This guy really nails it (see below). Critical addition: to get the compounded value of old efforts + new efforts, ongoing growth and observation is required. Seems an obvious point, but many miss it. Going over the same old ground with a closed mind -- like the trader whose seven years of experience are actually just one year, repeated seven times -- doesn't count. (In fact stagnation can kick it at any point; it takes conscious effort to fight entropy.) http://thinkingapplied.com/persistence_folder/persistence.htm The Mathematics of Persistence Lee Humphries Everyone is born with an empty wallet and no skill. Yet some go on to acquire means and expertise. How likely is that? Your prospects for a quick financial windfall are not good. Accounting fraudâonce a popular approach to fast cashâhas fallen on hard times as escalating legal costs and prison sentences erode its benefits. Inheritance has never been reliable: There are far fewer wealthy relatives than willing heirs, and the ones that exist have a selfish fixation on their own longevity. Powerball is a sucker's game. Imagine a string stretched from Owatonna, MN to Orlando, FL. A one-inch segment represents your odds of hitting the jackpot; the remainder, your odds of continuing your present lifestyle. If your chance of instant riches is minuscule, your chance of instant expertise is zero: Nobody acquires skill in a day. Still, for those who persist, the long-term prospects are good. Both money and knowledge can compound over time. To understand the compounding of money, consider a "five-dollar" experiment. Each week put five bucks in a cookie jar. Once a year, pull out $260 and invest it at 8.5% (a reasonable market return over the long haul). Do this year after year. You'll need a dozen years to build up your first $5000âthat's quite a whileâbut you'll need only six additional years to accumulate your next $5000. You'll have your third $5000 in another four years, and your fourth $5000 in just three more. In the early stages of compounding, gains are meager. Significant gains don't occur until later. But once they appear, they start to snowball. How about becoming an expert? Within their areas of competence, experts have many more categories of awareness than novices. The perception of subtleties is what Michael Jordan, Warren Buffett, and Yo-Yo Ma have in common. Not only have experts gathered many "elemental" facts about their field; they have linked them to one another to produce a vast array of "relational" facts. In simplest terms, a relational fact is the knowledge gained when you combine two elemental facts. To picture this, draw two dots and connect them with a line. The dots represent elemental facts; the line, a relational fact. Add new dots, connecting each to all the others. With three dots, you'll have three connecting lines. With four dots, six lines. With five dots, ten; etc. Every new dot compounds the number of connecting lines. Likewise, every new piece of information compounds the pool of available relationships. With a knowledge base of one hundred elemental facts, you have at your disposal about 5000 potential connections. Double your knowledge base and you will increase the potential connections to nearly 20,000. Learn a thousand things and the potential connections approach half a million. It is these latent relationships that the mind processes in its search for insight. The processing is autonomous and subliminal, but you can encourage it. Each day use your powers of observation and reasoning to learn some new thing about your field. Reflect on its connection to what you already know. Reflection compounds knowledge. With a sufficient knowledge base, you can start to build a portfolio of noteworthy workâproblems solved, know-how acquired and applied. To the extent that your growing portfolio is valued by others, your income is likely to increase. This, in turn, can accelerate the growth of your financial base. The power of dollars and of facts is collective, not individual. Before either can generate really large returns they must reach a critical mass. Mass grows as the accumulating returns on your past efforts are enhanced by the on-going contributions of your new effortsâin short, as you persist. There is no persistence without discipline. But self-coercion is fools' discipline. A devitalizing force at heart, it will eventually burn you out. Far better are the attractive forces of love, desire, and fascination. These are rejuvenating; their objects, energizing. The wise recognize this and harness them to travel to the City of Good Luck.
this post is so <b>money</b> the few people who realize this are either already millionaires or will soon be. good thread darkhorse.
I liked this piece. It is a reminder of the sheer power one individual can work at achieving and harnessing. Here is an addition. You can tell people you have more than enough power to use every day. You say," I can choose to act or not to act".
thus born one another mutual fund and if law of average applied, its performance will be on par with the sp index or somewhere below.
Yes. Mediocre = average and average = high point of the bell curve. Mediocrity is king by definition. Or, to put in layman's terms, "most folks kinda suck." Not particularly eye opening. And so the takeaway from your tautology is... what? Try hard not to suck?
Darkhorse, Thanks for posting that. While everything in it is common sense, following the principals of it seem to escape many of us. Ego, impatience, and greed often wreck what time and experience are trying to hand to us. That's a very interesting paragraph. On the outside looking in we can see the genius of Jordan and Buffett. We also would probably agree that both have a high degree of self-confidence, not to be confused with being ego-maniacs. Furthermore, we would also agree that the confidence that both of them have is deserved and productive toward their own desired ends. However, what is missing from the equation is at what point did their accumulated experiences justify their confidence in their own abilities? Surely, it is a journey and not a single moment of enlightenment. To make it relevant here, at what point can an investor/trader become aware of the true level of their own awareness? Does it ever happen? Are some bound to forever be overly confident and foolish? Are they prone to always conclude that they have just put in enough new relational facts to finally conquer? I see these people as ones that gain some new fact, and are so high on their own abilities to tie it into something else that they don't realize they are missing so many other parts of the gross relational fact puzzle. Are some contained by enough self-doubt to frequently miss out on opportunities? I would think an honest appraisal of one's self, including the obvious facts of success and failure would be enough to tune people in, but looking around it sure seems to me that people keep falling into the same traps over and over again. They are either way too high on themselves, or they languish in the world of self doubt and end up paralyzed. At what point can you know what you know, and yet have a good enough picture of what you don't know to keep everything in perspective. It's tough to know what you don't know, although not impossible. Just something to think about. murdog
Wow... terrific article indeed. My favorite part is when he said "The processing is autonomous and subliminal, but you can encourage it. Each day use your powers of observation and reasoning to learn some new thing about your field. Reflect on its connection to what you already know. Reflection compounds knowledge. And when he said "There is no persistence without discipline." I mean this guy describes the exact journey I took to gain that collective knowledge he talks about...piece by piece and the ability to resolve challenges that was preventing me from ultimately succeeding in the field of trading. Thanks for sharing this with us.
my thinking veered off in direction of his picks sold to the mass but that was diff from author direction, peace