Managed to read very good article
on True Knowledge in www.farnamstreet.com.
The blog writer has explained the
importance of First Principles Thinking. To explain it better he gave an
exceptionally good example which rightly hits the nail on the head.
“Another way to think about this distinction comes from another friend,
Tim Urban. He says[3] it’s like the difference between the
cook and the chef. While these terms are often used interchangeably, there is
an important nuance. The chef is a trailblazer, the person who invents recipes.
He knows the raw ingredients and how to combine them. The cook, who reasons by
analogy, uses a recipe. He creates something, perhaps with slight variations,
that’s already been created.
The difference between reasoning by
first principles and reasoning by analogy is like the difference between being
a chef and being a cook. If the cook lost the recipe, he’d be screwed. The
chef, on the other hand, understands the flavor profiles and combinations at
such a fundamental level that he doesn’t even use a recipe. He has real knowledge
as opposed to know-how”
This one is especially good for
investing people who often complain today that there is sea of information
floating around:
“A lot of professional investors read Farnam Street. When I meet these
people and ask how they consume information, they usually fall into one of two
categories. The differences between the two apply to all of us. The first type
of investor says there is too much information to consume. They spend their
days reading every press release, article, and blogger commenting on a position
they hold. They wonder what they are missing. The second type of investor
realizes that reading everything is unsustainable and stressful and makes them
prone to overvaluing information they’ve spent a great amount of time
consuming. These investors, instead, seek to understand the variables that will
affect their investments. While there might be hundreds, there are usually
three to five variables that will really move the needle. The investors don’t
have to read everything; they just pay attention to these variables.”
The article is worth reading. The
link is provided below:
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