crowds: Why People Go Mad in Groups,” https://www.amazon.com/Delusions-Crowds-Why-People-Groups/dp/B08TKLPMB5/ref=sr_1_20?crid=3ABR3PL0LD6CM&keywords=william+bernstein+books&qid=1689023669&s=books&sprefix=William+Bernstein%2Cstripbooks%2C135&sr=1-20
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo: Scott Burns, Herrington Harbor North, Chesapeake Bay 2022
(c) Scott Burns, 2023
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