A Critical Omission

Barry Ritholtz linked a fine video today on critical thinking.

Of course, precious few of us exercise truly independent thought very often and none of us does so nearly often enough. As no less an expert than Daniel Kahneman acknowledges, making consistently good choices based upon good reasoning is really hard. Training ourselves to do so more intuitively is even harder. The academic research is crystal clear on that point.  That’s partly because it takes lots of practice and we’re lazy and partly because it isn’t just a skill to be learned. And that’s the critical point that the video leaves out.

Productive critical thinking requires adequate domain knowledge to go along with lots of practice.  Most personal and far too many professional investors have neither. Critical thinking can’t be effectively undertaken in investing or anywhere else unless and until there is sufficient knowledge of the subject matter.  One’s knowledge base provides the foundation of and context for engaging in critical thinking. Critical thinking alone is never enough.

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