Why is it that so many investors today just aren't as good as they were in the old days?
It's because people today are in too much of a hurry, have too much information available too easily, and don't have to do the legwork of the past -- that's why.
Now, don't get me wrong. The Internet is a truly wonderful thing -- possibly the best invention that has happened in my lifetime. It provides a great deal of information for free to us all, accessible instantaneously with next to no effort. But that's part of the problem too -- with so much information so easily available, many people fail to take the time to properly absorb it and fully understand it, and do not appreciate its value.
In these Twittering days of instant online gratification, people confuse data with information, information with knowledge, and knowledge with understanding.
They set up all sorts of social media accounts, fill in their personal profiles telling us how many cats they've got and what they like for breakfast, register with The Motley Fool, sign up with an online broker, spam all sorts of forums asking what's the best share to buy, and sit there, anxiously waiting for Tweets, with their mouse-finger hovering over the "Buy" button.
When I were a lad
I remember back when I started investing, there was no Internet. I used to buy the Financial Times every weekend and scour its pages for news of companies that had reported that week. I'd buy Investors Chronicle every week too, and do the same thing with that.
I kept sending off those forms to request printed copies of company reports, and when the reports arrived I took them to bed and read them from cover to cover before dropping off to sleep (though they were often very effective at hastening that event). Every week, I'd take the headline figures from all of that week's reports, pick out the companies I might be interested in, and add them to my own spreadsheets.
By the time my first year was up, I'd covered, at least in passing, the interim and full-year results of every company that was listed on the UK stock market -- and I had my own records of the ones I was most interested in. And after 2 or 3 years had passed, I was beginning to understand enough about the companies I was following to even consider buying some shares. Of course, by then my shelves were groaning under the weight of my copies of the FT and IC, and all of the annual reports I'd collected.
But you know what? Because I'd had to put so much personal effort into accumulating my data, I valued it highly. I'd taken raw data, accumulated and processed it, and had turned it into information. I'd absorbed it all carefully, turning information into knowledge. And after those first few years, the light bulbs were switching on -- I was turning knowledge into understanding. When it came to events in the history of the companies I was interested in, I knew and understood them, because in a way I'd been there when they happened.
New data, old learning
Now, I'm not suggesting that the old ways were all better, and that we should disconnect ourselves from the Internet. It would plainly be stupid to, say, personally accumulate a 5-year summary of results from BT (LSE: BT-A) in real time, when it can be had instantly online -- and equally daft to patiently collect the printed quarterly reports four times a year when they're also there at the click of a button.
But we do still need to apply the same good old-fashioned brainwork, and steer clear of the common trap that so many people fall into when they mistake speedy access to data for speedy understanding.
Although the Internet has grown exponentially and we can get hold of such a huge amount of stuff in such a short time, our brains haven't -- they're still pretty much unchanged from the ones that occupied the skulls of those first modern humans in Africa more than 100,000 years ago, those early explorers in their sailing ships with their compasses and sextants, and the people of recent decades who brought us the magic of the Internet.
Take your time
The need to take enough time to learn properly and to understand what we're doing hasn't gone away, and we still need to develop the same skills as investors have done throughout history. (And, in fact, I think we need a new skill that they didn't -- a better ability, when looking at the bombardment of data we're now faced with, to extract the signal from the noise).
So don't be hasty. Accumulate your data, sift it for the information you really need, and take the time to fully understand it. Hopefully you'll be investing for many decades -- so that big "Buy" button on your online broker's site can easily wait.