Expertise Rule

Recently I calculated that I had spent more than 10,000 hours writing a blog, therefore following the famous rule made famous by Malcolm Gladwell in his book ‘Outliers’; to conclude I must be an expert in blog writing. Admittedly this is not creative writing, as in the form of writing a novel, but it is writing nevertheless, which gives me confidence in starting a career as a writer. I may have also spent nearly 10,000 hours reading books, so that makes me a near expert in book reading, too.  Most writers would tell you that reading and writing is important to being a good writer, therefore my experience so far should give me a step up. But the medium of a blog also provides other expertise as well, like being an expert on the Internet and ways one can monetize (or not) his online work. The point is that after nearly 8 years of writing a blog, one wonders what he is an expert in. Does it mean expertise in clear thinking, or expressing ideas, or is it a facility in understanding? One is sure that the motivation was to clear thoughts and de-stress, the act of journaling is really a form of meditation. Perhaps this is the true expertise one has gained, to handle anxiety and settle the mind, sort of like a wisdom practice.

I believe in making progress a step at a time, and one strove for expertise in writing, in finance and investment, real estate, stock, bonds and online ventures. One achieved modest success but the effort is wanting; a need to make a breakthrough so the investment in time is well spent. Unfortunately, one has dilly dallied, spending time indulging in a bookish life, to be a literati, or scholar in the Chinese sense. But the Chinese have a saying that unused learning is wasted learning. All the more reason that one must justify the past years of blogging, or it will turn out to be a large waste to time and resources. The conclusion one has a good foundation to succeed; hence, the challenge to control or manage the mind to get the job done. Perhaps this is where true mindfulness begins, to focus on the moment and sit down and write plus learn more about the other areas of improvement.  But there are visible signs of progress in real estate and stock investing, plus a direction to go to the next level, by forming an LLC, trying options (covered calls) or investing in bonds. Online ventures are also another way forward by maximizing experience into monetizing a food blog, using ad words and video resources. Hence, a way ahead in these areas.

Unfortunately, for creative writing projects, there is no other way but to write. Perhaps it is more of a creative exercise, where one must use tools like mind mapping or visual thinking to get a novel going. Thus a strategy is born, to maximize an experience that started with journal writing and de-stress, to blogging, to the internet and online investments. The other day my friends came to the house for dinner: Singapore dry noodles with minced meat, fish balls and mushrooms, ham, fried chicken wings, chocolate cake, mango and sticky rice. It was a nice time to catch up and especially share stories and future plans: moving to a new city, to a new job, a new house or new gadgets, all the trappings of moving forward.  These were all easy things to do, external movements toward something new; bereft of internal progress or perhaps a deliberate discipline to move ahead, one that requires reflection. But one is amiss as well, descending into stagnant satisfaction, not taking the considerable next step. Hence, time to assess what one achieved and to make a leap. It’s the courage to be dissatisfied, to know what one possesses is nothing if one stagnates; to undertake a journey that is primarily an internal quest.

The Epidemic of Absence

I just read a book about autoimmune therapies, ‘The Epidemic of Absence’ that describes an unorthodox cure by introducing hook worms (and other such maggots) into the bodies of people with autoimmune illness. The premise is that the immune system of the body will focus on the intruders (like viruses) as seen in less developed countries where such larvae exists; whereas in developed countries, progress has eradicated unhygienic conditions, resulting in autoimmune defenses attacking the body due to the lack of enemies like hook worms. Therefore, the cure is to re-introduce such maggots so the body’s defenses can focus on them rather than on itself. This type of cure is relegated to the fringes of the medical establishment because of the seeming lunacy of the cure but surprisingly done by a few brave souls who have lost faith in orthodox treatments that produce no results. Man does not know everything, with the inability of modern medical science to cure illnesses like autoimmune whereas logical thinking would conclude that the body’s defenses are dangerously idle if all traces of unhygienic conditions are eradicated from modern society. Therefore, it sometimes pays to be a little dirty.

