Pause to Think: Using Mental Models to Learn and Decide. 2024. Jamie Lester. Columbia Business School Publishing.
Pause to Think provides a unique blend of light-hearted and profound reading material. It is straightforward, engaging, and articulate in its recommendations for enhancing our approach to various tasks. The author presents mental models in a way that is both accessible and entertaining, making them not only memorable but also immediately applicable.
Jaime Lester, a seasoned professional in the hedge fund industry and an adjunct professor at Columbia Business School, has structured this impactful book into two sections: Part I focuses on Important Concepts, while Part II delves into Important Frameworks, with an interlude between them. Lester advocates for a deliberate, thoughtful approach to tasks as opposed to rushing through them. Recognizing our human imperfections allows us to counteract impulsive actions and biases. Consistency and mindfulness play key roles in reducing errors in decision-making.
Many of the cognitive biases discussed by Lester stem from investment research, specifically in the field of behavioral finance that originated in the 1970s. Behavioral finance posits that human psychology and emotions lead to irrational fluctuations in securities prices. The advent of robo-advisors is often seen as a remedy for these biases, aimed at guiding investors to assess risks, determine suitable allocations, and stick to their investment plans.
After each section in Part I, Lester provides exercises for readers to engage with. These exercises feature thought-provoking questions on a range of topics, such as investing, economics, probability, and statistics. By completing these exercises, readers can reinforce the concepts discussed and evaluate their own biases. Some exercises also test basic mathematical skills, encouraging readers to sharpen their abilities. A calculator may be handy if mental math skills have dulled over time.
In Part II, Lester expresses strong opinions on essential frameworks for investing. While readers may agree with his five keys to successful investing, they may debate his recommendations, such as disregarding the value of the investment portfolio, enrolling in automatic savings and investment plans, and avoiding high-fee investment products.
Lester emphasizes that micromanaging values is unnecessary, but periodic review of asset allocation and holdings is crucial. Automatic savings and investment plans should offer flexibility based on changing risk tolerance and liquidity needs. While setting and forgetting may not suit responsible investors, fees could be justifiable depending on the investment product and objectives.
Lester asserts that choosing stocks randomly may be more profitable than hiring a professional investor. However, many clients of investment advisors rely on professional guidance due to their lack of expertise or time constraints. Investment professionals offer support, advice, manage expectations, and provide performance reports to align the investment strategy with agreed-upon objectives.
Lester concludes the book on a positive note, focusing on the happiness framework. He emphasizes the importance of professional happiness evolving into overall happiness. The author encourages readers of all ages to prioritize activities that bring happiness rather than fixating on unfulfilling pursuits such as seeking the perfect job.
One highlight of Lester’s recommendations for maximizing happiness is incorporating mindfulness and gratitude into daily routines to maintain perspective and context. In light of global events like the pandemic, reflecting on the book’s insights can provide valuable lessons for personal and professional growth. Lester delivers a compelling narrative that resonates with investment professionals, making Pause to Think a book worth pausing to read.