The Commoncog Case Library is built around some powerful applied research, and designed to accelerate your business expertise. What is that research, and how do we know it works?
Here’s a tricky problem that you may or may not have thought about: how do the best investors and businesspeople learn from history?
Sure, we know that some of the best investors and businesspeople in the world read a lot. They read newspapers, they read annual reports, they read industry journals, and they read biography. They consistently invest in their own business education.
But that isn’t the question worth asking. That question is this: how do they learn from their reading? How do they learn from cases that have come before?
Some businesspeople do not read, but they actively seek out stories from other businesses and other businesspeople. There, the question is slightly different, but it is still the same problem: how do they learn from other people’s experiences?
This is the real challenge, isn’t it?
The question isn’t can you read as much as Warren Buffett and Charlie Munger — that’s pretty straightforward. You buy the books and you carve out the time. It is simply a matter of will. The question you need to ask is: even if you read all those books, can you learn the same way they do?
The truth is that there are many problems with learning from history. The biggest problem is that history is path dependent and unique. What has happened once may not happen again, and definitely won’t occur in the exact same way. Lessons from one industry do not cleanly apply to another. Heck, lessons from one firm often do not apply to a different firm in the same industry just a few years later!
So the wrong answer is to try and come up with some form of generalisable ‘lesson’. Lessons don’t work when it comes to cases — because cases are so varied in business and in investing. You cannot generalise to “do X when you see Y” if every case you will deal with is somewhat unique.
No, to learn from business history, you’ll need another approach. Thankfully, we don’t have to come up with that approach ourselves.
We have all of these great investors and businesspeople in front of us, after all. We can just copy them.
But in order to do that, we have to know how.
In 2009, the United States Department of Defence commissioned a report on the best accelerated expertise training methods known to man. That report was eventually republished in 2016 as the book Accelerated Expertise. In it, the authors cite two theories as the basis for all the successful accelerated training programs they profile in their report.
One of those two theories explains how experts learn from history in business and in investing. The name of that theory is ‘Cognitive Flexibility Theory’. It is a theory of how people become experts in ill-structured domains.
In other words, it explains how expert businesspeople become expert in the first place.
What is an ill-structured domain? An ill-structured domain is a domain where there are concepts, but the way concepts show up in the real world are highly variable.
Let’s use medicine as an example. Medicine is an ill-structured domain. There are concepts in medicine like ‘heart attack’ that you can read about in a textbook. Hundreds of medical students study such textbooks every year. But they do not automatically become experts in recognising heart attacks. Why?
The answer is simple. In the real world, heart attacks can look very different depending on the circumstances. You and I imagine a heart attack as a patient suddenly collapsing, clutching their chest. But expert doctors do not think this. Expert doctors know that heart attacks can look very different depending on the patient.
Some heart attacks start out looking like indigestion.
Other heart attacks can last a whole week.
Expert doctors hold the concept of a ‘heart attack’ as a rich cluster of cases in their heads. They know that a heart attack is not just one thing — they know it can show up as many things.
Similarly, expert investors and expert businesspeople do not think of business concepts as just ‘one thing’.
They know that business concepts like “competitive advantage” or “scale economy” or “network effects” can look very different depending on the industry, time period, or even the specific company.
The question is how do you get novices to become experts in such domains? To study this, the researchers began looking at the expert doctors. How did they become expert in the first place?
What they discovered was illuminating.
Expert doctors learn to pay attention to cases more than concepts in their domain. They do so because they know that cases are so varied, and that study of the mechanisms of the concept alone won’t help them recognise real cases in the wild.
But the way they used cases was also different from the novices. Concretely, the experts do two things differently:
What this means is that when experts encounter a new concept in an ill-structured domain, they know not to oversimplify. They do not reduce the concept down to one or two sentences, or even a handful of examples. Instead, they collect many, many examples of the concept in their heads. They also actively and constantly seek out new examples, in order to improve their understanding of the concept in the real world.
That way, when it is time to act, they can recognise the concept in the wild by drawing on fragments from all of the previous cases they know.
This is what separates experts from novices in ill-structured domains. Novices learn a concept and think that one or two examples shall suffice. Experts know that no finite amount of examples will ever suffice, and collect as many cases as they can for every concept they care for, for the rest of their lives.
The researchers began to realise that this is how experts in all ill-structured domains operate. By pure trial and error, experts in all of these domains converged onto the same approach.
Which brings us to this point.
The military was interested in these findings because warfighting is an ill-structured domain. They wanted their recruits to become expert soldiers quicker, faster.
We are interested in these findings because business and investing are ill-structured domains.
We want to use these methods to get better at business, faster.
How?
So far, nothing we’ve described is radically novel. This research lays plain what businesspeople like Charlie Munger and Warren Buffett have been saying for decades.
In other words, cases don’t tell you what to do, they teach you how to see.
A novice will say “This doesn’t look like a scale economy advantage to me.”
An expert will say, “This is absolutely a scale economy advantage, though extremely weird. But I know it because I’ve seen it before, this one company in the late 80s …”
If you are convinced by this insight, you may stop now and go execute as the great investors do. It’ll only take you a few decades of reading to catch up.
But: is there a way to accelerate this?
And the answer to that is: yes, there is.
What we’ve covered so far isn’t the complete story.
Cognitive Flexibility Theory describes how experts become experts in ill-structured domains. But the researchers also had a bunch of recommendations to speed up the process. This bit — this bit — is the bit that Commoncog’s Case Library is built around.
The researchers say you can speed things up by compiling a case library for students to take explore. They recommend presenting 10-20 cases per concept — the more varied, the better. They suggest students solve problems by referencing a case library, to build the habit of rapidly flipping through cases in one’s head.
The Commoncog Case Library takes this recommendation, and builds on it.
Think about it: say you want to take this insight, and execute a reading program for yourself.
What problems will you face? You will:
The Commoncog Case Library takes this research and accelerates it by doing the hard work for you.
The Commoncog Case Library comes bundled as part of a Commoncog membership.
Go on, give it a spin:
