Jurgis, related to your post - I wanted to share something I've been thinking about for a while also related to the learning process and investing. I contend that the learning process in investing is "broken" from the way we learn most things, and this likely contributes to why we may not know what key actions contribute to success
In most things that we learn we can incrementally adapt to improve our result. Like throwing a baseball, or hitting a tennis ball. We get immediate feedback, make adjustments, try again, gradually improve. It's fairly apparent if our adjustments are improvements or not.
With investment, I think the entire learning process is broken - making it extremely difficult "learn" in the traditional sense. Sure, we read books, try to discern what other people found worked in the past (assuming we're willing to just accept what the book tells us), but in practice how many of us really can effectively remember what actions, process, and thinking contributed to a successful investing activity on a stock we bought several years ago? And even then, were we just lucky? All sorts of biases cloud how we remember these things anyway. We have great difficulty being honest with ourselves about both our failings (don't accept enough blame)and successes (take too much credit). Additionally, part of the problem is that results can be so inconsistent/noisy that correct thinking can lead to bad investment results and wrong thinking is sometimes rewarded.
Ideally for learning purposes we'd be able to come to an investment decision today, and then hit a button that would tell us the result of that investment decision 1yr, 2yr, 5yr, etc into the future. Then be able to investigate what we got right or wrong. But that's simply not what happens. All the time and changes that occur over time cloud our memory and learning process.
As an example of how our memory is flexible (or at least how my memory is flexible) a few years back I had what I considered a mini revelation of this nature. I was performing in a corporate band challenge, and that can be a pretty fun/memorable event - or at least you'd think it would be. But long after the event I watched a video of the performance and was surprised at how different certain elements of the performance were in my memory than than what I saw on video. My conclusion was "wow, I remembered that a lot differently."
I think something similar happens in investing - too much time passes and due to flexible memory we have difficult time recreating and learning from our thoughts at a previous time, understanding what the correct and incorrect decisions were and why, what were the important aspects to focus upon, what aspect of decision making contributed to good decisions, and what contributed to bad. And what things we thought that were important simply were not, and what things were important that we didn't consider. And sometimes, even after all is said and done we still might not know if we made a correct decision but got a bad result, or vice versa.
I suppose a detailed investing journal is likely the best way to address this issue. I've been keeping one for about a year and a half now trying to archive my thinking so I can learn better - but my interests bounce around so much I'm unsure how useful that will be, but it does include alot of thinking on energy sector at end of 2014 and into 2015 - so that may be a good read to go back and evaluate. I do remember putting a lot of effort into understanding past oil busts, their depth/duration, and how different classes of energy stocks responded during different parts of the cycle. But it's always different, and this bust has been so much longer - so presently it's unclear to me if I made a bad decision to overweight energy, or if I made a good decision, but got a bad result. |