The point of view is intriguing although the author himself is afflicted with autoimmune disease, the motivation of which is seeking alternative therapies, considering the failure of orthodox treatment. One is attracted to this type of counter-intuitive thinking, where authors like Malcolm Gladwell thrive in this reasoning; reading his latest book, ‘David and Goliath’; shedding new light on the underdog, the hero who is victorious against incredible odds. It is the premise of his book that the underdog is in fact the inevitable victor when viewed in a different light, where incredible odds are but the unperceived disadvantage experienced by an ‘ignorant’ superior force. It is this type of thinking that is unique, like the point of view of an avant garde artist, attacking preconceived notions; perhaps similar in feeling in the 1920’s when looking at the abstract work of Picasso, an entirely different art at that time, needing the change of old patterns of thought. Having a contrarian mind is counter to so called common sense, away from the ‘group think’ of society, seen also in investors like Warren Buffet, whose buy and hold strategy is contrary to the ‘get rich quick’ zeitgeist of modern times.

Having this type of philosophy often gives one neuroses or having a worrisome mind because of ones inability to welcome uniqueness of thought, for example an investor like Warren Buffet can stick to his guns despite the world around him constantly churning with their buy and sell schemes. Group think is the enemy of the contrarian, having a sort of direct insight to human reality, perhaps a glimpse into the truth of the matter, whose internal logic makes sense only to himself and to the divine wisdom, oblivious of the ‘group think’ prevailing around him. The madness of this ‘group think’ is brought to frantic hilariousness by Dave Eggers in his ‘A Heartbreaking Work of Staggering Genius’; like a Jack Kerouac of the frenzied nerd mind, driven to extreme thought by the untimely death of both parents, pushing the hero towards seeking acceptance and validity in an unfair world; desperately trying to be relevant, to rise above the crowd of the young and senseless in Silicon Valley, to be an uber elite of the uber elite, driven by their family tragedy. But the book is more like a work of healing, to write in such manic deliriousness the children’s attempt to maintain normality despite their loss, achieving a sort of heroism; similar to Kerouac protagonists, going on the road to seek salvation in their manic travels.

Signal and the Noise

Nate Silver book is a wonderful fact filled work that attracts you to read but lacks the interesting insight of Malcolm Gladwell or Nassim Taleb. Silver is like one of those interesting young nerds who spew out facts and interesting tidbits but fail to get to the point. Nevertheless his book is an interesting romp into the realm of statistics and probabilities. One sometimes needs to pause and wonder what he is trying to say amidst the anecdotes and stories that abound. He makes an interesting observation on people – following the common distinction between hedgehogs and foxes; alluding that foxes are good in probabilities, who are able to distinguish between the signal and the noise. It is interesting to note that distinguishing the signal against the noise is a cognitive function – perhaps the distinction between what is the right news to absorb as against trash. One would need cognitive therapy in cases involving psychological problems.

Distinguishing the signal from the noise refers to statistics specifically the probability that an event would occur. This would cover the whole gamut from weather forecasting, to polling in election, to predicting earthquakes to economic forecast. I guess it is trying to distinguish how failures in predicting and forecasting are due to receiving noise instead of receiving the proper signal. It is like saying that perceptive investors like George Soros or Warren Buffett are able to distinguish the proper signals and discard the noise to make insightful decisions that make a lot of money.  Therefore distinguishing the proper signal is like accepting what is true and discarding the trivial facts. It is the quest for truth, a bull shit detector, so to speak. In the realm of forecasting, the best method would be to get the consensus from a group of experts; this consensus often comes close to the final outcome. 

Refining one’s mental reasoning and perception is one way to hone the mind, to allow one to receive the right signal. Like Sherlock Holmes, one must develop a ‘global mind’ in order to have a superior deduction method that could solve mind boggling crimes. Hence, distinguishing the signal from the noise is not just a challenge of probabilistic reasoning or forecasting but a frame of mind. For economist like Silver, this would mean gleaning the correct insight from a mass of statistics or data, while perceptive people like Barack Obama or Bill Clinton or any highly smart or perceptive people, who could discern the correct reality underneath the everyday veneer. Hence, one could also do meditation or self-reflection to achieve this frame of mind as compared to a nerd who could find meaning in numbers. The fact that the mathematical abilities of most people are declining especially in the USA as compared to Asian countries like Korea or Singapore make the matter worse.

