This comes from a math blog by a teacher called WITHOUT GEOMETRY, LIFE IS POINTLESS (get it?).

There is a recent post I wanted to reference — Habits of Mind — that was originally written for math students. With a few small changes, it can be readily adapted to thinking about markets, risk, investing, etc.

Have a go at it:

Habits of mind

1. Pattern Sniff
. . .A. On the lookout for patterns
. . .B. On the lookout for shortcuts

2. Experiment, Guess and Conjecture
. . .A. Can begin to work on a problem independently
. . .B. Estimates
. . .C. Conjectures
. . .D. Healthy skepticism of experimental results
. . .E. Determines lower and upper bounds
. . .F. Looks at small or large cases to find and test conjectures
. . .G. Is thoughtful and purposeful about which case(s) to explore
. . .H. Keeps all but one variable fixed
. . .I. Varies parameters in regular and useful ways
. . .J. Works backwards (guesses at a solution and see if it makes sense)

3. Organize and Simplify
. . .A. Records results in a useful way
. . .B. Process, solutions and answers are detailed and easy to follow
. . .C. Looks at information about the problem or solution in different ways
. . .D. Determine whether the problem can be broken up into simpler pieces
. . .E. Considers the form of data (deciding when, e.g., 1+2 is more helpful than 3)
. . .F. Uses parity and other methods to simplify and classify cases

4. Describe
. . .A. Verbal/visual articulation of thoughts, results, conjectures, arguments, etc.
. . .B. Written articulation of arguments, process, proofs, questions, opinions, etc.
. . .C. Can explain both how and why
. . .D. Creates precise problems
. . .E. Invents notation and language when helpful
. . .F. Ensures that this invented notation and language is precise

5. Tinker and Invent
. . .A. Creates variations
. . .B. Looks at simpler examples when necessary (change variables to numbers, change values, reduce or increase the number of conditions, etc)
. . .C. Looks at more complicated examples when necessary
. . .D. Creates extensions and generalizations
. . .E. Creates algorithms for doing things
. . .F. Looks at statements that are generally false to see when they are true
. . .G. Creates and alters rules of a game
. . .H. Creates axioms for a mathematical structure
. . .I. Invents new mathematical systems that are innovative, but not arbitrary

6. Visualize
. . .A. Uses pictures to describe and solve problems
. . .B. Uses manipulatives to describe and solve problems
. . .C. Reasons about shapes
. . .D. Visualizes data
. . .E. Looks for symmetry
. . .F. Visualizes relationships (using tools such as Venn diagrams and graphs)
. . .G. Vizualizes processes (using tools such as graphic organizers)
. . .H. Visualizes changes
. . .I. Visualizes calculations (such as doing arithmetic mentally)

7. Strategize, Reason and Prove
. . .A. Moves from data driven conjectures to theory based conjectures
. . .B. Tests conjectures using thoughtful cases
. . .C. Proves conjectures using reasoning
. . .E. Looks for mistakes or holes in proofs
. . .F. Uses indirect reasoning or a counter-example (Park School)
. . .E. Uses inductive proof

8. Connect
. . .A. Articulates how different skills and concepts are related
. . .B. Applies old skills and concepts to new material
. . .C. Describes problems and solutions using multiple representations
. . .D. Finds and exploits similarities between problems (invariants, isomorphisms)

9. Listen and Collaborate
. . .A. Respectful to others when they are talking
. . .B. Asks for clarification when necessary
. . .C. Challenges others in a respectful way when there is disagreement
. . .D. Participates
. . .E. Ensures that everyone else has the chance to participate
. . .F. Willing to ask questions when needed
. . .G. Willing to help others when needed
. . .H. Shares work in an equitable way
. . .I. Gives others the opportunity to have “aha” moments

10. Contextualize, Reflect and Persevere
. . .A. Determines givens
. . .B. Eliminates unimportant information
. . .C. Makes and articulates reasonable assumptions
. . .D. Determines if answer is reasonable by looking at units, magnitudes, shape, limiting cases, etc.
. . .E. Determines if there are additional or easier explanations
. . .F. Continuously reflects on process
. . .G. Works on one problem for greater and greater lengths of time
. . .H. Spends more and more time stuck without giving up

While the application to mathematics is very obvious, the application to investing is a bit less so. If you spend some time with this, and will see it is a very helpful set of suggestions.

