Michael Lewis stands as the acclaimed author behind bestsellers like Moneyball, The Big Short, Liar’s Poker, and The Undoing Project. Though several of his works focus specifically on finance, Lewis consistently explores how data analytics revolutionizes traditional industries.
While Lewis isn’t celebrated for personal investment performance, his extensive research and immersion in financial markets for his writing establishes him as a respected voice in the industry. Here, we’ll examine 10 key pieces of Michael Lewis investment advice that everyday investors can apply.
Let’s dive in!
Michael Lewis Investment Background
Lewis began his finance career as an analyst at Salomon Brothers in 1985, though he departed just a few years later to write Liar’s Poker, his debut book chronicling the rise of mortgage-backed securities through his Salomon experiences.
Following the 2008 financial crisis, Lewis returned to financial storytelling. The Big Short, released in 2010, examined prescient investors like Michael Burry who anticipated the housing market collapse. His 2014 release Flash Boys investigated high-frequency trading and the market inequalities it created.
Michael Lewis Investment Advice
Lewis earns recognition more for dissecting financial industry mechanics than for personal investment success. Nevertheless, he offers valuable insights for investors navigating today’s complex market landscape.
1. Stick to Index Funds
Lewis’s primary recommendation for investors centers on index funds. “I think the best way [to invest] is a low-cost index fund,” Lewis explains. “People really shouldn’t be making individual stock picks with their savings—that’s generally been demonstrated to be not such a good idea.”
Lewis practices what he preaches, keeping most of his personal wealth in Vanguard index funds.
2. Or Invest in Berkshire Hathaway
Lewis makes one notable exception to his index fund philosophy: Berkshire Hathaway represents a consistently solid investment. His reasoning: “I’ve always felt that if things get really bad, the market tanks, he’s always in a very good position to take advantage of the situation.”
He also advocates reading Warren Buffet’s annual shareholder letters, praising their accessibility to non-experts.
3. Focus on Making Money First, Investing Second
Lewis champions a “less is more” philosophy for investing. He advises setting up investments “in a basically simple way and then go about your business of making a living.”
For non-financial experts, dedicating time to earning income and placing it in passive investments beats attempting to outsmart the market through active trading.
4. The Key Decision is How Much to invest
After selecting index funds, Lewis believes the crucial decision becomes “how much is in the stock market, and that’s it.” Regarding his personal approach, Lewis aims to “try not to think about it at all.”
However, Lewis doesn’t provide specific guidance on determining optimal market allocation percentages. For this critical decision, he recommends consulting with a financial advisor.
5. Lean on Your Own Analysis
When allocating funds and selecting investments, Lewis emphasizes thorough personal research. “Experts make mistakes,” he notes, “and analyzing data can help prevent gut calls that become bad decisions.”
This principle runs throughout Lewis’s work. Moneyball demonstrated how data-driven player evaluation vastly outperformed traditional scouting methods. Following the book’s publication, virtually every Major League Baseball team adopted analytics-based roster construction.
6. Write Down Your Ideas
Lewis credits his 30-year career success partly to documenting ideas as they emerge. “Every few months,” he explains, “I go through that pile [of ideas], and it will be all new for me.”
This strategy applies directly to investing. Recording thoughts about specific companies or emerging market trends allows you to revisit them months later with fresh perspective, potentially identifying worthy investment opportunities.
7. Every Model Comes with Risks
Expert predictions fail because creating perfect models of companies or markets proves virtually impossible, according to Lewis. Even with flawless expectation calibration, “you never know what you don’t know.”
Successful investors must embrace uncertainty. While data informs better decisions, it doesn’t guarantee correctness.
8. Don’t Trust Certainty
When evaluating financial advisors, Lewis suggests trusting those who acknowledge analytical uncertainty. Conversely, “if that person exhibits total certainty about his predictions, you know you have a problem,” Lewis warns.
9. Don’t Be Afraid to Ask Questions
Lewis attributes much of his success to fearless questioning, even basic inquiries. His “gift,” Lewis explains, “is not being afraid to seem a little ignorant…Many times, I don’t know anything when I walk in” to investigate a story. This approach reveals hidden assumptions that drive his compelling narratives.
Fundamental questioning benefits investors similarly. Approaching investments with beginner’s curiosity helps identify underlying assumptions in analyses, enabling deeper examination of their validity.
10. Be Willing to Follow Your Ideas
Lewis’s career flourished because he consistently pursued his ideas. Many bestselling books originated as magazine pitches that revealed far greater depth through dedicated reporting.
Investors benefit from similar persistence in exploring initial insights. Whether discovering undervalued companies or identifying nascent market trends, following ideas beyond surface-level investigation can reveal opportunities the broader market hasn’t recognized.
Conclusion: Michael Lewis Investment Advice
Michael Lewis has crafted multiple bestsellers that penetrate the financial system’s inner workings. Though Lewis primarily embraces passive investing, his career methodology and writing approach provide valuable lessons for investors seeking deeper market understanding.