Silver’s book then is like the work of the Dalia Lama or philosophers like Eckhart Tolle, who provides guidance on correct thinking methods. To control the mind so to speak, so that the person achieve serenity and mental calm. Silver work is the extension toward the field of probability and economics. It is like predicting the probability that a man will have a car crash considering his love of drink and staying late. It is like those truthful saying like ‘a fool and his money is soon parted.’ It is deducting the outcome following logical reasoning of a Sherlock Holmes, but applied in highly complex systems like the weather or economics or political elections where highly linked components work together within a large system, integrated together. Distinguishing the proper signal from this highly complex leviathan is the aim of Silver’s book. For investors, it would be another useful tool to make the right investment decision.

Doing Nothing

 Nicolas Taleb the author of the book ‘Black Swan’ proposes that the best investment strategy is not losing money. According to him, the normal situation is that people always lose money and it’s rare for one to really earn in the stock market. He uses an interesting analogy with doctors. He claims that most of the time, in centuries past doctors lose their patients and it’s only in the recent years that patients are actually saved by their doctors. One should pay the doctor to keep you alive rather than his usual practice of putting you to an early grave due to fatal mistakes or lack of education. Putting this analogy to investors, most people in fact lose money and one needs to develop a way to not lose his capital. It’s a capital protection strategy not a money earning strategy.

This type of thinking is called negativity thinking. It fits Taleb’s philosophy of randomness. Those lucky people making money are really outliers. From Malcolm Gladwell’s book ‘Outliers’, one becomes an expert due to culture, practice and lucky circumstances. Achieving about 10,000 hours of experience is the starting point but one should be in the appropriate situation, raised in the appropriate culture that one could really succeed. This would remove most of the usual investors in the stock market. So the general public who do invest are really losing money. Following foolish trading strategies like timing the market, listening to talking heads in MSNBC, following rumors and being overconfident result in high transaction costs with constant trading and generally losing their hard earned cash as one goes in and out of stocks.

So the best strategy is really ‘not losing money’. This would probably mean a buy and hold strategy following the fact that the stock market is steadily rises in the long run. But one could still make a mistake picking stocks. So the best method is buying an index fund or an Exchange Traded Fund (ETF). Gladwell’s book makes the case that society generally loves the lone hero or pioneer or genius. Outliers like Steve Jobs or Bill Gates who strike it rich and obtain phenomenal wealth in their lifetimes, convince the general public that they can make it on their own too. Most don’t realize that these outliers succeed due to their inherent culture or location or opportunistic situation that is not available to almost all people. So most folks make a mistake into thinking that one could devote time and hard work to achieve phenomenal success without the other needed ingredients.

Of course, hard work does bring you out of poverty and results in success but not the type of outlier success that these lucky folks have achieved. Warren Buffet, one of the richest men is a true outlier and his down to earth manner fool people into thinking that they can be an astute investor just like him. One spends a lot of time trying to learn his methods mistaking the fact that he had a special childhood. For example, Buffet studied under the legendary investor Benjamin Graham who coined the term value investing, had a father who was a congressman who provided opportunities like meeting famous investment bankers at a young age. These special opportunities do not exist for the common folks but the latest technology allows everyone to open a brokerage account in the Internet and start investing their savings in the market in the hope of becoming Warren Buffet.

An illusion occurs that one could take a short cut and achieve success but in fact it’s false. Hollywood movies and easy credit contribute to the illusion so one could buy as many cars and homes, invest in real estate and the stock market and live like a millionaire. But all has come crashing down in the recent financial crises and folks are trying to regain their balance and survive and remain in their homes. So the new normal is ‘doing nothing’ like Taleb says. One finally realizes the mistake he is living in and perhaps realizes that becoming an outlier is not as easy as it seems. So one should not really seek expert’s advice but follow common sense that is becoming less and less common. One succeeds only because of luck and to think otherwise is a mistake. Is this the lesson that Nicolas Taleb or Malcolm Gladwell are trying to impart?  Perhaps it is a way of controlling hubris.