Saturday, May 17, 2008

Parallel Encounters - Redux

A recap of parallel encounters, it is a form of parallel learning which involves use of multiple media to educate yourself. These media may include TV, movies, books, internet, radio, nature, life, people, inanimate objects, experiences, et al. What it doesn't mean is, to just observe these things & forget about them. It is the conscious observation of the afore mentioned media to learn as much as we can about life, areas of interest & think of possible applications of the concepts learned into our respective professions. This isn't meant to sound so formal, this is what we humans normally do, but some people have surpassed the natural limits of doing this, to gain that coveted niche which everybody seeks. Learning was/is/never will be a dull activity if we substitute our lack of love for a particular medium with some other media. Its always possible to learn, which way we do it, is totally a matter of taste.

There are many pioneers of this concept, who have chosen specific media to teach themselves & subsequently apply their gained knowledge to their respective professions & achieve 'super-normal' results. Some of them made it so big that they became doomed to fail (reasons infinite). But I don't think they failed because they learned, I think they failed because of some inherent recklessness on their part, or being succumbed to cognitive biases or .... we can give any reason under the sun, in hindsight everything seems possible.

Why is it so important or even necessary to some extent to do this? As I mentioned Sir Ken Robinson's views in my previous post, we have reached intellectual inflation, what needed an 'X' degree now requires a 'X' PG degree & so on. So in the wake of all this, when we are doing what everybody else is doing, how unique are we? This applies necessarily to the investment profession. If you don't have a variant perception, you will always under perform as compared to the market average. But if you have a different way of analyzing the same information which is available to everybody else, quite possibly you will come up with a diverse outcome or a diverse theory. Its not about theorizing or diverse outcomes I am worried about, its the process of approaching the problem.

Everyone approaches problems in a slightly different way. A person trained in math will approach a math problem with a different perspective than a person trained in arts. Why does a disparity exist in their approaches? Is it because they were trained differently? Quite possibly, YES. the subjects they learn, the concepts they encounter, eventually result into setting their thoughts in a particular pattern. Where a scientist will look at a problem with the question "why", an artist will look at the same problem with the question "how". This generalization may not prove much, but these systemic differences in people's approaches can be readily observed. Ask those people who are afraid of numbers or math equations, ask them why they are afraid? They usually don't have a convincing answer, at least no one has ever convinced me about their fear of numbers (needless to say, post a comment if you have a convincing answer :) ). i think, it is because, they don't know why they are afraid. With enough practice these same numberphobics will solve even differential calculus with the same concentration as a math grad. This is because their brains have accepted the pattern due to excessive practice, or even developed heuristic techniques to solve those problems.

The point is, "process is king". The way you approach the problem is vastly detrimental to the outcome of the problem (solution). The legendary fund manager of Legg Mason Capital Management, Bill Miller, uses multiple sources of knowledge to design his investment process. For instance, his investment strategy team includes, a Roman historian, Bill Miller himself is a philosophy major, then you will find regular finance grads & the most important association, Santa Fe Institute of New Mexico. Imagine the brainstorming they have. I can't. Santa Fe Institute is a premier research institute catering to various subjects which eventually merge at the study of Complex Adaptive Systems. So the combined knowledge from all these sources & the basics of valuation & value investing or some other investment theory, Bill Miller comes up with killer investments with almost contrarian & diverse processes. At the end of the day, all one wants from an investment is a good return. So whats wrong in thinking in a different way to maximize it?

Another example I would like to cite, is of Victor Niederhoffer, the twice bust speculator, who otherwise had a tremendous streak, writes in his biography (The Education of a Speculator) about his education from various sources. A curious glance through the chapters of the book would clearly show the various sources he cites (although very impressively). From his training at his childhood neighborhood, to his squash training, from history (books), from professional experiences, from other people in his profession (peers & great speculators before him), from sports & board games, from gambling & betting, from sex, from academia, from music, from markets, & so on. The list is endless & he delivers extremely detailed analyses of which source has resulted in imbibing which quality in him. I am not really interested in his professional streak or the way he speculated, but I am mainly interested in the way he made use of all these sources to do what he did (sometimes even better then others, till he failed twice).

Even looking at my intellectual hero, Nassim Taleb, reading his books is like reading 100 books at once in consolidation with a theme or a backdrop. There are so many books that I have picked up from the library shelves just because Taleb cites some argument or example from that book. Almost always, those books turn out to be insanely amazing. Taleb also recommends, movies, research papers, history, philosophy, his books are a cornucopia of subjects, concepts & eventually decision processes. Taleb's books are the only one's I have found with a very thick bibliography, citing amazing reference material.

The lesson which I take from these people & many more, is that, learning is a dynamic process. It doesn't stop once you leave a classroom. It improves your understanding about things which you wouldn't normally think about, it helps develop an approach which you wouldn't have normally chosen to adopt, it helps spawn those ideas in your head which (maybe) nobody around you is thinking of. Bouncing ideas of these various media has another advantage. Suddenly trivial arguments become less tasking & heavily enjoyable :).

Like Douglas Adams said: "I'd take the awe of understanding over the awe of ignorance any day."

1 comment:

Abhir said...

hey bill miller's major advantage is coz of the diversity of investment team and also bcoz of lookng at at problems from different angles (description problems ). how u perceive a problem depends on how u describe it ,since people attach probabilities not to events but to descriptions of events.