Investing: The last liberal art

Top Recommended Investment Books

  • Book Title: Investing: The Last Liberal Art
  • Author(s): Robert G. Hagstrom
  • Publication Date: First published in 2000
  • Genre(s): Business, Economics, Finance, Non-fiction


Investing: The Last Liberal Art, written by Robert G. Hagstrom, offers a unique perspective on investing by drawing on a wide range of disciplines. Published in its updated edition in October 2013, the book explores how concepts from psychology, physics, biology, and literature can enhance our understanding of investment strategies and market behavior. For finance professionals, Hagstrom's interdisciplinary approach provides valuable insights that extend beyond traditional financial analysis, encouraging a broader intellectual foundation for making informed investment decisions.

Investing: The Last Liberal Art (Columbia Business School Publishing)
Buy Now
We earn a commission if you make a purchase, at no additional cost to you.
07/16/2024 07:26 am GMT

Content Summary

Key Concepts

  • Interdisciplinary Approach: Hagstrom emphasizes the importance of integrating knowledge from various fields to develop a comprehensive understanding of investing. He argues that limiting one's perspective to purely financial data can result in a narrow and incomplete view.
  • Mental Models: The book introduces the concept of mental models—frameworks for thinking that can be applied to different situations. Hagstrom explains how these models, borrowed from disciplines such as psychology and biology, can help investors make better decisions.
  • Broad Knowledge Base: Hagstrom advocates for the cultivation of a wide-ranging knowledge base. He believes that understanding concepts from multiple disciplines can provide investors with a more holistic view of the market and enhance their analytical capabilities.

Core Topics

  • Mental Models in Investment Decisions: Hagstrom discusses how mental models can be applied to investment decisions. He provides practical examples of how these models can help investors interpret market trends and make more informed choices.
  • Integration of Various Disciplines: The book covers how insights from psychology, such as behavioral finance, can explain irrational market behaviors. It also explores how principles from biology, like evolution and adaptation, can be applied to understanding market dynamics.
  • Literature and Investing: Hagstrom delves into how themes from literature can offer valuable lessons for investors, such as the importance of narrative and the human aspects of financial markets.
  • Philosophical Foundations: The book touches on philosophical concepts, encouraging investors to think critically and develop a robust framework for understanding and navigating the complexities of the financial world.

Overall, Investing: The Last Liberal Art provides a rich tapestry of ideas and insights from various fields, all aimed at enhancing the reader's investment acumen through a broader intellectual perspective.

Critical Analysis


  1. Unique Interdisciplinary Perspective: One of the most significant strengths of Investing: The Last Liberal Art is its interdisciplinary approach. Hagstrom effectively bridges the gap between finance and other fields, providing a fresh and holistic perspective on investing. By integrating concepts from psychology, physics, biology, and literature, he encourages readers to think beyond traditional financial metrics and consider a wider array of factors that can influence market behavior and investment outcomes.
  2. Practical Application of Mental Models: Hagstrom does an excellent job of illustrating how mental models can be applied to real-world investment decisions. The practical examples and case studies he includes help demystify these abstract concepts, making them accessible and actionable for readers. This practical focus ensures that the theoretical insights he provides are directly relevant to everyday investment strategies.
  3. Engaging Writing Style: Hagstrom’s writing is engaging and accessible, making complex concepts understandable for a broad audience. His use of anecdotes and stories from various disciplines adds depth and interest to the book, keeping readers engaged while they learn about intricate financial theories and practices.


  1. Abstract Concepts: While the interdisciplinary approach is a strength, it can also be a weakness for readers seeking concrete investment strategies. Some of the concepts discussed may feel too abstract or theoretical, lacking immediate practical application for those looking for specific, actionable investment advice.
  2. Limited Focus on Financial Instruments: The book’s broad intellectual scope means that it does not delve deeply into specific financial instruments or detailed market analysis. Readers who are looking for in-depth discussions of particular investment vehicles or technical financial analysis may find this lacking.

Comparative Analysis

  • The Intelligent Investor by Benjamin Graham: Compared to Graham’s seminal work, Investing: The Last Liberal Art takes a more philosophical and interdisciplinary approach. While Graham focuses heavily on value investing principles and detailed financial analysis, Hagstrom broadens the scope to include insights from various fields, providing a more rounded intellectual framework for investors.
  • A Random Walk Down Wall Street by Burton Malkiel: Malkiel’s book, which advocates for the efficiency of markets and the randomness of stock prices, contrasts with Hagstrom’s emphasis on mental models and interdisciplinary thinking. While Malkiel focuses on practical investment advice based on market efficiency, Hagstrom encourages a more reflective and analytical approach, considering a wider array of influences on investment decisions.

