Book: Peak–Secrets from the New Science of Expertise
Author: Anders Ericsson and Robert Pool
Key takeaways: Ericsson and Pool introduce the concept of “purposeful practice”, which has (a) well-defined, specific goals, (b) focused, (c) involves feedback (from a trainer, or otherwise), and (d) requires getting out of one’s comfort zone. Often, to improve, people just “try harder” but often the answer is to “try differently”, and not quit. According to the author, in his studies, he preferred to work with trained athletes, dancers, musicians and singers, because they had learned to not quit.
How could this translate to investing?
- “well-defined specific goals” could be identifying catalysts, and its 2nd order effects, in advance
- feedback will be provided by the market (often, if the call goes against you, the temptation will be to ignore market’s reactions as incorrect, but the fact is that you can’t change the market–you can change only yourself, so the correct way to deal with it, is to change the thought process and better guess what the market is going to do).
- “try differently” may be to look at the company in different ways–perhaps SOTP, as a RV exercise, or as a take-out candidate.
- it is important to be focused and really practice–we should not be “just hitting the ball”, but being very cognizant about what we’re trying to achieve.
- one has to monitor his/her progress, so we know how far we’ve come.
One of the best ways to get an idea of one’s mental representation is to stop in the middle of the task, turn off the lights, ask them to describe the current situation–what has happened and what is about to happen.
How could this translate to investing?
- the best way to do this has to be writing investing memos, which detail not just what has happened, but what is about to happen.
In absence of a trainer, the next best thing is to learn from the best predecessors.
Prasad Capital 