"I want to introduce you to a different kind of investment book—one unlike any other," said Stephen Foerster, Ivey Professor of Finance and author of the newly released Trailblazers, Heroes, and Crooks: Stories to Make You a Smarter Investor. "This isn’t a traditional investment guide. Instead, it’s a collection of stories. A central theme throughout the book is the importance of developing your own investment philosophy. That way, we can hopefully learn from history and the stories it has to offer."
Foerster recently spoke at his book launch event, hosted by Ivey’s Scotiabank Digital Banking Lab and the Ivey Alumni Network: London Chapter. The event included a fireside chat between Foerster and Angelica Vazquez, Chair of the London Ivey Alumni Network, covering investment strategies, financial goal setting, and behavourial finance.
Investment Wisdom through Stories
In Trailblazers, Heroes, and Crooks, Foerster takes readers on a journey through history, weaving stories of triumphs, failures, and cautionary tales into timeless lessons for investors. A key lesson explored in the book is the importance of distinguishing between correlation and causation – a concept he brings to life with relatable examples.
During the 2020 UEFA European Championship, Cristiano Ronaldo’s gesture of moving Coca-Cola bottles at a press conference made headlines for allegedly causing a $4 billion drop in the company’s value. However, Foerster explains this as a classic case of mistaken correlation for causation, noting that a deeper analysis reveals Coca Cola’s stock movements were driven by broader market trends rather than Ronaldo’s actions.
He also illustrates spurious correlations with the "Super Bowl Stock Market Predictor," which claims that market performance can be forecast based on which football conference - NFC or AFC - wins the championship.
These stories, and others in the book, encourage investors to critically examine patterns and their relevance in shaping investment strategies.
“Steve does all this so adeptly in the book,” says Professor Romel Mostafa, Director of Lawrence National Centre for Policy and Management, “He assembles historical anecdotes across time and place, chapter by chapter, drawing out critical lessons. The result is a brilliant collage of insights into investing that we all could benefit from.”
The Power of Diversification
“We see [correlations] everywhere, and we make inferences, but we have to be careful,” Foerster explains. While it’s tempting to look for cause-and-effect relationships in observed patterns, he urges investors to be cautious. Instead, he points to diversification – an investment approach that relies on identifying uncorrelated assets to reduce risk without compromising returns.
This principle, famously described by Harry Markowitz as the “only free lunch” in investing, laid the foundation for modern portfolio theory. Markowitz’s groundbreaking work in the 1950s demonstrated how constructing portfolios with asset that are not perfectly correlated enables investors to balance risk and reward more effectively. Foerster connects these ideas to actionable strategies that empower smarter, more resilient investing.
Crafting an Investment Philosophy
At its core, Trailblazers, Heroes, and Crooks helps investors at all levels to develop their own investment philosophies—guiding principles that shape decision-making. Foerster emphasizes the importance of reflection, encouraging investors to consider their beliefs about market efficiency and how those beliefs influence their investment strategies.
For example, he refers to Nobel laureate Eugene Fama’s efficient market hypothesis, which suggests that financial markets are highly efficient with prices fully reflecting all available information, leading investors to a passive “buy-and-hold” approach. Conversely, investors who question market efficiency may favour active strategies to capitalize on perceived inefficiencies.
By teaching readers to distinguish noise from meaningful trends and embrace diversification, Foerster provides a clear framework for developing adaptive investment philosophies.
