Sunday, June 03, 2012

Tales of a Self-Directed Childhood and Adolescence

Self-directed individuals often learn to follow their own lead at a very early age. With such a head start, many of them become quite successful, and sometimes drop out of traditional educational programs so as to get on with their lives.

The excerpt below comes from "Principles" by Ray Dalio (via Forward Base B), the founder of a $120 billion hedge fund:
In order to be motivated, I needed to work for what I wanted, not for what other people wanted me todo. And in order to be successful, I needed to figure out for myself how to get what I wanted, not remember the facts I was being told to remember.

One thing I wanted was spending money. So I had a newspaper route, I mowed lawns, I shoveled thesnow off driveways, I washed dishes in a restaurant, and, starting when I was 12 years old, I caddied.

It was the 1960s. At the time the stock market was booming and everyone was talking about it, especially the people I caddied for. So I started to invest. The first stock I bought was a company called Northeast Airlines, and the only reason I bought it was that it was the only company I had heard of that was tradingfor less than $5 per share, so I could buy more shares, which I figured was a good thing. It went up a lot.It was about to go broke but another company acquired it, so it tripled. I made money because I waslucky, though I didn’t see it that way then. I figured that this game was easy. After all, with thousands ofcompanies listed in the newspaper, how difficult could it be to find at least one that would go up? Bycomparison to my other jobs, this way of making money seemed much more fun, a lot easier, and muchmore lucrative. Of course, it didn’t take me long to lose money in the markets and learn about how difficultit is to be right and the costs of being wrong.

So what I really wanted to do now was beat the market. I just had to figure out how to do it.

The pursuit of this goal taught me:

1) It isn't easy for me to be confident that my opinions are right. In the markets, you can do ahuge amount of work and still be wrong.

2) Bad opinions can be very costly. Most people come up with opinions and there’s no cost tothem. Not so in the market. This is why I have learned to be cautious. No matter how hard I work,I really can’t be sure.

3) The consensus is often wrong, so I have to be an independent thinker. To make any money,you have to be right when they’re wrong.So …...

1) I worked for what I wanted, not for what others wanted me to do. For that reason, I never feltthat I had to do anything. All the work I ever did was just what I needed to do to get what Iwanted. Since I always had the prerogative to not strive for what I wanted, I never felt forced to doanything....

2) I came up with the best independent opinions I could muster to get what I wanted. Forexample, when I wanted to make money in the markets, I knew that I had to learn aboutcompanies to assess the attractiveness of their stocks. At the time, Fortune magazine had a littletear-out coupon that you could mail in to get the annual reports of any companies on the Fortune500, for free. So I ordered all the annual reports and worked my way through the most interestingones and formed opinions5...

3) I stress-tested my opinions by having the smartest people I could find challenge them soI could find out where I was wrong.about which companies were exciting. 6 ...

4) I remained wary about being overconfident, and I figured out how to effectively deal withmy not knowing. I dealt with my not knowing by either continuing to gather information until Ireached the point that I could be confident or by eliminating my exposure to the risks of notknowing.

I never cared much about others’ conclusions—only forthe reasoning that led to these conclusions. That reasoning had to make sense to me. Throughthis process, I improved my chances of being right, and I learned a lot from a lot of great people. 7 ...

5) I wrestled with my realities, reflected on the consequences of my decisions, and learned and improved from this process.

By doing these things, I learned how important and how liberating it is to think for myself. _Principles by Ray Dalio (PDF)

In other words, Ray Dalio became self aware and self-directed at an earlier age than is generally the case for modern youngsters. But his story is not that unusual in terms of others who began to blaze their own trails at an early age.

It is true that in the United States, before the public school system became such a dominant part of the lives of children and adolescents, large numbers of young people learned to make their own way -- via self-study, apprenticeship, trial and error, rites of passage, sheer willpower and persistence, and blind luck. But Ray Dalio and many other successful people, acquired self-direction despite society's expectation that children should be put in their place by the educational and societal powers that be.

That is the challenge for concerned parents and significant others in the lives of children, who would like to see these children grow to be self-directed, independent, and very dangerous to the status quo of psychological neoteny and lifelong incompetence. What sort of environment should these concerned guardians and mentors create for children, in order to set them on the path to competent independence?

More on this later.

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