The Missing Ingredients

Within the art of storytelling, how important characters meet is often significant and portentous, laying the groundwork for and foreshadowing what is to come. For example, Florentino Ariza and Fermina Daza in Love in the Time of Cholera, by Gabriel García Márquez: “…that casual glance was the beginning of a cataclysm of love that still had not ended a half a century later.” A corollary to this general trope is the “meet cute” construct in various sorts of movies, most typically with love stories. For example, in Silver Linings Playbook, Pat (Bradley Cooper) has just been released from a mental hospital and is invited by a friend for dinner. Joining them will be Tiffany (Jennifer Lawrence), a woman with issues of her own. The host tells Pat not to ask Tiffany about her dead husband, Tommy. Yet almost immediately after she walks in the door, Pat says, “How did Tommy die?”

One of literature’s iconic first meetings takes place in Sir Arthur Conan Doyle’s A Study in Scarlet, wherein Sherlock Holmes and his soon-to-be partner, Dr. John Watson, meet cute (in an intellectual way) at the chemical laboratory of a hospital where Holmes was conducting experiments. They are brought together by a mutual acquaintance because they both are looking for affordable accommodations, which turn out to be the famous apartment on Baker Street. Holmes proceeds to astonish Watson with his observational and critical thinking skills by ascertaining much about the good doctor’s life and experience from seemingly scant evidence. Below is that famous scene in the BBC’s modern retelling of the Sherlock Holmes stories, starring Benedict Cumberbatch as Holmes and Martin Freeman as his stalwart sidekick, wherein this first Holmes story is re-imagined as A Study in Pink.

This meeting is the genesis and is emblematic of a “beautiful friendship” that becomes perhaps the quintessential buddy-comedy relationship in literature and so very much more. Here is Doyle’s original description of Holmes “sherlocking” Watson’s backstory, which climaxes that first meeting.

“I knew you came from Afghanistan. From long habit the train of thoughts ran so swiftly through my mind that I arrived at the conclusion without being conscious of intermediate steps. There were such steps, however. The train of reasoning ran, “Here is a gentleman of a medical type, but with the air of a military man. Clearly an army doctor, then. He has just come from the tropics, for his face is dark, and that is not the natural tint of his skin, for his wrists are fair. He has undergone hardship and sickness, as his haggard face says clearly. His left arm has been injured. He holds it in a stiff and unnatural manner. Where in the tropics could an English army doctor have seen much hardship and got his arm wounded? Clearly in Afghanistan.” The whole train of thought did not occupy a second. I then remarked that you came from Afghanistan, and you were astonished.”

Today, Sherlock Holmes quite literally belongs to all of us in that, after a protracted legal fight a few years ago, the federal courts held that all of Doyle’s pre-1923 Holmes writing is in the public domain and does not, as previously thought, reside exclusively at 221B Baker Street. Metaphorically, that was already true, of course, in that Holmes and Watson are essential parts of our contemporary mythology. In pertinent part, Sherlock Holmes may as well be the patron saint of observation and induction, which is the essence of critical thinking. Watson is his necessary foil.

Critical Thinking

The U.S. National Council for Excellence in Critical Thinking defines critical thinking as the “intellectually disciplined process of actively and skillfully conceptualizing, applying, analyzing, synthesizing, or evaluating information gathered from, or generated by, observation, experience, reflection, reasoning, or communication, as a guide to belief and action.” The American Philosophical Association offers a consensus portrait of the ideal critical thinker as someone who is inquisitive in nature, open-minded, flexible, fair-minded, has a desire to be well-informed, understands diverse viewpoints, and is willing to both suspend judgment and to consider other perspectives. That sounds a lot like Sherlock Holmes.

Getting better at critical thinking is especially important to the investment business. According to the World Economic Forum, Future Jobs Report (2016), during the 2015-2020 period, the greatest skills disruption is likely to occur in the financial services/ investment industry as compared to all others, with huge and increasing skills demand for complex problem-solving and critical thinking – particular specialties of Mr. Holmes.

In Maria Konnikova’s excellent and engaging Mastermind: How to Think Like Sherlock Holmes, her main emphasis is using science to demonstrate how, with a bit of mindfulness and discipline, we can all aspire to think like Sherlock. “If you get only one thing out of this book,” she writes, “it should be this: the most powerful mind is the quiet mind. It is the mind that is present, reflective, mindful of its thoughts and its state. It doesn’t often multi-task, and when it does, it does so with a purpose.” Best of all, Sherlock’s extraordinary intellect as well as his unique powers of thought, observation and logical deduction are fully rooted in reality.

As argued by Andy Greenwald, “Sherlock is the rare superhero with a power that makes total sense in the real world, one far more useful on a day-to-day basis than heat vision or a giant, Norwegian hammer: He observes everything and misses nothing. For a culture plagued by FOMO [Fear Of Missing Out], Sherlock’s omniscience is both antidote and inspiration. An hour in his chilly presence suggests that the answers to all of life’s mysteries, frustrations, and unsolved serial murders are sprinkled all around us, as tactile as crumbs on a tablecloth. The trick is simply knowing when, where, and how closely to look.”

We would all like to be and aspire for our children to be as analytical as Sherlock Holmes. We want (and want our children) to think “outside the box” as well as to think well overall, with such thinking based upon careful awareness and evidence. Getting there requires more than is often assumed. We need what is too often missing from our understanding, missing ingredients of a sort. As I often say (and as my masthead proclaims), information is cheap, meaning is expensive.

How Do You Get to Carnegie Hall?

Getting to Carnegie Hall

You have probably heard the old joke.

“How do you get to Carnegie Hall?

“Practice, practice, practice.”

Funny, yes, but also true.

