Imagine that you wanted to become good at the piano and you studied extensively the best books on piano theory and piano pedagogy, but you actually played the piano very little. Or that you wanted to be a low-handicap golfer, but, instead of practicing and playing golf, you spent your time watching the golf channel and extensively reading books on golf technique. If you wanted to be the best, these things might actually end up helping you – perhaps quite a bit. But they would only do so if you actually practiced your craft intensely over a long period of time.
There is a growing consensus that in order to become world-class at something it requires ten thousand hours of intentional practice. Intentional practice does not mean going through the motions; it means determined, planned practice with complete focus. That’s what it takes to get really good at something, even for those who are judged to have talent.
Last year, I happened to see a program on ESPN that showed a behind the scenes look at a football practice at one of the top BCS programs. Since time was precious, every aspect of the practice was planned in advance and carefully thought through. A specific scenario was practiced for x minutes and then a horn would blow and the players would move on to the next drill. Nothing was left to chance. Afterwards the coaches broke it all down and prepared for the next practice. My point is not that an investor’s day needs to be scripted, but that one should carefully think about how to best spend one’s time and then stick to the plan.
So, what does this have to do with investing? Perhaps the analogy is obvious. Buffett has said that the most important thing we can do to become successful investors (along with learning to think properly about market prices) is to spend our time valuing companies. This means looking beyond them as stocks and actually studying and evaluating them as living, breathing businesses. This takes time and it takes practice. The good news is he tells how he does it: he spends his days reading and thinking – annual reports, 10-Q’s newspapers, business magazines, trades, etc. Of course, it this also assumes a sound search strategy with good filters so you are spending your time valuing businesses that have a chance of being good purchase candidates.
I believe there are no shortcuts.