Be A Learning Machine

In the 1980’s my parents used Inland Letter to communicate with families and friends in India. It took few days for the letter to reach the destination. For sending urgent messages, telegrams were used which reached the destination in few hours.

In early 1990’s we got a telephone connection (landline) in our house. With in seconds we were able to talk to families and friends. In the late 1990’s pagers were introduced. It enabled companies to send and receive alphanumeric messages to and from their employees.

In the early 2000’s I got a Nokia mobile phone and it enabled me to talk to anyone from anywhere. During this time Internet became popular in India and I created my email account with Hotmail.

In 2013, I am using a smartphone for talking, texting, tweeting, emailing, and, everything.

In two decades the medium of communication got disrupted several times. In the process the end users (including me) got benefited immensely. But what about the employees and shareholders of the pager and telegraph companies? They lost a lot money and their jobs.

Capitalism is creative destruction

Should we not innovate then? Of course not. If innovation did not happen then I would not be writing this blog and it would take days or weeks to communicate important messages. Society as a whole got immensely benefited from innovation and hence it is good. In Elementary Worldly Wisdom – Charlie Munger wrote about why Walmart destroying small town merchants is not bad.

Walton, being as shrewd as he was, basically broke other small town merchants in the early days. With his more efficient system, he might not have been able to tackle some titan head-on at the time. But with his better system, he could destroy those small town merchants. And he went around doing it time after time after time. Then, as he got bigger, he started destroying the big boys.

Well, that was a very, very shrewd strategy.

You can say, “Is this a nice way to behave?” Well, capitalism is a pretty brutal place. But I personally think that the world is better for having Wal-Mart. I mean you can idealize small town life. But I’ve spent a fair amount of time in small towns. And let me tell you you shouldn’t get too idealistic about all those businesses he destroyed.

Plus, a lot of people who work at Wal-Mart are very high grade, bouncy people who are raising nice children. I have no feeling that an inferior culture destroyed a superior culture. I think that is nothing more than nostalgia and delusion.

We live in a knowledge economy with people specializing in very narrow skills. With innovation happening in every industry some of the skills will become obsolete and in the process some of us can become unemployable. The next question is who thrives in the knowledge economy? We can get the answer for this question from Darwin’s evolutionary perspective.

From an evolutionary perspective, the fittest individuals are simply the ones who have the combination of traits that allow them to survive and produce more offspring that in turn survive to reproduce. In fact, they may be relatively weak, small, and not particularly intelligent. What makes an individual fit all depends on the environment at the time and the combination of traits that are most suited to flourishing in it. In the case of Darwin’s finches, specialized beaks provided the advantage. However, in a changing environment, it is often the versatile generalist who has the greatest success.

What are the traits for thriving in the knowledge economy? The trait is to – Be a learning machine. Charlie Munger in a speech to USC Law School Commencement – May 13, 2007 tells

I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.

If you had invested $1 in Berkshire Hathaway in 1965, it would have grown to $5,868 by the end of 2012. This comes to an average annual gain of 19.7% and an overall gain of 586,817%. Such an extreme outcome reflects the contributions of one great single mind – Warren Buffett. In one speech Charlie Munger tells

Warren is one of the best learning machines on this earth. The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you. Warren was lucky that he could still learn effectively and build his skills, even after he reached retirement age. Warren’s investing skills have markedly increased since he turned 65. Having watched the whole process with Warren, I can report that if he had stopped with what he knew at earlier points, the record would be a pale shadow of what it is.

The work has been heavily concentrated in one mind. Sure, others have had input, but Berkshire enormously reflects the contributions of one great single mind. It’s hard to think of great success by committees in the investment world – or in physics. Many people miss this. Look at John Wooden, the greatest basketball coach ever: his record improved later in life when he got a great idea: be less egalitarian. Of 12 players on his team, the bottom five didn’t play – they were just sparring partners. Instead, he concentrated experience in his top players. That happened at Berkshire – there was concentrated experience and playing time.

We can learn a lot from direct and vicarious experiences. Reading is a great way to get vicarious experience and it is cost effective. For example you can learn all about Business and Investing for just $2.99. How much should one read? We can get the answer to this question from Buffett.

I just sit in my office and read all day. When asked how to get smarter, Buffett once held up stacks of paper and said “read 500 pages like this every day. That’s how knowledge builds up, like compound interest.

Where is the time for reading 500 pages every day? I had the same question and Shane Parrish (farnamstreetblog.com) showed me how. If not 500 pages every day, we can at least read one book every week. In one year it comes to 52 books.

We are social animals and we do what our family and friends do. This is called as Social Proof in psychology. We will read more if we surround ourselves with those who read a lot.  In the busy world there are very few who read a lot. You can find them here, here, and, here.

To summarize, you have to be a learning machine to thrive in today’s world. One way is to read a lot.