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Pathways Advisory Group, Inc.
Evon Mendrin, CFP® |
How much of what you read today will you still care about a
year from now?
I was lucky enough to stumble upon a blog post by Morgan
Housel of Collaborative Fund that proposed that very question.
In the post, “
Expiring vs. Long-Term Knowledge,” he challenges us to consider: what is the quality of all the
stuff we read, and how much does it
really benefit us?
With access to the internet, television, and radio, we are
flooded with information. Media content is chopped down into bite-sized
portions so we can consume more and more. Newsfeeds constantly update us on
every bit of information, on any topic we want. How much of that content will
you care about years from now?
Citing an observation by MIT’s endowment fund, Housel
describes two types of knowledge: expiring knowledge, which has no long-term
value, and long-term knowledge, which is valuable over time. He lays out the
differences:
“Expiring
knowledge catches more attention than it should, for two reasons. One, there’s
a lot of it, eager to buzz our short attention spans. Two, we chase it down,
anxious to squeeze out insight before it loses relevance.
Long-term
knowledge is harder to notice because it’s buried in books rather than blasted
in headlines. But its benefit is huge. It’s not just that long-term knowledge
rarely expires, letting you accumulate it over time. It’s that compounds over
time. Expiring knowledge tells you what happened; long-term knowledge tells you
why something happened and is likely to happen again. That “why” can translate
and interact with stuff you know about other topics, which is where the
compounding comes in.”
There’s an abundance of expiring knowledge! I count four
applications on my cell phone alone dedicated to giving me short-term, mostly
useless content. What does this information really teach that I can use far
into the future? Sadly, not much.
The advice and knowledge within these books are still as
relevant today as they were when first published – and those are on business
and finance alone! Not to mention subjects such as history, construction,
engineering, automobiles, music, faith, art, and science.
Many of us may not remember the newspaper articles we read
in 2011, but – like Housel, we may remember details of great books we read in
2011 and how it affected our thinking.
Even some of the greatest entrepreneurs of our time
attribute their success to reading good content. Warren Buffett once remarked,
“Read 500 pages like this every day. That’s how knowledge works. It builds up,
like compound interest. All of you can do it, but I guarantee not many of you
will do it.”
As Housel writes, it’s not just that long-term knowledge
rarely expires, but that it compounds!
It begins to spread into other areas in your life! Skills you learn from one
piece of writing can carry over to other hobbies or work. Long-term knowledge gives you the deeper why’s, what’s and
how’s. It helps to sort through the
expiring stuff, to know what to pay
attention to and what to ignore. In the
same way, relying on short-term knowledge for decision making can compound in
your life as well.
Investing is a great example – the hottest market headlines
are always fighting for attention, and yesterday’s headlines are forgotten.
Even data from companies – such as quarterly earnings, performance, expenses,
and cash flow – expire in short-term value once the next quarter comes.
These
bits of information compete against long-term research and discipline. How easy
it is to make quick, emotional decisions from an article we’ve read –
forgetting about the long-term plans we’ve established.
So, what are we to do? Housel writes:
“I try to ask when I’m reading:
Will I care about this a year from now? Ten years from now? Eighty years from
now?
It’s fine if the answer is ‘no,’
even a lot of the time. But if you’re honest with yourself you may begin to
steer toward the enduring bits of knowledge.”
As for me, I think I’ll go ahead and blow the dust off the
stack of books I’ve been neglecting. News on the latest Donald Trump tweets
will have to wait.
-Written by Evon Mendrin from our June 2017 Client Newsletter Article.
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