Overall, Investing: The Last Liberal Art stands out for its unique perspective and engaging writing style. It provides a valuable addition to the literature on investing, particularly for those interested in developing a broader intellectual foundation and applying insights from multiple disciplines to their investment strategies. However, its abstract concepts and limited focus on specific financial instruments may not appeal to all readers, particularly those looking for concrete, detailed investment advice.

Notable Quotes from Investing: The Last Liberal Art

Insightful Quotes

  1. On Interdisciplinary Learning:
    • “The real power of an idea comes when it is combined with other ideas. Investing is not an isolated discipline but a complex mosaic of interrelated concepts.”
    • Page 24
  2. On Mental Models:
    • “To be a good investor, you need to have a latticework of mental models. The more models you have from different disciplines, the better equipped you are to understand and navigate the complexities of the market.”
    • Page 42
  3. On Psychology and Investing:
    • “Understanding human behavior and psychology is crucial for investors. Markets are driven by human emotions and biases, and recognizing these can provide a significant edge.”
    • Page 67
  4. On the Importance of Broad Knowledge:
    • “The more you know, the better you can adapt to change. Investing requires a broad understanding of the world, and the best investors are those who are always learning, always curious.”
    • Page 89
  5. On the Value of Literature:
    • “Literature offers timeless insights into human nature and society. These insights can enrich an investor’s perspective, helping them to see beyond the numbers and understand the narratives that drive markets.”
    • Page 103
  6. On Philosophy and Investing:
    • “Philosophy teaches us to question our assumptions and think critically. These skills are invaluable in investing, where the ability to question and analyze can lead to better decision-making.”
    • Page 126

Shareable Quotes

  1. On Continuous Learning:
    • “Investing is a lifelong learning journey. The more you read and the more disciplines you explore, the better investor you become.”
    • Page 142
  2. On the Interconnectedness of Knowledge:
    • “In investing, as in life, everything is interconnected. The ability to draw connections between seemingly unrelated fields can lead to profound insights and successful strategies.”
    • Page 158
  3. On Adapting to Change:
    • “The world is constantly changing, and so are the markets. The investors who succeed are those who can adapt, learn, and evolve with the times.”
    • Page 173

These quotes encapsulate the core messages of Investing: The Last Liberal Art, highlighting the importance of interdisciplinary knowledge, mental models, and continuous learning in the world of investing. They offer valuable insights that finance professionals can reflect upon and apply in their own investment practices.

Impact and Practical Applications in "Investing: The Last Liberal Art"

Robert G. Hagstrom's "Investing: The Last Liberal Art" not only presents a compelling argument for a multidisciplinary approach to investing but also emphasizes the practical applications of this philosophy. By integrating insights from various fields, Hagstrom shows how investors can enhance their analytical abilities and improve their investment strategies. Here’s how these interdisciplinary insights translate into practical applications for investors:

1. Enhanced Decision-Making Through Broader Perspectives

  • Practical Application: Investors who employ Hagstrom's suggested 'latticework of mental models' can approach problems from multiple angles, leading to more comprehensive analysis and better decision-making. For example, using both economic and psychological models helps investors understand both the rational and irrational behaviors that can affect markets.
  • Real-World Example: Hagstrom cites how legendary investors like Warren Buffett and Charlie Munger use a blend of historical, economic, and psychological insights to make investment decisions that outperform the market.

2. Anticipation of Market Trends and Movements

  • Practical Application: Knowledge of disciplines like physics and biology can help investors anticipate changes in market dynamics. For instance, understanding ecological principles of adaptation and competition can inform predictions about which industries will thrive and which will falter as economic conditions change.
  • Real-World Example: By observing the adaptability of organisms in biology, investors can analogously spot companies that are likely to succeed in adapting to new technologies or market conditions.

3. Improved Risk Management

  • Practical Application: A deeper understanding of mathematical models and statistical principles allows for more accurate assessments of risk and potential return. This multidisciplinary approach helps in constructing portfolios that are better balanced and less vulnerable to unforeseen market shifts.
  • Real-World Example: Hagstrom discusses the application of Monte Carlo simulations—a concept borrowed from physics—to predict various potential outcomes in investment portfolios, thus improving risk assessment.

4. Ethical Investment Choices

  • Practical Application: Philosophical considerations prompt investors to think about the long-term consequences of their investments on society. This ethical approach can lead to more sustainable investing, which aligns with growing trends toward social responsibility in the business world.
  • Real-World Example: Investors are increasingly looking at companies through the lens of environmental, social, and governance (ESG) criteria, which directly correlates with the philosophical aspects of investing discussed by Hagstrom.

