You read a book, enjoy it, and put it down. You read an article, enjoy it, and put it down. A week later, you forget about it and the fire is lost.
We learn so much about the power of compounding, the power of building systems, the psychology of human biases etc. But learning does not seem to translate into action.
Simply reading and consuming content won’t get you results. But the actions you take after that will.
How can we narrow the gap between our learning and execution?
A Pilot’s Six-Element System
In Poor Charlie’s Almanack, a collection of Munger’s speeches, he addresses how broadscale professionals can learn from narrowscale professionals (e.g. a pilot).
In piloting, as in other professions, one great hazard is the negative effect of the man-with-a-hammer tendency.
Just imagine what would happen if a pilot responds to a hazard as if it was “Hazard X” just because in his mind he only has a “Hazard X” model.
For this reason, a pilot is trained using a strict six-element system:
(1) Formal Training
The starting point is formal training. Just like pilots who have a broad knowledge of practically everything that is useful to fly a plane, we need to undergo training.
For instance, how often are managers formally trained in management methods before being put into a management role? That’s an investment more organisations need to make.
(2) Practice-Based Fluency
But having knowledge is not enough. We have to be able to practise until we are fluent.
Imagine being on a plane with a pilot who is unable to handle two or three interlinked hazards at once.
In the same vein, as much as reading about investing is good, it is not sufficient. Always apply your knowledge and strategies you have learned in order to become proficient.
Raise your knowledge to a level of practice-based fluency.
(3) Thinking Forward and in Reverse
Know what to focus on and what to avoid.
As Munger says, “Invert, always invert”.
In the world of investing, this means to avoid ruin at all cost.
You can become successful not by owning the best stocks but to avoid the big losers.
(4) More Important = More Time
“His training time is allocated among subjects so as to minimize damage from his later malfunctions; and so what is most important in his performance gets the most training coverage and is raised to the highest fluency levels.”
For a pilot, the things that are the most important in his performance are allocated more training.
Dedicate your time and focus o the things that matter.
(5) Checklist Routines
Like a pilot who follows pre-flight checklist, develop a step-by-step routine when it comes to making decisions.
Your life is essentially the summation of decisions you make. There will be many overlaps in the types of decisions we have to make, be it about health, money, relationships. By going through a “checklist” routine, it would help you approach the solution in a more systematic way.
In terms of investing, this could mean having an investing checklist of things to look out for before purchasing a stock.
A step-by-step selection criteria is not only useful for screening stocks, more importantly, this could help us to increase our conviction and tune out from the noise in the market.
(6) Maintenance to Prevent Atrophy
Even after original training, a pilot is forced to regularly use the aircraft simulator to prevent loss of currency.
We need to maintain our knowledge over time through practice and investing in our development.
“If I only had an hour to chop down a tree, I would spend the first 45 minutes sharpening my axe.” – Abraham Lincoln.
Always sharpen your axe. Take time to hone your skills.
Here is a quick overview of the 6 Elements discussed.
- Have some formal training
- Raise your knowledge to practice-based fluency
- Think forward and in reverse
- More important = more time
- Always have a checklist
- Maintenance your knowledge