Learning is a multi-layered undertaking. When people are learning something, they are usually presented with opportunities to learn many other lessons at the same time from the same experience. That’s what makes learning so hard, and it’s also what makes learning so valuable. In business terms, the most important knowledge has numerous barriers to entry but scales well.
When we talk about this at Array, we distinguish among four different aspects of a learning experience: the particular item learned, the larger hypotheses to which that item relates, the manner in which we learned and the sources of the information. If it’s a good day (and if we’ve had our second cup of coffee), we capture lessons learned in each of these areas for every experience. We believe that self-directed investors too can benefit by considering these different elements.
Individual observations provide the foundation for insights, but to create real value we need a hypothesis that can initiate or guide action – so each observation needs to be examined against current beliefs and then vice-versa. Does the new information give rise to new hypothesis or perhaps strengthen an existing one to the point it merits testing? Or does the information instead call into question things you thought you knew, raising questions about earlier sources or thought processes?
At the same time, track how people learn best: reading a textbook or listening to an interview or back testing a strategy – all of it can be helpful, even if none of it is as rich in learning as actual investing. People who document what they learn and take note of how they learned it not only get better but get better faster. Awareness of a preferred learning style may be the second greatest potential source for accelerating education.
The most leverage in learning, though, resides in selecting the right sources of information: in short, teachers and classmates. Of course, success in the long-run requires all of the above – plenty of good data, well-tested hypotheses, high self-awareness and the best team – but trusting the wrong people at the outset means everything they say and do might point you in the wrong direction [link], whereas surrounding yourself with people you can trust means you’ll have the right resources to learn effectively. We’ll share our take on that core challenge in the next post.