Compound Learning
Prudence and Zara are twins.
They were raised in the same house, attended the same university, and started their first jobs on the same day.
At that moment they’d both built up 100 knowledge points.
Prudence joins a large, stable, traditional company that provides slow and steady progression within a narrow specialisation. She does her job diligently, but she waits to be taught through infrequent training sessions.
Prudence steadily increases her knowledge by 1% each year.
Zara joins a dynamic startup in a role that exposes her to new ideas and roles. She actively seeks out new information and feedback and outside of work she also enjoys learning about creative writing, psychology, and management techniques.
Zara with her more active pursuit of knowledge learns at 10% per year.
After one year, the gap is barely noticeable with Zara nudging ahead to 110 knowledge points compared to Prudence’s 101.
But over a longer period of time the gains compound, and after 25 years:
Prudence has now reached 128 knowledge points.
But Zara is out of sight with 1,083 knowledge points.
The twins were once equally capable, but a consistent difference in annual improvement compounds to a huge advantage by the time they would expect to be in leadership roles.
“An investment in knowledge pays the best interest." - Benjamin Franklin
Compound Gains
Compound gains is a financial term for the simple idea that if you invest wisely, and leave it alone, it results in profit.
Time x Interest Rate = Compound Gains
It’s the core business strategy of Warren Buffet, who has become one of the world’s wealthiest people by doing just that.
He calls it ‘The Snowball Effect’ and says, “Life is like a snowball. The important thing is finding wet snow and a really long hill.”
Time is a key variable because as the interest compounds on top of the previous interest the benefits shoot up at the end.
As he says, “No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.”
Interest Rate requires us to seek the right snow (a great investment opportunity).
This idea also works in life and careers where the investment opportunity is our ability to learn effectively.
Buffet advises people to, “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.”
His business partner, Charlie Munger describes the value, “I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.”
Time x Learning Rate = Compound Gains
“The most important investment you can make is in yourself.” - Warren Buffett
Deliberate Practice
The psychologist Karl Anders Ericsson spent decades trying to understand what it takes to become excellent at something difficult.
He showed that world-class performance isn't a result of natural talent, it's due to a rigorous type of training he called ‘deliberate practice’.
Deliberate practice involves:
Pushing beyond our comfort zone to attempt things that are just beyond our current abilities.
Setting well-defined goals where you don’t just perform the task you look to improve a specific niche skill.
Gathering immediate feedback that tells you what you did wrong the moment you do it.
Using our full concentration in short intense sessions.
Prudence and Zara both worked for the same length of time, the difference was that Zara learned through deliberate practice, whereas Prudence just practiced.
In his 2008 bestseller Outliers, Malcolm Gladwell cited Ericsson's study when he claimed it takes 10,000 hours of practice to master any complex skill.
But that’s nonsense.
I’ve driven for 10,000 hours and I’m not being invited to take part in this weekend’s F1 race.
It’s not just about practicing, because not all practice is the same.
Once people pass their driving test their driving ability plateaus.
You can drive for 25 years and still not end up a much better driver because you’re just repeating the same year 25 times.
And in some circumstances this is fine - who really needs to be an elite driver?
But when you really want to excel at something and push past the plateau you have to be deliberate and learn with conscious effort.
“If you're not growing anywhere, you’re not going anywhere.” - The New Zealand All Blacks
Type II Fun
The good news is that learning through deliberate practice is fun.
Well Type II Fun.
The Fun Scale was created by the geology professor and mountaineer Rainer Newberry and it has become a standard phrase in adventure sports.
Type I Fun is fun to do, not challenging, and fun to remember (like eating a danish pastry).
Type II Fun is uncomfortable to do, challenging, and fun to remember because it’s deeply rewarding and enjoyable in retrospect (like climbing a mountain).
[Type III Fun is uncomfortable to do, challenging and miserable to remember (like being shipwrecked). You can give this one a miss.]
Deliberate practice is the ultimate Type II Fun.
It’s hard to do because growth is the process of breaking and rebuilding.
Prudence is cruising along with occasional Type I Fun, but Zara is tackling Type II Fun.
"Wise people learn when they can; fools learn when they must." - Duke of Wellington
Compound Careers
Throughout our childhood and formal education the process of learning is the responsibility of parents, teachers and lecturers who lead us along a largely predefined path.
Some people, who didn't enjoy the process of schooling, or the style of teaching, or the array of rules that were imposed on them, rebel the moment they have control and vow never to learn again.
Other people, who may have enjoyed and performed well in formal education, but never had to think about how learning actually worked, are released into the world, trained to expect others to teach them.
For either of these groups their learning slows dramatically at this point in their lives.
They become stagnant.
They can work for years, like Prudence, gaining a lot of experience and yet not dramatically progressing.
It’s a frustrating experience for them and the people who work with them.
They don’t understand the compound career game that is being played out all around them
Then there is the other group, like Zara, who either naturally, or through experience, discover the benefits of continued learning.
They understand the rules of the game.
The best explanation of how careers function today comes from Andrew S. Grove, the legendary former CEO of Intel in his book High Output Management.
He argues that the biggest mistake people can make is believing our career belongs to our employer.
In Grove's view, you are not a staff member; you are your own start-up.
“As a general rule, you have to accept that no matter where you work, you are not an employee - you are in a business with one employee: yourself. You are in competition with millions of similar businesses... if you want to work and continue to work, you must continually dedicate yourself to retaining your individual competitive advantage.”
Compound learning requires a fundamental shift in ownership.
When we view ourselves as our own CEO the responsibility for growth shifts from ‘the management’ to our own desk.
We stop waiting for a training invite and start seeking out the ‘wet snow’.
Grove warned that in a globalised world, plateauing isn’t just stagnation, it’s a risk.
“Nobody owes you a career. You own it as a sole proprietor. You must compete with millions of individuals every day, and every day you must enhance your value, hone your competitive advantage, learn, adapt… The key task is to manage your career so that you do not become a casualty.”
And even more so in the age of AI, we have to continuously learn, because if AI also starts at 100 points of baseline knowledge, only the compounders will stay ahead of the curve.
"The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn." - Alvin Toffler
Ericsson, K.A., Krampe, R., and Tesch-Romer, C., “The Role of Deliberate Practice in the Acquisition of Expert Performance”, Psychological Review (2003)
