Joys Of Compounding: The Passionate Pursuit of Lifelong Learning

by Gautam Baid

Temperament is more important than IQ.

“The best investment you can make is an investment in yourself.” “The more you learn, the more you’ll earn.” “Learn from your mistakes, and the mistakes of others.”9

An investment in knowledge pays the best interest.

Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.

Adler and Van Doren identify four levels of reading: elementary, inspectional, analytical, and syntopical.

Elementary reading. This is the most basic level of reading as taught in our elementary schools. It is when we move from illiteracy to literacy.

Analytical reading. Analytical reading is a thorough reading. This is the stage at which you make the book your own by conversing with the author and asking many organized questions. Asking a book questions as you read makes you a better reader. But you must do more. You must attempt to answer the questions you are asking. While you could do this in your mind, Adler and Van Doren argue that it’s much easier to do this with a pencil in your hand. “The pencil,” they argue, “becomes the sign of your alertness while you read.” Adler and Van Doren share the many ways to mark a book. They recommend that we underline or circle the main points; draw vertical lines at the margin to emphasize a passage already underlined or too long to be underlined; place a star, asterisk, or other symbol at the margin for emphasis; place numbers in the margin to indicate a sequence of points made in developing an argument; place page numbers of other pages in the margin to remind ourselves where else in the book the author makes the same points; circle keywords or phrases; and write our questions (and perhaps answers) in the margin (or at the top or bottom of the pages). This is how we remember the best ideas out of the books we read, long after we have read them—by making a book our own through asking questions and seeking answers within it. As Cicero said, “Nothing so much assists learning as writing down what we wish to remember.”

Syntopical reading.

The Matthew Effect in Knowledge Acquisition

First Principles Thinking

flawless execution of the fundamentals.

Rene Descartes, the French philosopher and scientist, embraced this approach with a method now called Cartesian Doubt in which he would “systematically doubt everything he could possibly doubt until he was left with what he saw as purely indubitable truths.”

The Feynman Technique

The Feynman technique has four simple steps: 1. Pick and study a topic. 2. Take out a blank sheet of paper and write at the top the subject you want to learn. Write out what you know about the subject as if you were teaching it to someone who is unfamiliar with the topic—and not your smart adult friend but rather a ten-year-old child who can understand only basic concepts and relationships. 3. When you must use simple language that a child can understand, you force yourself to understand the concept at a deeper level and to simplify relationships and connections among ideas. If you struggle, you have a clear understanding of where you have gaps in knowledge. This is valuable feedback, because you have now discovered the edge of your mental capabilities. Knowing the limits of your knowledge is the dawning of wisdom. 4. Return to the source material, and then reread and relearn it. Repeat step 2 and compile information that will help you fill in those gaps in your understanding that you identified in step 3. Review and simplify further as necessary.

Look at stocks as part ownership of a business. 2. Look at Mr. Market—volatile stock price fluctuations—as your friend rather than your enemy. View risk as the possibility of permanent loss of purchasing power, and uncertainty as the unpredictability regarding the degree of variability in the possible range of outcomes. 3. Remember the three most important words in investing: “margin of safety.” 4. Evaluate any news item or event only in terms of its impact on (a) future interest rates and (b) the intrinsic value of the business, which is the discounted value of the cash that can be taken out during its remaining life, adjusted for the uncertainty around receiving those cash flows. 5. Think in terms of opportunity costs when evaluating new ideas and keep a very high hurdle rate for incoming investments. Be unreasonable. When you look at a business and get a strong desire from within saying, “I wish I owned this business,” that is the kind of business in which you should be investing. A great investment idea doesn’t need hours to analyze. More often than not, it is love at first sight. 6. Think probabilistically rather than deterministically, because the future is never certain and it is really a set of branching probability streams. At the same time, avoid the risk of ruin, when making decisions, by focusing on consequences rather than just on raw probabilities in isolation. Some risks are just not worth taking, whatever the potential upside may be. 7. Never underestimate ...

Knowledge is overrated. Wisdom is underrated. Intellect is overrated. Temperament is underrated. Outcome is overrated. Process is underrated. Short-term outperformance is overrated. Long-term adherence to one’s investment philosophy is underrated. Gross return is overrated. Stress-adjusted return is underrated. Upside potential is overrated. Downside protection is underrated. Maximization of returns is overrated. Avoidance of ruin is underrated. Growth is overrated.

Categorization of stocks into large cap, mid cap, and small cap is overrated. Categorization of businesses into great, good, and gruesome is underrated.

Study the science of art. Study the art of science. Develop your senses—especially learn how to see. Realize that everything connects to everything else.

one would find that he had at his disposal repertoires of possible actions; that he had checklists of things to think about before he acted; and that he had mechanisms in his mind to evoke these, and bring these to his conscious attention when the situations for decisions arose [emphasis added].2

One of the advantages of a fellow like Buffett … is that he automatically thinks in terms of decision trees [emphasis added].

“Solitude and Leadership”

Understand deeply.

Make mistakes.

Raise questions.

Follow the flow of ideas.

Change.

You are what your deepest desire is. As is your desire, so is your intention. As is your intention, so is your will. As is your will, so is your deed. As is your deed, so is your destiny.

Take up one idea. Make that one idea your life—think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success.

fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.

Give me six hours to chop down a tree and I will spend the first four sharpening the axe.

Gates and Buffett gave the same one-word answer: “focus.”

Intensity is the price of excellence.

Focus on those investments for which the microeconomics are going to dominate the outcome. This approach will allow you to call upon your accumulated experience in analyzing companies and industries and to utilize the same to your advantage.

One of the best hacks in the investment field is learning to be happy doing nothing.

We have two lives, and the second begins when we realize we have only one.

One day your life will flash before your eyes. Make sure it’s worth watching.

“regret minimization framework”

The framework I found, which made the decision incredibly easy, was what I called—which only a nerd would call—a “regret minimization framework.” So I wanted to project myself forward to age 80 and say, “Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.” I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried [emphasis added]. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision.

Deliberate Practice

Practice alone doesn’t make perfect. As James Clear says, “Motion does not equal action. Busyness does not equal effectiveness.”11

It’s repeatable.

It receives constant feedback.

It is hard.

It isn’t much fun.

Finding our calling in life, pursuing it with a strong passion and intense focus, and engaging in deliberate practice results in ikigai. Will Durant put it best when he said, “We are what we repeatedly do. Excellence, then, is not an act, but a habit.”