Sutton’s Law

Q: “Why do you rob banks?”

A: “Because that’s where the money is.”

This is 'Sutton’s Law' and is taught in medical schools worldwide as a way to help practitioners diagnose the most obvious reason before jumping to alternative theories.

Sutton’s Law was based on notorious bank robber, Willie Sutton or “Slick Willie”, who committed over 30 bank robberies in and around NYC during the 1950's.

Sutton’s quote can be appropriate when thinking about investment.

I have been spending a bit of time recently thinking about how my investment philosophy has changed over the years. I started off very much a ‘value’ investor, wanting to look for bargains and apply a margin of safety to each analysis. I was inspired by reading ‘Margin of Safety’ by Seth Klarman and ‘The Intelligent Investor’ by Ben Graham. After all, if it was good enough for Buffett, it would be good enough for me.

Challenging ones assumptions is an important concept and in the private client sphere I was operating in, I was thinking more about ‘growth’ or ‘quality’ companies to invest in for client portfolios. I read 'One Up on Wall Street' by Peter Lynch and met with UK legends like Nick Train and Terry Smith to understand their way of investing. It was another way of looking at things.

I don’t think there is ever a right or wrong way to think about this stuff. Just what makes the most sense to you and what you are most comfortable looking at. Either way, my advice is to always consider the alternative in healthy doses to avoid confirmation bias (as well as many other biases!).

Thinking back to Slick Willie, it’s a factor to consider that whether you are value or growth or quality or whatever that you should have some common sense in your process and to not overcomplicate things. In my experience, that's when it goes wrong. Its no good trying to rob a bank if they don’t have any money after all.