Simple rules beat complex algorithms.

“Sunrise Over the Eastern Sea” by Fujishima Takeji. Source: Google Cultural Institute

There’s something deeply relaxing about great art. It draws us into the artist’s vision, and communicates a world view without tying us up in endless speculations. The greatest works of art seem to accomplish this effortlessly: the Mona Lisa’s inscrutable smile; the Sistine Chapel’s celebration of the classical beauty of our human frame; Monet’s lilies in their reflecting pool. They call us to deeper reflection, ourselves.

How does the artist do this? Form, line color – simple expressions of profound intensity. They don’t overwhelm us with excessive detail. Instead, they use basic rules of thumb to offer a singular vision, presented with technical expertise, of course.

We experience this in all kinds of human endeavors: in sports, when the quarterback lead’s a late drive to win the game in the final few seconds; in ethics, where the “Golden Rule” is actually quite profound; in business, where the most effective employees are those we like to work with. Whether we like someone sums up a lot: our colleague’s work ethic, team spirit, technical abilities, and the respect they communicate to other staff and customers. How could we not like someone like that?

And we see the utility of simple rules in investing. Well-run companies that provide basic goods and services, conveniently, at fair prices generally make good investments. That’s been the what’s behind both Wal-Mart’s and Amazon’s success, despite their vastly different businesses. Cheap stocks outperform expensive stocks over the long run, if you can avoid the junk. That’s at the core of value investing. A long-term outlook helps you outlast the squiggle and jiggles. Save more at the beginning of your career to have more when you retire. Simple rules are effective.

We seem to live in an algorithmic age, where app-based businesses are continually running A/B tests to enhance their yield, and high-speed traders measure trade latency in nanoseconds. But the work that lasts – that makes an impact – is simple. It just isn’t easy. That’s why so many lesser performers look for shortcuts.

Douglas R. Tengdin, CFA