The Importance of Social Science in Investing

Many people study investing by reading books on trading techniques, financial statements, or macroeconomics. Some dive deeper into specialized fields like semiconductors.

But does mastering these subjects alone lead to investment success? My answer is a firm "No." While I don't discount the importance of technical and financial knowledge, I believe there is another essential pillar that is often overlooked: the social sciences, philosophy, history, and literature. To be clear, it's not that financial books are unnecessary; rather, I believe that studying the humanities is a prerequisite for any serious investor.

The Root of Every Stock is Society

In this post, I want to discuss the importance of social science in investing. Why is it so critical? The answer lies in the term itself. Social science teaches us about society, and nothing in this world exists in isolation from it. This applies directly to the stock market. At the root of every stock is a company, and every company exists within the fabric of society. Therefore, understanding society is equivalent to understanding the fundamental principles and the true starting point of investing.

Karl Polanyi and the "Embedded" Economy

I didn't arrive at this conclusion on my own. The idea that social science is the root of investing came to me while reading Karl Polanyi’s The Great Transformation. Polanyi argues that the economy should be "embedded" within society. He offers a sharp critique of a capitalist system where the economy becomes decoupled from social context, allowing the market to dominate society.

The Trap of Isolated Financial Analysis

Current investment trends reflect exactly what Polanyi warned about. We are obsessed with analyzing companies and financial data as independent entities, as if they were organisms living in a vacuum. The world has become swept up in the tendency to view "the economy" as a separate, autonomous life form rather than a part of our social fabric.

We must not forget that a company exists within society. To understand a business, one must understand the society it belongs to. Analyzing a company in isolation provides only a partial understanding—if even that. We need to grasp the social ground upon which these companies stand.

Investing is Not Just About Numbers

Social science is the very field that explains the principles and dynamics of how society operates. Thus, studying it is not an elective for investors; it is a necessity. Investing without a foundation in social science is like trying to master physics without knowing F=ma.

As a Public Administration student, whenever I share my dream of becoming a world-class investor, people often ask why I didn't major in Business or Economics. Whenever I summarize this logic—how society and investing are fundamentally intertwined—my explanation is often met with skepticism. While that can be frustrating, it also gives me a sense of purpose: I want to spread this connection between social science and investing. This post is part of that mission.

Conclusion

Returning to the main point, what I truly want to emphasize is the importance of internalizing the fundamental principles of investing by understanding the society in which companies operate. To excel in investing, we must look beyond charts and balance sheets; we must read the world through the lens of social science.

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