Get Smarter: The Buffett Formula

By Brittany MaschalNov 08, 2016

“The best thing a human being can do is to help another human being know more.”
— Charlie Munger

“Go to bed smarter than when you woke up.”
— Charlie Munger

Most people go though life not really getting any smarter. Why? They simply won’t do the work required.

It’s easy to come home, sit on the couch, watch TV, and zone out until bedtime rolls around. But that’s not really going to help you get smarter.

Sure you can go into the office the next day and discuss the details of last night’s episode of Mad Men or Game of Thrones. Sure you know what happened on Survivor. But that’s not knowledge accumulation, it’s a mind-numbing sedative.

You can acquire knowledge if you want it.

In fact there is a simple formula, which if followed is almost certain to make you smarter over time. Simple but not easy.

It involves a lot of hard work.

We’ll call it the Buffett formula, named after Warren Buffett and his longtime business partner at Berkshire Hathaway, Charlie Munger. These two are an extraordinary combination of minds. They are also learning machines.

“I can see, he can hear. We make a great combination.”
— Warren Buffett, speaking of his partner and friend, Charlie Munger.

We can learn a lot from them. They didn’t get smart because they are both billionaires. No, in fact they became billionaires, in part, because they are smart. More importantly, they keep getting smarter. And it turns out that they have a lot to say on the subject.

How to get smarter

Read. A lot.

Warren Buffett says, “I just sit in my office and read all day.”

What does that mean? He estimates that he spends 80 percent of his working day reading and thinking.

“You could hardly find a partnership in which two people settle on reading more hours of the day than in ours,” Charlie Munger commented.

When asked how to get smarter, Buffett once held up stacks of paper and said he “read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”

All of us can build our knowledge but most of us won’t put in the effort.

One person who took Buffett’s advice, Todd Combs, now works for the legendary investor. He took Buffett’s advice seriously and started keeping track of what he read and how many pages he was reading.

The Omaha World-Herald writes:

Eventually finding and reading productive material became second nature, a habit. As he began his investing career, he would read even more, hitting 600, 750, even 1,000 pages a day.

Combs discovered that Buffett’s formula worked, giving him more knowledge that helped him with what became his primary job — seeking the truth about potential investments. [Omaha World-Herald]

But how you read matters too.

You need to be critical and always thinking. You need to do the mental work required to hold an opinion.

In Working Together: Why Great Partnerships Succeed Buffett comments to author Michael Eisner:

Look, my job is essentially just corralling more and more and more facts and information, and occasionally seeing whether that leads to some action. And Charlie — his children call him a book with legs. [Working Together: Why Great Partnerships Succeed]

Continuous learning

Eisner continues:

Maybe that’s why both men agree it’s better that they never lived in the same city, or worked in the same office. They would have wanted to talk all the time, leaving no time for the reading, which Munger describes as part of an essential continuing education program for the men who run one of the largest conglomerates in the world.

“I don’t think any other twosome in business was better at continuous learning than we were,” he says, talking in the past tense but not really meaning it. “And if we hadn’t been continuous learners, the record wouldn’t have been as good. And we were so extreme about it that we both spent the better part of our days reading, so we could learn more, which is not a common pattern in business.” [Working Together: Why Great Partnerships Succeed]

It doesn’t work how you think it works

If you’re thinking they sit in front of a computer all day obsessing over numbers and figures? You’d be dead wrong.

“No,” says Warren. “We don’t read other people’s opinions. We want to get the facts, and then think.” And when it gets to the thinking part, for Buffett and Munger, there’s no one better to think with than their partners. “Charlie can’t encounter a problem without thinking of an answer,” posits Warren. “He has the best thirty-second mind I’ve ever seen. I’ll call him up, and within thirty seconds, he’ll grasp it. He just sees things immediately.” [Working Together: Why Great Partnerships Succeed]

Munger sees his knowledge accumulation as an acquired, rather than natural, genius. And he’d give all the credit to the studying he does.

“Neither Warren nor I is smart enough to make the decisions with no time to think,” Munger once told a reporter. “We make actual decisions very rapidly, but that’s because we’ve spent so much time preparing ourselves by quietly sitting and reading and thinking.”

How can you find time to read?

It takes time and energy to read. One way to help make that happen is to carve an hour out of your day just for yourself.

In an interview he gave for his authorized biography The Snowball, Buffett told the story:

Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, ‘Who’s my most valuable client?’ And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day. [The Snowball]

It’s important to think about the opportunity cost of this hour. On one hand you can check Twitter, read some online news, and reply to a few emails while pretending to finish the memo that is supposed to be the focus of your attention. On the other hand, you can dedicate the time to improving yourself. In the short term, you’re better off with the dopamine laced rush of email and Twitter while multitasking. In the long term, the investment in learning something new and improving yourself goes further.

“I have always wanted to improve what I do,” Munger comments, “even if it reduces my income in any given year. And I always set aside time so I can play my own self-amusement and improvement game.”

Reading is only part of the equation

But reading isn’t enough. Charlie Munger says, “We read a lot. I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.”