My son-in-law is a fantastic musician who has played in Carnegie Hall and in many of the world’s great concert halls. Josh has played for presidents at the White House and on television. He has played in the Macy’s Thanksgiving parade. He has played the national anthem at numerous professional sporting events. His day job is with the U.S. Air Force Ceremonial Brass. He is primarily a classical musician.

He is a wonderful contemporary musician too.

Josh is exceptionally talented – obviously. He got a terrific education (Eastman School of Music and Yale) and has had great teachers. Yet the biggest component to his success is practice and lots of it. He has practiced long and well since elementary school. He has gone years without missing a single day of practice, seven days a week, 365 days a year. Malcolm Gladwell’s famous 10,000 hours was just a starting point for him.

Nobody becomes a great instrumentalist (or surgeon, chess grandmaster, basketball player, money manager, or anything else requiring complex skill) without some combination of training and practice that totals a whole lot of time and effort. However, all too many people seem anxious to deny the effort requirements of real success. Watch this (mostly) excellent video on critical thinking.

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 is partly because it takes lots of practice – we tend to be lazy – and partly because it is not just a skill to be learned.  The above video does not sufficiently emphasize that critical point.

Subject matter expertise and critical thinking skill are not in any way the same thing, of course. However, researchers recognize that “[b]ackground knowledge is a necessary but not a sufficient condition for enabling critical thought within a given subject” (more here and here). A key feature of expert knowledge is “the possession of a rich body of content knowledge.” Indeed, “much of value is lost if critical thinking is conceived of simply as a list of logical operations and domain-specific knowledge is conceived of simply as an aggregation of information.” Such expertise mandates the understanding of the strengths, weaknesses, subtleties and consequences to all the underlying positions and viewpoints relating to a particular decision. Thus better decision-making – discovering when and how we are wrong – requires better critical thinking.

Becoming Sherlock Holmes Is Hard

I am married to a (wonderful 5th grade) teacher. She and her colleagues all regularly hear from parents about how much they (and their kids) hate “drill and kill” teaching, which they perceive to be any teaching that requires a bit of practice. They want to avoid becoming “Tiger mom” Amy Chua, who (rightly) argues, “Tenacious practice, practice, practice is crucial for excellence; rote repetition is underrated in America.” The most common parental buzzwords are “creativity,” “innovation,” and “understanding,” noble goals all. As Daniel Willingham, a University of Virginia professor of psychology who has written extensively on learning and memory, outlines, “Drilling often conjures up images of late-19th-century schoolhouses, with students singsonging state capitals in unison without much comprehension of what they have ‘learned.’” Instead (at least to the extent they have thought about it), these parents quite rightly want their kids to become fascinated by learning, to be fully engaged in their (highly entertaining!) lessons and to become adept at the critical thinking skills Sherlock Holmes so fully epitomizes (if not like Holmes in personality, at least as commonly portrayed).

However, as every good teacher understands, “distributed practice” – a better term for drilling – is essential for most student success, no matter how accessible Google is. As E. D. Hirsch Jr., the distinguished literary critic and education reformer, explains, distributed practice “is helpful in making the procedures second nature, which allows you to focus on the structural elements of the problem. …You can’t be proficient at some academic tasks without having certain knowledge be automatic — ‘automatic’ meaning that you don’t have to think about it, you just know what to do with it.”

That is how I passed the bar exam. I created flash cards of the (very long list of) basic elements I needed to know and memorized them so I could use them and apply them to the test’s fact patterns and questions. Good teachers and good technology can combine to limit when and how drilling is used and to make even necessary drilling more engaging. Nevertheless, some measure of drill is inescapable for students to aspire to mastery of the material.

To be clear, making education fun is a laudable goal. Student engagement is imperative for true mastery of any subject. Moreover, the memorization and recitation of facts is a far journey from anything like mastery. Memorization is not meaning. Mastery takes good analysis – the stuff of critical thinking – but also demands comprehensive factual knowledge and subject matter understanding. Information is cheap. Meaning is expensive.

Another look at the first meeting of Holmes and Watson offers insight here. Holmes deduced that Watson had been in Afghanistan prior to their first meeting in part because he was very practiced and accomplished in the arts of observation and critical thinking, but also because he had a broad and deep knowledge of the British military, geography, how injuries heal, and the day’s current events. Without both that practiced skill and that knowledge, Holmes would have remained entirely in the dark about Watson’s personal path to their meeting.

Beyond the rudimentary process of weeding out obvious logical errors and fallacies, 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 cannot be effectively undertaken in investing or anywhere else if and when there is not sufficient knowledge of the subject matter. Moreover, the more difficult the problem, the more information is required. One’s knowledge base provides the foundation of and context for engaging in critical thinking. I would have thought this idea uncontroversial in the investing world given how hard it is to master. Yet one guy in our business blocked me on Twitter because he was so angry at my assertion that good critical thinking requires subject matter expertise (which is why I began looking at this subject more closely).

With sufficient education and proper training – necessary but often ignored ingredients of first rate analysis – we have the opportunity freely to exercise critical thinking skills for profit, fun and even for the good of humanity. As these skills and the knowledge base to use them effectively are in extremely short supply generally, if you have them and exercise them, you will have a tremendous advantage. I hope you will make every effort to acquire, retain and sharpen those skills together with adequate (and more) domain knowledge. You need not have the knowledge or experience Cliff Asness has (even though it would help – a lot), but you do need to know your subject well to be any good at it. At a minimum, you need to be able to read and understand Cliff Asness. Getting there takes a lot of work, work that will never be completed. It is surely worth the effort.


2 thoughts on “The Missing Ingredients

  1. Pingback: 09/03/17 – Sunday’s Interest-ing Reads | Compound Interest-ing!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s