Last week, I had the honor to be asked to speak to a group of graduate students of accounting at Ohio State University about a career in investing. One student asked, “What single piece of advice do you have for someone just starting out?”

My answer: “Remain skeptical.”

The job of a manager of a publicly-traded firm is to present their company in the best possible light to analysts, investors, and the public at large. While out-and-out lying will buy an executive an all-expense paid trip to the same federal resort at which Bernie Madoff currently resides, offering information selectively is a valid, legal, and oft-used strategy.

In 2009, Bernie Madoff pleaded guilty to 11 felony counts and admitted that his wealth management company was a Ponzi scheme. He now has plenty of time for reading.


As I told the accounting students, every time I hear a company manager offering facts about his or her firm, I preface the statement with the phrase “The [CEO, CFO, Head of Sales, etc.] contends that…” then do my best to find evidence for or against that contention.

For instance, if Company A’s CEO says, “Our hot new product has already gained a strong following in the engineering community,” I start searching for a way to find objective evidence one way or another.

This might mean reading through industry discussion boards to see what engineers are really saying or skimming through competitors’ statements for references to the threat from Company A’s new product.

This style of skepticism does not necessary yield firm answers right away – all the evidence for and against the claim is anecdotal, after all. However, over time, the anecdotes start to measurably manifest themselves in the real world – changing revenue rates and positions on market share league tables, for instance. After following a company closely for some time, assessing management contentions becomes easier because you have built a knowledge base of prior claims and whether they turned out to be true or not.

I believe the best investors share three characteristics:

  1. They understand the factors that drive company valuations
  2. They remain skeptical about companies’ claims related to the valuation drivers
  3. They dedicate their analytical time to finding creative ways to refute or confirm the contentions.

Once an investor understands a company, answering the question “Should I buy, sell, or set this idea aside for a better opportunity?” is easy. The answer becomes obvious the better you understand the facts.

Jim Chanos, founder and president of Kynikos Associates LP, gained initial investing fame by being skeptical about the claims made by Enron, short-selling the stock, and profiting when it went bankrupt in 2001. From the author’s experience, the best investors are short sellers because they are the most focused at understanding and testing claims made by company management.


An adherence to this process in my investing life has carried into other aspects of my life, and has convinced me that all of us must take action now to prepare our society for upcoming radical changes to the way we live due to Anthropogenic Global Warming – man-made climate change.

In the late 1970s, when AGW first started to be widely discussed in academic and political circles, it was – in the investing terms I have used here – a contention.

The scientists of the time understood the physics behind greenhouse gasses (first discovered in the late 1800s) and realized that the enormous volume of greenhouse gas emissions (from power generation and transportation) should have a measurable warming effect on global temperatures. They contended that without a reduction in emissions, certain things would occur – a rise in atmospheric carbon dioxide and a concomitant gradual warming of the atmosphere and our seas.

Since that time, two generations of physicists and climate scientists have tested those early contentions, refining their understanding of the details related to AGW through thousands of tightly controlled, peer-reviewed scientific studies.

The evidence is overwhelming, and the answer is obvious. Emissions from human economic activity has boosted the amount of atmospheric carbon dioxide to a level not seen for several million years.

In 2012, the Berkeley Earth Surface Temperature (BEST) project – a scientific think tank whose founder, Richard Muller, was skeptical of AGW claims and which was funded in part by energy magnate Charles Koch – confirmed that the evidence of global warming in the second half of the twentieth century was clear and irrefutable and that the extent of warming agreed with assessments done by NOAA, NASA, and university researchers.

Richard Muller’s study of Earth’s temperatures going back more than 200 years finds the same old story: It’s gotten hotter in the last 60 years. What’s different is the scientist behind the latest study, Richard Muller. The California physicist was doubtful of what climate scientists have been saying – until he did his own research, partly funded by climate change skeptics. 

Understanding that our planet is warming due to the influence of how we operate our society has important investing implications. Investing in twentieth century technologies for transportation, power generation, and food provision is as irresponsible and nonsensical today as trying to corner the buggy whip market was 100 years ago.

It is a good thing that entrepreneurs world-wide are starting to move us past twentieth century technology and prepare us for the challenges of the mid-twenty-first century (see my most recent article about AgTech, for instance). Energy production, transportation, farming, home building, and communications are all fields that will help our children and grandchildren lead satisfying lives despite the increased stresses caused by climate change.

These are the areas on which individuals and families attempting to create and maintain intergenerational wealth should focus. To do otherwise – to invest in the nineteenth century technology of coal or of the early twentieth century technology of oil – is to purposefully destroy your family’s wealth and well-being.