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10,000 Hours...and Counting

October 22, 2017

In his book Outliers, Malcolm Gladwell claims that it takes approximately 10,000 hours of "deliberate practice" to master any complex skill or profession (for example, to become a great pianist or a great investor). (Note - for a contrary view, however, see here.) Moreover, the concept of "deliberate practice" can be explained as follows (source):

 

Then there's the larger matter of how you practice. In "So Good They Can't Ignore You," author Cal Newport says that what makes ridiculously successful people so successful is they're experts at practicing — they can push themselves to the exact limit of their skillset and thus expand their abilities day after day.  If you're not expanding yourself in such a fashion — called deliberate practice in the org psych lit — you'll never be ridiculously successful.

 

Thus, it appears that there are two distinct components required to become "expert" level at any vocation. First, one must put in the requisite time (10,000 hours or more); and second, the time one puts in must be in the form of "deliberate practice" (or practice specifically designed to force skill improvement). In other words, one will NOT become expert at a skill if the person either (A) fails to put in enough time or (B) puts in the time but does so lackadasically or thoughtlessly.

If we accept all of the foregoing theory as true, then we can assess whether yours truly has been on the correct path to become an expert investor or not (note that this is a totally different concept than whether it is possible to consistently "beat the market", i.e., the question of whether the market is efficient). Has the necessary time been put in? And, if so, has the time put in been in the form of "deliberate practice"?


With respect to the first question, we have hard data. Luckily, in accordance with the time-keeping practices of our former profession (law), we have tracked hours worked since leaving said profession on October 16, 2013 and embarking on an investing career, with the following totals:

 

October 17, 2013 through December 31, 2014 (average of 10/hours worked per day) ==> total of 440 days and 4,400 hours worked

 

January 1, 2015 through December 31, 2015 ==> 4,900 hours worked

 

January 1, 2016 through December 31, 2016 ==> 4,740 hours worked

 

January 1, 2017 through October 21, 2017 ==> 3,460 hours worked

 

TOTAL ==> 17,500 hours worked over 1,465 days (11.95 hours/day)

 

So far, so good. We have far surpassed the minimum threshold of 10,000 hours stipulated by Gladwell as necessary (although not sufficient) to become an "expert" at investing. Next comes the tricky part, however. What percentage of the 17,500 hours worked can we truly say were spent in "deliberate practice" versus frittered away (even though superficially we believed we were working efficiently the entire time)? Let's first throw out 75% of the initial 4,400 hours worked as being the equivalent of "figuring out how to attain 'deliberate practice' status". In other words, any novice will have a ramp-up period testing work habits and methods before that person achieves a legitimate "deliberate practice" routine. Next, since people are not robots (and hence do not operate at 100% efficiency levels all the time, due to fatigue, distractions, boredom, etc.), let's assume that despite our best intentions only 70% of the remaining hours were engaged in the "deliberate practice" of investing. We thus arrive at the following results:


Hours of deliberate practice: 0.25 X 4,400 + 0.70 X 13,100 = 10,270 hours

 

Voila - it appears based on the above calculations that yours truly has recently passed the magical (if one believes Gladwell's theory) 10,000 hour barrier required in order to become an expert at a skill (in this case, the skill of investing). Does passing the 10,000 hour mark automatically qualify a person as an "expert"? It is not totally clear--skill level is subjective. However, at a minimum it appears that we have cleared the dual hurdles that otherwise would prevent one from becoming an expert. We certainly *hope* we have attained expert level. Only time will tell whether the next 10,000 hours of deliberate practice will be more fruitful than the initial 10,000, however.

 

(Incidentally, here are our guesstimated calculations for Warren Buffett's total hours of "deliberate practice" at investing (so far!):

 

Age 6-12: 1,000 hours (3.2 hours per week);

Age 12-22: 10,400 hours (20 hours per week);

Age 22-50: 116,500 hours (80 hours per week);

Age 50-70: 62,400 hours (60 hours per week); and

Age 70-87: 35,400 hours (40 hours per week).

 

TOTAL ==> 225,700 hours (or the equivalent of 9,404 24-hour days).

 

Note that Buffett likely passed the 10,000 hour barrier around age 21; in addition, by the time he started his investment partnerships at age 26 in 1956, he likely had nearly 30,000 hours of deliberate practice under his belt. No wonder he achieved returns of 30% per year over the ensuing 12 years!)

 

 

 

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