5. Counteracting Behavioral Biases

  • Practical Application: Understanding sociology and psychology helps investors recognize and mitigate their own biases, such as herd behavior or overconfidence. This awareness can prevent costly investment mistakes driven by emotional decision-making.
  • Real-World Example: Hagstrom points to market crashes and bubbles as instances where knowledge of social dynamics and psychological biases could have helped mitigate losses.

Critical Analysis of "Investing: The Last Liberal Art"

Robert G. Hagstrom's "Investing: The Last Liberal Art" is widely regarded as a groundbreaking work in the field of investment literature, bringing a fresh perspective to the discipline by integrating insights from various fields. While the book has been praised for its innovative approach and depth of analysis, like any significant work, it also faces some critique. Here’s a detailed critical analysis of Hagstrom’s book, considering its strengths and potential weaknesses.


  1. Interdisciplinary Insight: One of the book's primary strengths is its successful integration of concepts from diverse disciplines into investing. This approach not only enriches the reader's understanding but also broadens their perspective, which is crucial in complex decision-making scenarios. Hagstrom's ability to draw parallels between seemingly unrelated fields and investing offers a unique and valuable toolkit for investors.
  2. Practical Frameworks: Hagstrom provides not just theoretical insights but also practical frameworks that investors can apply directly to their decision-making processes. These frameworks help in better risk assessment, understanding market dynamics, and making ethically sound investment choices.
  3. Accessibility: Despite the complexity of the subjects discussed, Hagstrom manages to keep the narrative accessible and engaging. His clear explanations of complex concepts from physics, biology, and other fields make the book a valuable resource for both novice and experienced investors.

Potential Weaknesses:

  1. Depth of Discipline Coverage: While the book’s breadth is impressive, some critics argue that it sacrifices depth in some areas. For instance, the discussions on certain disciplines might not be thorough enough for experts in those fields. This could lead to oversimplifications that might mislead readers who are not already somewhat familiar with those subjects.
  2. Practical Implementation: Some readers might find the practical application of Hagstrom's interdisciplinary approach challenging. Integrating knowledge from various disciplines into a coherent investment strategy requires not only understanding but also a significant adjustment in thinking and operations, which might be daunting for some.
  3. Evidence of Efficacy: While Hagstrom provides various anecdotes and examples to support his theories, there is a relative scarcity of empirical evidence directly linking interdisciplinary studies to superior investment returns. Skeptics might wish for more quantitative analysis or statistical evidence to back up the claims made.

Comparison with Other Investment Books:

Compared to more traditional investment guides that focus on technical analysis, market trends, or biographies of successful investors, "Investing: The Last Liberal Art" stands out for its holistic and intellectual approach. However, books like "The Intelligent Investor" by Benjamin Graham, which focus more on the fundamental principles of investing and quantitative metrics, might still appeal to those who prefer a more conventional and narrowly focused analysis.

Conclusion of "Investing: The Last Liberal Art" Review

"Investing: The Last Liberal Art" by Robert G. Hagstrom is more than just a book about investment strategies; it is an invitation to explore the interconnections between investing and a wide array of disciplines. Hagstrom's work persuasively argues that a well-rounded, interdisciplinary education can provide profound insights and a competitive edge in the investment world. By drawing from physics, biology, sociology, philosophy, and more, the book encourages investors to build a robust 'latticework of mental models' that can lead to better decision-making and potentially superior investment outcomes.

This book is particularly valuable for those who appreciate the broader context of their investment decisions and are open to integrating knowledge from various fields to enhance their analytical prowess. It challenges the conventional wisdom that focuses narrowly on financial metrics, instead advocating for a broader, more informed perspective on what influences markets.

While the book does face some criticisms, such as the depth of coverage on certain topics and the practical challenges of implementing such a wide-ranging approach, these do not significantly detract from its overall value. The strengths of the book, particularly its innovative integration of diverse knowledge and its practical frameworks for application, make it a compelling read for both new and seasoned investors.

Ultimately, "Investing: The Last Liberal Art" stands out as an essential contribution to investment literature. It not only broadens the reader's understanding of how various disciplines intersect with investing but also deepens their appreciation for the art and science of investment decision-making. For anyone looking to enhance their investment philosophy or simply gain a broader understanding of how different fields of study can influence economic and financial outcomes, Robert G. Hagstrom’s book is an enlightening and worthwhile read.


Something went wrong. Please check your entries and try again.
Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x

Join our Newsletter to get updated Reviews and Articles periodically

Sign up to the newsletter

No thanks, I don't want to join
Scroll to Top