Commenting on what it means to have knowledge, in How To Read A Book, Mortimer Adler writes: “The person who says he knows what he thinks but cannot express it usually does not know what he thinks.”

Can you explain what you know to someone else? Try it. Pick an idea you think you have a grasp of and write it out on a sheet of paper as if you were explaining it to someone else. (see The Feynman Technique and here, if you want to improve retention.)

Nature or nurture?

Another way to get smarter, outside of reading, is to start surround yourself with people who are not afraid to challenge your ideas.

 

Source.

News

Do We Give Children Too Many Trophies?

By Brittany MaschalNov 03, 2016

 

I think so, and I might not be alone.

Ashley Merryman, the co-author of “NurtureShock: New Thinking About Children,” argues that participation trophies can send a dangerous message:

If children always receive a trophy — regardless of effort or achievement — we’re teaching kids that losing is so terrible that we can never let it happen. This is a destructive message, because how we react to kids’ failure is just as crucial as celebrating their success. A recent study found if parents thought failure was debilitating, their kids adopted that perspective. If parents believed overcoming failure and mistakes made you stronger, then their children believed it, too.

Thus letting kids lose, or not take home the trophy, isn’t about embarrassing children. It’s about teaching them it can take a long time to get good at something, and that’s all right. Kids need to know they don’t have to win every time. It’s O.K. to lose, to make a mistake. (In a study of Gold Medal Olympians, they said a previous loss was key to their championships.)

It’s through failure and mistakes that we learn the most.

We must focus on process and progress, not results and rewards.

Read more here and join the discussion on The Learning Network!

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Why I’ve Stopped Doing Interviews for Yale: Because the Admissions Situation is Crazypants.

By Brittany MaschalNov 02, 2016

Ben Orlin is right, college admissions is crazypants. The Business Insider article that stemmed from his Twitter post is worth a read.

Rejection by a university ought to feel like getting swiped left on Tinder,” he wrote. “There’s nothing terribly personal about it. The admissions office doesn’t really know you. The university is just looking out for its own interests, and you don’t happen to fit into the picture.

Orlin’s hesitation to be a part of a process that results in near total disappointment for applicants is even more understandable when looking at Ivy League acceptance rates.

For the class of 2020 the admission rate is below 10% for almost all Ivy League schools.

He flips that number around to talk about how many rejection letters Yale doles out.

No matter how sincere their intentions, the Yale admissions team is beholden to grim statistical reality: 94% of students are getting rejection letters,” he wrote.

Orlin suggests that Ivy League admission decisions should be chosen by lottery, and have base requirements that students must meet before applying in the first place. Will it happen? No. But something needs to be done.

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Best Global Universities Rankings

By Brittany MaschalOct 27, 2016

I do not rely much at all on “rankings” but since many families like to take a look at them, I thought I would post the latest from US News. These institutions from the U.S. and around 60 other countries have been ranked based on 12 indicators that measure their academic research performance and their global and regional reputations. Students can use these rankings to explore the higher education options that exist beyond their own countries’ borders and to compare key aspects of schools’ research missions. These are the world’s top 1,000 universities.

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Colleges With Generous Merit Aid

By Brittany MaschalOct 19, 2016

My favorite data site College Kickstart has compiled a list of competitive 4-year institutions that offer merit aid to 20% or more of undergraduates. Merit awards are typically not based on financial need but rather on academic performance and other qualities deemed desirable by the institution. As such, they can make college more affordable for academically gifted students—especially those that are unlikely to qualify for need-based financial aid.

Read more here!

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In Transitional Year, SAT Scores Drop on Old Test

By Brittany MaschalSep 27, 2016

The College Board today announces average scores on the SAT for last year’s high school graduating class — and such announcements are typically a time of debate over the state of education, the value of standardized testing, educational inequities and more. This year’s results are somewhat difficult to analyze, because some students took the old version of the SAT and others the new. The College Board reported declines in the average scores from the class, but those averages are for those who took the old SAT. The ACT also reported declines this year, noting that more students are taking the test. Both the College Board and the ACT are pursuing more contracts with states to require high school seniors to take one test or the other, and that means more test takers may not in fact be prepared for or preparing for college.

In comparing the old SAT’s scores for the class of 2016, compared to 2015:

  • The average for critical reading was 494, down from 497.
  • The average for math was 508, down from 512.
  • The average for writing was 482, down from 487.

Full results are available here, but readers are cautioned by the many caveats about comparisons because of the transitional year.

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2016 Survey of Admissions Directors – Insights

By Brittany MaschalSep 23, 2016

A few important, key insights from the 2016 Inside Higher Ed Survey of College and University Admissions Directors. Read all of the notes on key themes in the full article by Scott Jaschik on Inside Higher Ed here.

A New Application

A year ago, the big buzz at the NACAC annual meeting was the announcement of the Coalition for Access, Affordability and Success, a group of elite public and private colleges that aimed to make the application process more personal, more open to the needs of individual students and colleges and more educational. At the NACAC meeting, coalition members heard plenty of skepticism and vowed to explain in the months ahead just what their effort entailed and why it would help colleges and students.

