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.
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.