Category: Apprenticed Investor, Investing, Mathematics, Psychology, Rules

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

6 Responses to “10 Habits of Mind for Investors”

  1. PrahaPartizan says:

    Looking at the last several lines in the list, it reminds me of a saying we bandied about in business regarding the two types of “experts” one found. There were the experts who learned more and more about less and less, until they knew everything about nothing. Then, there were the experts who knew less and less about more and more, until they knew nothing about everything. The former was usually applied to engineering and manufacturing staffs, while sales/marketing and finance usually got hit with the latter. It also helps to understand the utility of consultants.

  2. dead hobo says:

    I guess when you’re a wall street pro, all that shit comes naturally. The only couple of things missing from that quite detailed list were:

    1 A base of unequivocal and total knowledge to work from

    2 No confirmation bias

    3 you have to be smarter than shit and always right

    4 You have to be able to actually analyze your ideas and want to and actually try, as opposed to having knee jerk reactions, instant sales pitches, accepting what you boss tells you and passing it along just to keep your job, not be a sociopath who just sees people as objects to pillage, and not be stupid enough to believe what you hear on CNBC as fact.

    Yeah, investing is a science and an expression of truth. So are magic charts, pundits who are naturally smarter than the rest, investment advisers who shun personal wealth in order to pass along what they know in order to make the great unwashed better off, analysts who almost always have their expectations beat to hell (Why do they always get it soooo wrong and always in such a way that you MUST go out and give your savings to an investment adviser NOW because things are ready to take off!!), and, of course, you can feel safe because the SEC and DOJ would strike them dead if they were lying.

    Thanks for the simple rules. Fortunately, I already know them and always practice them all with intelligence, purity, introspection, and precision. Too bad you left the really good ones out. They’re the ones you really make money with. These are just the ‘public’ sucker rules that are generally tossed about when the rubes want to know how to make money in the markets. If you let out the real ones, it would be like Tom Edison’s shaggy dog. I understand your reluctance to spill the rest.

  3. drewburn says:

    Other than the stick-to-it stuff and the idea-bouncing, it is problem solving and the scientific method. I think it fits investing perfectly, except perhaps the stick-t0-it stuff. If you have a loser, ere on the side of dumping it sooner, rather than later. Speed/timing is an issue in investing, whereas a mathmatician can spend months deciding whether he/she was right or wrong.

  4. engineerd1 says:

    Yes, this is a good description of how successful problem solvers proceed, both in mathematics and science. It sort of points to a truth that the discovery process isn’t linear, solely logical, or exclusively “fact-based”. Investing is trying to anticipate a complex, adaptive system, which is generally the sort of problem we try to avoid in science, because such systems can’t be solved by classical methods. The avoidance usually takes the form of making simplifying assumptions, much the way economists do when they hypothesize equilibrium, rational agents etc…. This guy sounds like a good teacher…. the sort that is drowned out by the union thugs and professional morons that run education….and form one leg of the stool that supports the evil party.

  5. this is a nice list/taxonomy..
    http://www.thefreedictionary.com/taxonomy

    as an aside, I tried to think of how many people I knew that could, actually, sink their teeth into this..

    then, I remembered that most have a hard, enough, time trying to ‘get’ this, truncated, version..
    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=OODA+Loop

    bonus link: http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Eliyahu+Goldratt+Theory+of+Constraints

  6. NormanB says:

    69 rules!!! 59 too many. Therefore, at best useless; at worst, counter-effective.