The Online Investing AI Blog

An interesting debate is percolating about the new book, “Free,”  by Chris Anderson.

I haven’t read it (yet), but apparently Seth Godin and Malcolm Gladwell have. Anderson’s book says that as computing power increases and its cost decreases, information products are essentially going to be free.

In a New Yorker article, Gladwell disagrees with the theory. He, pretty adroitly, brings up reasons why Anderson’s theory will flop: from the inability for YouTube to turn a profit to the failure for nuclear energy to produce super cheap power.

In response, Godin declares a mighty, “So what?” Whatever the price of nuclear power in China is, Godin points out, the digital world is getting cheaper, faster, and more powerful. Whether or not there’s a business model to support it, the info-Singularity approacheth. Godin counters:

The first argument that makes no sense is, “should we want free to be the future?”

Who cares if we want it? It is.

The second argument that makes no sense is, “how will this new business model support the world as we know it today?”

Who cares if it does? It is. It’s happening. The world will change around it, because the world has no choice. I’m sorry if that’s inconvenient, but it’s true.

There’s a similar debate on Automated Trading.

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Right now, I’m reading “Outliers: The Story of Success” by Malcolm Gladwell.

As always, Gladwell’s book is full of counter-intuitive beauty. In this book he is able to pierce the skin of common wisdom about success. For instance, there’s a common meme that there are some people who are just destined for success.

Take the Beatles for example.

And while Gladwell points out that John Lennon, Paul McCartney, George Harrison, and Ringo Starr had lots of natural talent. It was practice that made them great. Lennon, McCartney, and Harrison, for example, were given an opportunity to play strip clubs in Hamburg, Germany, where they had to play eight hours a day, seven days a week.

They were also introduced to different styles of music, too.

Consequently, they were a much better band when they came back than when they left.

So how much practice is necessary? Gladwell thinks the magic number is about 10,000 hours based on a study of classical musicians.

What does this mean for traders and investors?

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Malcolm Gladwell, author of Blink and The Tipping Point, recently wrote a new book called Outliers. This book is pretty interesting, because of Malcolm’s easy-to-read storytelling style. However, I don’t agree with all of his ideas.

One of the best and most powerful ideas in the book is that success takes a lot of practice. Specifically, it takes 10,000 hours! Most people give up after a few hours, and many before they even begin. But Malcolm says, if you really want to get to be outstanding at something, you have to do it for 10,000 hours.

The interesting thing about this concept is that it applies in areas where people think that talent is everything. For example, consider professional violin players. Malcolm says that the ones who play in the famous orchestras are there because they have practiced for 10,000 hours. And, those who are only good enough to teach in high school have practiced for only a few thousand hours.

So, what he is really doing is turning the idea of talent on its head. People think that talent is inborn, and a little bit of practice is all it takes for it to shine through. But according to this book, the only reason that the talent shone through is because the person practiced 5,000 to 10,000 hours longer than the person who who didn’t have “talent.”

One of the troubling ideas in the book that I don’t agree with is that timing is critical. Contrary to Malcolm’s view, it seems to me that timing is only a single part of the success formula. There are a host of other factors that are much more important to success than timing. These include: attitude, skills, beliefs and passion.

Did you read the book? What do you think?

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