There is a saying – “When the student is ready, the master appears, but when the student is truly ready the master disappears.” 

Learn from Others

Those who do not have experience, learn by watching & studying others. It’s a valuable part of our development. This is exactly how kids learn how to speak or pick up a vocabulary and an accent by imitating and watching their parents. Mirroring others is an established form of learning. 

This form of vicarious learning is usually very useful because we cannot live all the different versions of life, ourselves. Someone who is fond of traveling will share their travel experiences, someone fond of adventure sports shares their learnings from their adventures, someone who is a great cook, shares their experiences of making great dishes. We get a good flavor of these different lives from the experience of others.. 

Learn by studying the greats

There’s a part of capital market literature which has been of immense value. Especially from the US capital markets point of view, there’s been great documentation of the history of capital markets going all the way back to 100+ years. Many legendary investors / traders have been written about, interviewed, there’s also their biographies. There’s even detailed documentation of the histories of companies, industries and macroeconomic events that have been written about. Not to forget the academic & regulatory research which supplements the study of how business, strategy & capital markets have evolved.

For a person who is new to investing and having some sense of what they want to learn, this is a mountain of knowledge. A good starting point for many in this field, has been to study the greats and learn from their investing experience. What we pick up from these great investors is that given a set of data points, macroeconomic factors and valuations, how did someone make a decision to buy/hold/sell something. 

This data is of value only when we try not to imitate the thought process of this person. Just like the vicarious experience in other aspects of life, most new investors won’t get the chance to deploy their capital and learn all these lessons on their own. With the probabilistic nature of the market, one can only get so many chances to buy/sell/hold to test all our learnings. The feedback loop is extremely noisy where, many times, we are unable to distinguish whether we deserved to succeed or if we got lucky. Also if one chooses to be a long term investor, with long holding periods as part of the process, the number of ideas one can churn and learn from, will also be less.

This doesn’t discount the ability to think through scenarios. What we learn from others is not to copy their thought process but how different people process data. What sort of analysis was needed, what sort of information gathering was done & what sort of behavior was demonstrated to reach to a decision? If the investor has a public track record, most of these data points can be verified quite easily.

Are we truly ready to do it ourselves?

Armed with some idea of how others are investing and thinking about investing, we can also attempt it ourselves. Even before we know how to build our temperament the first thing many of us would do is to start buying & selling stuff. The short feedback loops are especially very interesting. We also start to believe our superiority when we make a quick profit and start to doubt ourselves hopelessly when we make a loss. Notional or real, all these profits and losses are deeply emotional for us. 

With enough iterations over a cycle or two, a period of 5-10 years, one can start seeing their own strengths and weaknesses. If we haven’t documented our decisions, we can still intuitively know what we are good at and what we are weak at. Which type of investing style is more suited to our basic temperament and which style is not suited for us. 

Meanwhile the learning continues as more and more capital market literature keeps gushing out and we are constantly in a state of self doubt and learning. 

Stop learning from others

This is the tricky part in our learning journey. There is a moment when we need to acknowledge that we are learning and yet we have learnt enough of something to confidently be able to do it at a professional level. This applies not only to professional investors but also to individual investors who are personally managing their family’s asset allocation. 

A time comes when the teacher has to disappear and we need to be comfortable in the driving seat without any guidance. At this stage we need to be self aware about our limitations and our style of processing ideas. We need to be sure that we constantly keep going through the data sources that we rely on regularly and make sure that we are also aware of the changing circumstances in the marketplace. 

Sadly, for all these inputs, learning from others doesn’t work. It doesn’t work for several reasons. The context of investing is not the same as the person you are learning from. The market environment & macroeconomic circumstances are different. The business & the sector dynamics have evolved into something else. The size of the business & nature of competition is different. In many cases if we are learning from investors outside of India, the country specific & geopolitical nature of the sector / business is also different. 

One last thing that truly affects the quality of learning is that we are not the same people. The upbringing, the education, the career trajectory, the personal network & the temperament of the great investors we study from are fundamentally different from our own. We can’t expect to mirror their abilities when we are making our decisions. However they can be great guides, if we remember the lessons well.

The self-peeling onion

Investing is a fundamentally contradictory job. What you learn is valuable and at the same time not valuable because the information & insight can decay over time. We need to constantly update ourselves and yet be fully aware of the parts of our thought process that don’t / shouldn’t change. As we go through many trades / investments, we also need to be able to measure ourselves if we are truly getting better or merely on a long lucky streak.

We accumulate layers and layers of education, experience and insights which come in handy while building a portfolio. We also believe that while doing so we are learning some fundamental truth about the market or investing. From the outside, all these seem like layers of onions we need to peel to reach the fundamental truth of investing. Sadly, peeling all the layers of the onion only makes the onion disappear.