10,000 Hours - Success = Talent + Timing + Practise

I picked up a book at the airport the other day, called "Outliers: The Story of Success" by Malcolm Gladwell. It's very readable, and I ripped through the first 90 pages on my flight. (Amazing with a cranky tired 8yo next to me. Thank goodness for in-flight Foxtel. ;))

In those pages, he suggests that success is a function of innate talent, preparedness, and what some might call "luck" (specifically, timing).

Innate talent is pretty self-explanatory, and by "luck", he means "being in the right place at the right time". He gives examples that a huge proportion of the big Silicon Valley names were born in 1954-55 (Steve Jobs, Bill Gates, Bill Joy, and many other examples are given), and this made them exactly the right age to take advantage of the development of computer time-sharing, and enabled them to gain a high level of programming experience at a young age, which was previously impossible.

He also demonstrates that a huge proportion of successful ice hockey players are born in January, February, and March. Why? Because they start streaming ice hockey players very young, around 8 years old. At that age, the 11 months difference between a January and a December birth make the January-born child stronger and more mature as a player. So they get put in a higher league, get more coaching, play against better players, practise more, etc, and the difference becomes entrenched to such an extent that even amongst adults, ice hockey players are disproportionately born in the first 3 months of the year.

Yet another example of timing: Carnegie, Rockerfeller, Marshall Field, JP Morgan... all born in the 1830s, perfectly timed to take advantage of the transformation of the American economy in the 1860s-70s (industrialisation and the rise of Wall St).

All of these examples bring us to the third element: "preparedness". Gladwell gives examples of programmers, musicians, and sportsman to show that there's a pretty consistent "rule-of-thumb" that it takes 10,000 hours of practise at something for your brain and body to become highly skilled at that task. If you look at musicians who've been playing a long time, the very best ones have nearly all done more than 10,000 hours of practise, and few of the "good but not brilliant" ones have hit this mark. Gates and his peers were the first people to have the opportunity to spend a lot of time programming (and he did!). Those ice hockey players born in January practise a lot more once they're streamed into a higher league, than their December-born colleagues.

So I guess his book is amplifying on the old truism "practise makes perfect", but it does so in an entertaining and informative manner, and incorporates innate talent and luck/timing into the formula.

I was thinking how these principles would apply to property investing.

The luck component is that some people start their property investing journey at a time when property is just about to boom. Whilst a boom is somewhat predictable, but I'd be willing to bet that the vast majority who began investing in, say, 1998, didn't consciously time their entry to coincide with the onset of a huge boom; most of them were, I'd bet, "lucky" with regards to timing.

I'm not sure that we can apply "hours" to our example, but I suspect that the more deals you analyse, the more hours you spend researching, and the more property-related reading that you do, the better your ability is to spot that "diamond in the rough". (You know, that deal that you find, which later on everybody says was "good luck". ;))

It strikes me that some of the deals which I've seen case-studied and thought "wow, that was an awesome deal!", didn't stand out as an awesome deal at the time. At the time, they looked a lot like the properties that surrounded them, in terms of price, size, etc. It turned out that the thing that differentiates an average deal from a spectacular deal is to see the potential that's peculiar to that property, and it takes practise to see that potential. It's the experience in analysing deals, knowing the market, and recognising the "hidden value" in a large roller door, the depreciation in the plant, the potential future usage, etc, that allows somebody to spot those deals with the potential to be spectacular.

OK, I'm off to analyse some more deals... ;) I'd love to hear your thoughts on these principles, and recommend the book to you.
Practise makes permanent

Thanks for sharing ozperp.

On the LUCK theme (Labour Under Correct Knowledge), the "practise" however many hours that may involve, is what leads us to be prepared.

To that end, LUCK is when preparedness meets opportunity. ;) The opportunities are all around, it depends on the observer. To get better "eyes" one needs to be in the game and analysing "deals", feet on streets, fingers on keyboards and always looking for the twists. That comes with practise and experience.

In my case, I definitely see things thru different eyes than my original "green perspective" did when I first started playing this game. Practise (experience of successes :) and failures :( ) at work, again.

The "practise makes perfect" axiom, needs a caveat IMHO.

Practise makes permanent. So practising the right things makes perfect. Perhaps, "perfect practise makes perfect." And, on that score, perfection may be elusive anyway.

Best we strive at being excellent and nurturing our "opportunity eyes" by looking, analysing and inspecting deals even when we are not quite ready for the next purchase. In that manner, we are enhancing our preparedness for when the "luck"comes our way. :D

Great post Tracey, thanks again for sharing.
Yep, absolutely what you both just discussed.

Even though we are hardwired for a certain type/temperament brain function we still can perfect by practise and strengthen (that which does not come naturally) by practise.

My strengths and plus's toward investing have been not only an asset but fine tuned through the act of deals and investing.

The things I did not have particularly great strength in is.. (all the detail of figures and a million other things) becomes better the more I do it.

My great strength of research and learning, knowing places, people, networking -all of that is made even better because now it is circumstance appropriate, not just willy nilly gather in one and all ..

Andrew Koob in The Root of Thought discusses neuroscience along these aspects.

The once little realised applications of the astrocytes (type of glia)...are now known to be responsible for the creative and imaginative existence as human beings.

So the 4 temperaments, although they maybe born with hardwiring of cerebral back left, front left, right front and right back...have opportunity to strengthen and practise at what they do best, but also to practise that which is not their preferred, natural strength... It is the most fascinating thing!!!

I am not the same property investor I was 5 years ago, I'm not as quick as some, but it is an incredible freaking journey so far. I cannot believe somedays the things I practise, the things I look for, the things I do.

It is a hoot.
OK, I've whipped through another approximately one-third of the book, where he focuses primarily on what I'd call a "sense of entitlement", in the positive sense of the word, but is related to emotional intelligence, and socio-economic background.

He looked at a sample of people with genius IQs (and therefore presumably ample "innate talent"), and asked what differentiated whether they'd have a successful life.

An oft-cited factor in such studies is socio-economic status when you were growing up. He tried to probe a bit deeper and figure out what specifically about having a higher SES as a child helps you. Partly it's because you're more likely to have books at home, and parents who are interested in you as an individual and ensure you participate in appropriate extra-curricular activities (which give you skills and a sense of achievement)... but a lot of it is associated with a sense of entitlement - in the positive sense of the word.

What he means is that you expect the world to operate in a certain way, and, more significantly, you expect that when those rules are violated, there are things that you can do about it. You don't feel powerless, but that you're entitled to expect that something will be done to fix it.

The example he gave is that if a poor kid fails a test because the teacher marked him unjustly, his parents are likely to say "Well, life's not fair mate, get used to it. You can't beat authority!" or something like that. The rich kid is more likely to have their parents ask "Where did the teacher go wrong? Did you ask them about it?", and feel entitled to question it. They're more likely to both question authority, and have the communication and emotional skills to persuade the teacher that they should have received a higher mark. Basically, low SES kids are often having that "chip on their shoulder" constructed from early childhood. :(

Such a fascinating book!