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10 Habits of Mind for Investors

Posted By __Barry Ritholtz__ On September 11, 2010 @ 1:00 pm In __Apprenticed Investor,Investing,Mathematics,Psychology,Rules__ | __Comments Disabled__

This comes from a math blog by a teacher called WITHOUT GEOMETRY, LIFE IS POINTLESS ^{[1]} (get it?).

There is a recent post I wanted to reference — Habits of Mind ^{[2]} — 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.

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URL to article: **http://www.ritholtz.com/blog/2010/09/10-habits-of-mind-for-investors/**

URLs in this post:

[1] WITHOUT GEOMETRY, LIFE IS POINTLESS: **http://mathteacherorstudent.blogspot.com**

[2] Habits of Mind: **http://mathteacherorstudent.blogspot.com/2010/09/habits-of-mind.html**

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