Elon Musk, Warren Buffet and Charlie Munger follow this rule
Photo by Morgan Housel on Unsplash
The difference between timeless wisdom versus short-lived information
Some things we learn have no value after a year or even a month, while other things prove to be very useful years ahead. We should spend more time absorbing knowledge with no expiry date.
Accumulating timeless wisdom is a much surer bet than focusing on the new, trendy thing. It will not become outdated, and you can use the big ideas in your mental arsenal to make better decisions.
If you dive deeply into a field, it will be much easier to get a deep understanding if you also know the big ideas from other fields. That is because reality doesn’t care about the confined space between academic disciplines, and your knowledge will be deeper if you have a web of connected knowledge to link it to.
You will have massive advantages if you constantly accumulate knowledge that doesn’t expire in a few years.
If two people read the same book, the person with the most preexisting knowledge will learn the most. That is because they have more mental models to link the information to and can connect the dots.
It is when we have the chance to connect knowledge to preexisting knowledge that the real value comes. You have a web that strengthens as you build a more thorough understanding of the world and accumulate more knowledge.
“It is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, i.e., the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang onto.” — Elon Musk.
The mind is not good at seeing how our current behavior affects long-term outcomes. We tend to see things linearly, but many things work exponentially for better or worse.
For example, the habits you engage in can make your life much better or worse a few years later. If you focus on foundational learning, you can do things you would never have imagined a few years later.
“If you are investing in your education and you are learning, you should do that as early as you possibly can, because then it will have time to compound over the longest period. And that the things you do learn and invest in should be knowledge that is cumulative, so that the knowledge builds on itself. So instead of learning something that might become obsolete tomorrow, like some particular type of software [that no one even uses two years later], choose things that will make you smarter in 10 or 20 years.” — Warren Buffet.
Warren Buffet and Charlie Munger have been notoriously dismissive of new, trendy investment opportunities and they follow what they know to work based on business fundamentals.
Personal experience
I picked up reading four years ago and focused on foundational learning in different fields. By focusing on learning foundations in different fields, I have accumulated knowledge that has helped me in my career and other endeavors. I know that the knowledge will become more valuable later as well when it can be connected to more ideas and be applied in more contexts.
Some examples of good books I have read are “Poor Charlie’s Almanack,” “Meditations” by Marcus Aurelius, “Principles” by Ray Dalio, and “Influence” by Robert Cialdini.
Here are some examples of information that will get outdated quickly:
Most news except insightful articles
Most social media
Hot stock tips
Avoid these kinds of articles like the plague.
It might just as well be called five ways to gamble away your savings. If information is presented without detail or analysis, it is likely not of any real value.
Here are some examples of things we can optimize and learn about that will compound over time:
Habits and other things you do every day.
Learning how to learn. That will make you a lot more effective.
Mental models
Mental models are how we see and understand the world. It is impossible to know all the details about something, and a mental model is a tool that can organize information. Mental models allow us to tackle problems in different ways.
Examples of mental models:
Compounding
80/20 rule (Pareto principle) — 80 % of outcomes are determined by 20 % of causes.
Opportunity cost
Incentives — impacts human behavior by imposing punishment or rewards.
Cognitive biases — a cognitive bias is a systematic deviation from rationality in our thinking process, which operates largely subconsciously.
To learn more about mental models, I encourage you to check out Charlie Munger.
The importance of patience
An example of the difference between timeless wisdom and short-lived information is analyzing stocks based on fundamental analysis and a hot stock tip right now. Not only will only the first kind of knowledge have value over time but trying to get rich quickly often ends in a fiasco. We need patience.
If you read for 100 hours about fundamental investing principles from legendary investors such as Warren Buffet, Benjamin Graham, and Ray Dalio, you will accumulate a lot of timeless wisdom.
On the other hand, if you spend 100 hours reading the latest stock tips from CNBC, you will mostly encounter noise, and the knowledge will have very little value down the line. Even worse, you could be misled and lose money because of the often confident but useless claims in those kinds of articles. Focus on timeless principles rather than short-term tips and tricks.
Examples of people with a gradual rise
When knowledge accumulates over time, it becomes immensely precious. Robert Greene, the author, is an example of someone with a steady rise.
He has written many wonderful books, such as “48 Laws of Power”, “Mastery,” and “Laws of Human Nature.” Before becoming an author, he traveled extensively and had around 70 entry-level jobs. In his 30s, he lived in a small studio apartment, and later in life, he became a big success.
His knowledge about human nature had become honed through reading and experiences, and it was first when it had reached a certain point that he could do something great with it. The knowledge had compounded.
“All overnight success takes about 10 years.” — Jeff Bezos.
Great success takes many good, daily habits repeated daily for years. That is because compounding must work its magic for a long time before someone can reach the top.
To actually get great economic benefits from something, we need deep knowledge within a field to outmaneuver the competition, which requires learning for years. Impatient people will typically not allow the necessary time before compounding gets us into a results phase. That is also why getting rich quick schemes often end in ruin.
To earn a lot of money from something, we need time to learn and master the craft, which simply can’t happen next week if we start now.
Business, communication, and psychology
In my opinion, learning about business, communication, and psychology is something you will not regret in any case. If you spend time learning how to earn more money or save more to ensure your future freedom and provide for the people you care about, there is no permutation of reality where you wouldn’t find that immensely valuable.
Financial freedom only ensures that if someone you care about needs help, you can provide for them, which will happen sooner or later.
In addition, no matter who you are, you will be dealing with people for the rest of your life. Therefore, it can be helpful to communicate as well as possible with friends, coworkers, family, and others to maximize your own and others’ happiness and set clear expectations.
Finally, learning about psychology can help you make better decisions and understand more of your own and others’ irrationality. Knowing how we are prone to make miscalculations makes us more likely to avoid missteps and lapses of judgment. If you understand psychology, you can control your emotions better and realize how you can help others better as well.
By combining knowledge in a way few other people have, we also get a significant advantage. For example, many people are gifted at math and know a lot about stocks and business. But when this knowledge is combined with understanding human psychology and how people behave under distress, you are suddenly uniquely positioned to make money in the stock market.
One of the reasons why we have booms and crashes in the stock market are psychological tendencies such as:
Loss aversion
Bandwagon effect (social proof)
Fear of missing out
Focusing on learning foundational, pragmatically valuable things in these fields will almost certainly pay good dividends over time.
Final thoughts
If we spend our time learning practical foundational concepts, 5, 10, or 20 years from now, we will have a giant web of knowledge stored that we can add branches to continually. That will most likely be immensely useful, help you make better decisions, and be happier and more effective in your life. Knowledge compounds!
In addition, you can probably monetize it in some way when compounding has started to work its magic, and you are getting nearer the top of a field or combining knowledge in a new way.
“Read 500 pages every day. That’s how knowledge works. It builds up like compound interest” — Warren Buffet.