What I Learned About Learning and Investing

behavior Apr 05, 2019
 

By Puah Soon Lim

Today I want to talk about learning. It is a subject that I am very passionate about. When I was growing up, I have difficulty learning. Particularly when I was in primary school. I failed all of my subjects and I have trouble staying focus and I was easily distracted.

Naturally, I have nightmares about taking an examination.  Some of those early nightmares stay with me till today. I still have anxieties attack in my sleep when I have dreams about going for an examination even though those days were long past me. I studied hard in my schooling years but I realized that knowledge doesn’t stay with me when all that I do is studying for an exam by rote learning and not through understanding.

I have already returned a large portion of what I learn to my school teacher and lecturer over the years. But I am someone that embrace lifelong learning. I am still having joy discovering new things, learning new things each and every day.  At the moment, I am embarking on two ambitious projects. One is to play the piano and the other is woodworking. I know, what you are thinking. It is far and away from the subject of investing. I will talk about that eventually.

You see, there are easy ways to learn something and there are difficult ways to learn something. For a start, understand your learning style, is important. I learn in my ACTA class that there are different learning style among different learners. You could be a visual, audio or kinesthetic learner. Whichever way that you take in information best, you should try to leverage that first.

I just use the word leverage and I want to talk about how you can use that to learn something. Specifically, I want to talk about the leverage point. Whenever,  I want to pick up any skills, learn anything new about anything. If you know how to look for the leverage point in learning it. You can cut down a lot of suffering and most important of all, saving a lot of time in learning it.  This applies to anything you want to learn from learning how to do coding, to picking up a musical instrument or even learning how to cycle a bicycle or swimming.

 

What is the leverage point?

The leverage point can be found by answering the question, “What is the best way to learn this?”

Let me give you two examples to illustrate what I meant. Let’s say you want to learn how to cycle a bicycle or maybe you want to teach someone how to ride a bicycle. As in riding a two-wheel bicycle. I have seen a lot of parents bought their young ones a bicycle that is fitted with training wheels or safety wheels. That turned out to be the worst way to learn how to cycle on two wheels. The best way to learn and the leverage point in learning how to cycle is by learning about how to balance yourself on two wheels first.

If you are teaching a young one to ride, that is easy. You can purchase a balance bike first to let the young one strike along just for fun until they are comfortable with balancing on it. Then you take them up a small slope and ask them to use the balance bike to slide down the slope. If they can comfortably slide down the slope. Then when you hand them an actual bicycle with the pedal, they would have no trouble pedaling around with a real two-wheel bicycle. If you are a grown up already, I don’t think they have any balance bike for sale for an adult but what you can do is to take out the crank and the pedal, remove the chain and then use it as a balance bike and learn how to balance on it first. It is the fastest way to learn how to ride on a two-wheel bicycle.

Another example that I have is swimming. Despite the fact that swimming is an essential life skill, it has never been taught correctly. Traditional instruction teaches you to not drown rather than learning to swim. Most people learn how to swim by wearing a floating device first. The fear of drowning in water is real. But just like learning how to cycle, this is one of the worst things you can do when you try to learn how to swim. The floating device is actually inhibiting your learning.

The leverage point in learning how to swim is to learn how to float first. How to let your body float on its own without any device assisting. You lung traps quite a bit of air and usually, that amount of air is enough to float your body. However, for some with heavy density bone, they will have difficulty floating. These are also the one that will have trouble learning how to swim. You can try this in a learning pool or a shallow pool. Try putting your legs up on the edge of the pool and allow your body to just float on the water and experience the weightlessness that comes with it. Once you learn how to float it is easier to then incorporate the various strokes that you want to learn.

By the way, I am not a swimming coach. Do get someone watching over you when you attempt any of these risky maneuvers. The only three persons who had received swimming lessons from me are my two children and my wife. I am happy to say that they are all competent and confident swimmer who can swim laps after laps in a swimming pool. They have never once enrolled in a swimming class.

What about the subject of investing? It is probably the most complex system in the world to learn. Charlie Munger describes it as a “lattice of mental model.” And here is the counterintuitive aspect of learning how to investing. As similar to what I said about the above two examples - learning how to ride a bicycle on training wheels is a bad idea and learning how to swim using a floatation device is also another one.

I feel the same with investing. Learning investing by jumping into the various techniques and strategies - technical analysis, fundamental analysis and experimenting with different investing approaches, is a bad idea.

Warren Buffett says “You have to understand accounting and you have to understand the nuances of accounting. It’s the language of business and it’s an imperfect language.. but unless you are willing to put in the effort to learn Accounting Principles – how to read and interpret financial statements – you really shouldn’t select stocks yourself”                       

That paragraph above gives you the clues to where the leverage point for investing lies. I have found that what Buffett said is really true. And in fact, if you want to become a better investor, the leverage point in learning how to invest is to learn about the language of business. Accounting and finance is a language, a means of communicating among all the segments of the business community. It assumes a reference base called the accounting model of the enterprise. While other models of the enterprise are possible, this accounting model is the accepted form and is likely to be for some time. If you don’t speak the language of accounting or feel intuitively comfortable with the accounting model, you will be at a severe disadvantage in the business world. Accounting and finance is a fundamental tool of the trade.

And if you like to read, here is my recommended reading list to get you started.

 

 

I am going to end here for today. Let me know if you like this video and leave me some comments below and remember to subscribe to this blog and our YouTube channels.

 

Till then, see you soon.

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