I usually just stealth-publish these daily journal posts, but I liked the title so much that I decided publish this one “normally”.
Which one is wiser?
- car mechanic who knows everything about cars and how to fix them
- someone who knows everything about financial markets
Traditionally one could think that financial markets are pretty complicated, so the latter guy would be wiser. That’s not the case.
Both have used equal amount of time to get good at their craft, but when put each in to the shoes of the other, both will look like idiots.
In other words, being smart is extremely subjective.
There is one dimension of being “smart” that I’d like to point out even though I’ll probably have problems clarifying it:
It’s the ability to be curious about your environment and go look for knowledge from various sources (in other words, google and wikipedia) on how the world works.
This ability gets even more important when it comes to ones “craft”, for example like the car mechanic back there. Master mechanic will get curious about practically everything related to cars and that’s how he builds the expertise towards true mastery.
I’ve been investing for about 4 years now and only lately I’ve gotten more into what I consider as “leveling up” as an investor. In other words, I’ve been gaining (reading) lots of new information.
For a long time I had a thought that there were only handful of companies that I should invest in, but this belief got smashed recently.
It’s a vast world out there – tens (hundreds?) of thousands of companies that I could and some of those that I probably would eagerly want to invest in. I never just considered this possibility but relied on my “sources” to provide me sufficient information.
It all comes to this: “What you see is all there is”
That’s a quote for Daniel Kahnemans book Thinking Fast and Slow.
This is the reason why so many people are so fucking stupid. They believe that they know everything based on what they already know (“what you see is all there is”), never considering the possibility of additional, even crucial information.
Of course this means that I’m a fucking idiot as well. Everyone is, but the difference is whether one knows this or not.
Smart people are never sure that they know enough and that’s why they always seek for different perspectives and more information.
And that’s how they get smart (duh)
You’d think that Warren Buffett has it all figured out when it comes to investing. He doesn’t and he never will.
And that’s the reason why he’s managed to stay at the top.
Here’s a great article that I read earlier today: The Buffett Formula – how to get smarter. You don’t have to be an investor or interested in investing to benefit from that article.
Most people go though life not really getting any smarter. Why? They simply won’t do the work required.
Warren Buffett says, “I just sit in my office and read all day.”
When asked how to get smarter, Buffett once held up stacks of paper and said “read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”
The minds of successful people are highly similar
When you really get into something, like I’ve gotten to self-improvement or investing, you start to see an interesting phenomena.
After getting some more knowledge about your field, you see that successful people in your field act and think very much alike.
This is not a coincidence.
Also when you compare successful people from different fields, you’ll also see a lot of similar traits between most of them.
Take a handful of self-improvement (or investment or field x) gurus and ask them 10 good books that they’ve read and think are good. You will see that they have read a lot of the same books.
And if you read those books, you’ll start to see how they’ve influenced everyone and how all of their thinking “connects” to each other.
The masses and the quiet group
Disclaimer: the following text contains a lot of extremely simplified thought-flow (which is one of the purposes of this journal) and it takes a lot of shortcuts.
There was an essay by Warren Buffett “superinvestors of Graham and Doddsville“, those were the investors that have similar background of thinking and they consistently produced great returns on the market.
He made an interesting point about how the information about their method is widely available and even preached by Buffett all the time, but most people for one reason or another, just don’t get it. It’s not even rocket-science or anything like that.
This is applicable to any other field. I’ve seen this pretty much everywhere: there’s the big mass that’s loud and thinks in a simplistic way and then there’s the more quiet group at the side, mostly silent.
I’ve realized that when I’m new to a field, I watch the loudest group, but once I accumulate more knowledge, I find myself straying more and more away from the consensus and the masses (to the quiet group at the side).
In investing the masses follow latest trends, be it techno bubble or recently, social media stocks (facebook, twitter). They act on their feelings and never read annual reports of the companies that they own. The quiet groups are the ones who do the research, read the reports, read books related to investing and then get consistent superior returns compared to the markets.
In politics the masses are ones who seem to lack the ability to think in multidimensional ways, for example what kinds of effects new legislation will have. It’s easy to think that A will affect B, but the world is much more complex than that. A will definitely affect B, but it will also affect C, D and E and by affecting those, it will also affect F, G and H.
This is the most apparent in economics politics. The main reason for this is probably because at least in my country people are not taught even the most basic things about economy in school.
The quiet group in politics can look beyond ideologies, have lots of different points of views and consider the effects of different things in a multidimensional way. These are the people who have gone more in-depth because they realized that they don’t know shit.
It’s called (relatively) quiet group because they can rarely be sure that they are aware of all the facts (or dimensions related to the matter).
Also, they think that such opinions opinions need a lot of clarification, as they always do.
But instead of listening to carefully composed thoughts, what are the masses attracted to?
YES WE CAN
I admit that I took a lot of shortcuts with the “masses” and “the quiet group”, it’s an extremely simplified explanation of the experience that I have about various fields.
I also think it’s worth mentioning that I don’t really see myself or anyone other superior to people in that way: The most reasonable answer is that we take part in to the “masses” in some ways in our lives. We may be smart about one thing and belong to the quiet group, but stupid about other and belong to the masses without realizing it.
As mentioned in the “car mechanic” “financial expert” analogy, the masses are most likely just people who haven’t allocated a lot of time to that particular field.
World is always a lot more complex and we simply can never hope to understand it perfectly. However the more we know, the more opportunities rise in our lives.