To judge from the Inside Higher Ed survey, the coalition still has a lot of work to do. Among the findings:

  • Only 29 percent of admissions directors agree or strongly agree that the Common Application needs to have more competition, compared to 49 percent who disagree or strongly disagree. This finding suggests that the Common Application has repaired much of the damage from its technology meltdown two years ago that left many colleges frustrated to be stuck without what they considered viable alternatives to the Common App.
  • Only 23 percent of admissions directors agree or strongly agree that the “digital locker” — an online tool the coalition is creating to let high school students save materials throughout their high school careers — is a good way to prepare for college and the admissions process. Thirty-eight percent disagree or strongly disagree.
  • Only 8 percent of admissions directors agree or strongly agree that the coalition has done a good job of explaining its process to colleges and their applicants — compared to 68 percent who disagree or strongly disagree.
  • And only 15 percent of admissions directors agree or strongly agree that the coalition application would encourage more applications from minority and disadvantaged applicants (a rationale offered by many coalition supporters). Fifty-seven percent disagree or strongly disagree.

Annie Reznik, executive director of the coalition, said she wasn’t surprised by some of the negative reactions, even if she thought they might not reflect the work the group has been doing. “Any new initiative brings hesitancy and skepticism,” she said via email.

And much of the initial public discussion, she said, didn’t focus on efforts by member colleges to increase outreach to disadvantaged students. Numerous efforts have been started in recent months by the group and by its member colleges to increase college awareness in low-income areas and to talk to more students about the importance of college. In time, she said, people will see that the coalition is about these efforts, not just the application.

Much has been misunderstood about the locker, she said, but that is proceeding with positive results. “Many individuals external to the coalition have identified additional, excellent uses for this student space,” she said. “Some ideas include: supporting a portfolio grading system using the locker, encouraging students to save pieces from an English class’s personal writing unit in their lockers, collecting letters of recommendation from service work that could be shared with a teacher or counselor, scanning a copy of a student’s hard-earned compliment card for providing great service at work.”

The New SAT

Since Inside Higher Ed‘s 2015 admissions survey, the College Board has started using a new SAT, designed to align itself more closely than the previous version with a college-preparatory high school curriculum. A key feature of the new SAT was to revamp the widely criticized writing test.

The response of admissions directors to these changes appears underwhelming. And the new writing test is not attracting broad support. Nor is ACT’s writing test.

Admissions Directors on the SAT and ACT Writing Tests

Statement Strongly Agree Agree Neutral Disagree Strongly Disagree
The new SAT version represents a significant improvement over the old version. 2% 12% 65% 13% 9%
I expect more colleges to go test optional in the years ahead. 26% 47% 22% 4% 2%
I consider the writing test on the SAT to be a good measure of student writing ability. 0% 19% 44% 21% 16%
I consider the writing test on the ACT to be a good measure of student writing ability. 2% 18% 44% 22% 15%

The expectation that more colleges will go test optional may be of concern to both the College Board and the ACT, although it is important to note that most applicants to most test-optional colleges continue to submit scores.

But the test-optional numbers are growing. Just this week, the National Center for Fair and Open Testing, a critic of standardized testing, released data showing that half of the colleges on U.S. News & World Report‘s list of the top 100 liberal arts colleges are test optional.

Also this week, ACT released a report questioning the rationale behind colleges going test optional. The report says that these policies are based on false assumptions and that test scores add to the information admissions officers need.

Race and Admissions

The Supreme Court ruled in June that colleges have the right to consider race and ethnicity in admissions (and presumably also in financial aid) in certain circumstances. The ruling came in a challenge to the policies of the University of Texas at Austin in litigation that had been going on for years. The Supreme Court ruling cited the research Texas did over the years to show why it needed to consider race in admissions — and the decision said that colleges need to have conducted such studies to consider race.

The survey results suggest that relatively few colleges have done or plan to do such studies. This may be because many colleges do not consider race in admissions (and aren’t competitive in admissions). But this could make some colleges vulnerable to lawsuits.

Nearly three-fourths (73 percent) of admissions directors said they believed the Supreme Court ruling would preserve the legal right to consider race and ethnicity for the foreseeable future.

But only 13 percent of colleges said they conducted studies similar to those the Supreme Court cited as making the Texas approach legal. And only 24 percent said they planned to either start or continue such studies.

Only 4 percent said they planned to change admissions practices in light of the court’s ruling.

Critics of affirmative action, during the months before the Supreme Court ruled, repeatedly argued that colleges’ current practices have the impact of making it more difficult for Asian-American applicants to win admission.

This year’s survey asked the admissions directors two questions related to that argument. A significant minority indicated that they believe Asian-American applicants are held to a higher standard generally, and that this is the case at their institutions.

Admissions Directors on Asian-American Applicants

Statement Public % Yes Private % Yes
Do you believe that some colleges are holding Asian-American applicants to higher standards? 39% 42%
At your college, do Asian-American applicants who are admitted generally have higher grades and test scores than other applicants? 41% 30%
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