Monday 29 August 2011

Knowledge versus Competence

I hear and I forget. I see and I remember. I do and I understand - Confucius

There are three methods to gaining wisdom. The first is reflection, which is the noblest. The second is imitation, which is the easiest. The third is experience, which is the bitterest. – Confucius

Above are 2 quotes from Confucius to act as the backdrop for my post today.

What is the difference between Knowledge versus Competence?

If you take someone relatively new to the stock market and give him/her a pop quiz on stock market terminologies – be it fundamental or technical – I bet he/she will score highly in this quiz! If we repeat the same quiz on old-timers in the stock market, they will not score too highly as their answers probably don’t fit the “standard” answers…

Why? These veterans would have “internalized” or “adapted” the theories and terminologies to reflect their real life experience; while rejecting those that don’t work.

As newbie, we do what we have been taught in school – quote famous people and sayings to “score” points in exams – forgetting this is not how it works in the stock market... (Hey! I just quoted 2 sayings from Confucius. Ouch!)

Knowledge is WHAT we KNOW.

Competence is HOW to DO IT.

It’s quite fashionable these days to see investors/traders giving themselves (including me) titles:

I am a value investor.

I am a dividend investor.

I am a growth investor.

I am a day trader.

I am a swing trader.

Blah, blah, blah.

But what we all really want to be is a MONEY MAKING investor/trader!

And we all know that takes competence (how to make money); not book knowledge (what we know).

No incantations or invoking of gurus’ names (but boy it sure impress people!) would help us in our competence development if we don’t:

1)     Act independently
2)     Experience the reality ourselves
3)     Reflect on the outcome ourselves

Please don’t steal the reflections of gurus as your own. Don’t believe? Just ask those self-declared disciples of Warren Buffet and ask how much they have made so far… You can easily substitute Warren Buffet with any famous guru – be it Peter Lynch, George Soros, Jim Rogers, etc. Ask and run away!

You may also want to take a peek at my previous post:  Are you the Opinion leader or Follower?

Be a first rate you!

Not a 2nd rate or 3rd rate Warren Buffet.

Be yourself! Stand tall, walk straight.              


  1. i like to call myself - an idiot, more accurately, a stupid idiot and thats not a joke.

    thats what i know myself and thats knowledge.

  2. so competence is what we already know about ourself. knowledge is what know what we don't know about ourself.

  3. thats the problem with act firsy check later. rephase,

    so competence is what we already know about ourself. knowledge is what we now know what we don't know about ourself.

  4. Reminds me of a cheer back in school:

    "Stand tall, be proud.
    Say your name out loud!
    We will, we will, smash you!
    Smash you!"


  5. haha stand too tall i will get my head chop off in trading.

  6. 1) AK,

    I only say stand tall; not advocate violence! Tsk tsk. What a "violent" school. LOL!

    2) Coconut,

    Eh... What we already know about ourselves is Self-awareness.

    That includes when we know what we don't know.

    Blur spider (Ignorance) is when we don't know what we know and don't know! LOL! How's that for confusion!?

    Act first check later has one big advantage over those that analyse but don't act - you know what works and what doesn't in REALITY for you :)

    The "ideal" is of course check first and act second - less painful bruises, but we still need to act.

  7. How to put into practice without knowledge?
    Then how to be competent without practice after practice?
    How long it takes to train to be a qualified doctor? a lawyer? engineer?

    Of course i can trade in the market as long as i have the money. No need knowledge or practice; though most probably will lose all my money in no time.

    Then i realised i need investment knowledge. After that i need to put knowledge into practice. i only know i am competent when my portfolio starts to make money.
    There is no such thing as "One step you reach heaven".
    Ha! Ha!

  8. no wonder this world is so confusing haha. ok i agreed is self-awareness.

    so we don't need to be knowledgable to be good in what we do, just self-awareness.

    i traded stocks without much knowledge about the company that i'm dealing with, never read their reports. same for commodities and FX and investment too, really. if i do read them, i can't trade.

  9. hi temperament, just the opposite, i feel more worry when portfolio is performing very well.

    and when the portfolio is down, i get more worry haha.

  10. Hi Temperament,

    I only know one way - I will start to buy 2 dollars toto every week when I return. No need knowledge; just the competent to say: "Auntie, 2 dollars toto quick-pick. Tank cute!"

  11. Coconut,

    You are weird! Or very rich!!! LOL!

    If I don't make money I don't say I investor/trader. I say I am paying my school fees in the market still...

  12. why weird? that should be the way!

    if you make big profit, it is telling you that you can also lose big. many a times, big losses usually comes just after a big win.

    and hey! i'm not rich ok! i'm always very poor haha.

  13. Hi Coconut,
    You make big profit only because you gamble big. Of course the opposite can happen. You lose big because you gamble big. Funny, there is something never change, BIG.

    i wish i have the guts to put all my money in one winning stock. That will settle everything for me in life-Good or BAD? My pet dream.

    What? Assets Allocation? i don't understand.
    Trader has Asset Allocation meh?
    Ha! Ha!

  14. Hello Coconut,

    You have awoken me! You Tao deeper than mine.

    Have you watched Kill Bill part one?

    I am now doing a Lucy Liu apologising to Uma Thurman - I am sorry for calling you "weird".

    I got eyes never see or-yi-or!

  15. whats kill bill? burn my money? you can call me anything, thats what i'm trying to be.

    so think again, if you make big, that means you are taking too much risk or the next big one will be just around the corner, usually big lost.

    hi temperament, sorry you have that kind of dreams, i give up long ago. and who ever buy and sell things are call traders. you are a everyday trader and you not aware of it.

  16. Look at competency over at least one full market cycle of Bull-Bear-Bull or Bear-Bull-Bear as one's strategy may work well in bull market but will fail badly in the bear market.

  17. how nice if our life cycle also like that, bull-bear-bull, but bull-bear-dead....

    the only way for us to be "competence" in life is to pass on the bull to our children, hear that SMOL? competent in life haha.

    during our bear cycle, we got to see our bull in action.

  18. Coconut...

    Hit below the belt. Ouch! I now croching on the ground rolling in pain. LOL!

    Lucky my parents no pressure me to have a male heir to carry on the family name. I think there's enough Teochew "Seahs" in Singapore already. I "outsource" my responsibilities! Phew!

    What you have awoken in me is that I need to think defence (wealth preservation) too; not just offence (wealth accumulation).

    I can't trade/invest $10,000 the same say I do for $100 ;)

  19. Yes CW8888,

    Make money during Bull cycle can be me merely rising with the tide.

    It's when I can protect my winnings and make money still during Bear cycle that I can call myself a money-making speculator for ONE Bull/Bear cycle.

    If I can repeat my performance over SEVERAL Bull/Bear cycles, only then will I dare call myself a competent speculator.

    What Temperament says is very true. It's not one step reach heaven. Reaching the gates of heaven is one thing. Getting accepted in is another thing altogether. LOL!

  20. Yeah I so agree, be a first-rate YOU!


  21. any fancyfull name is bullshit. Make money consistently is real.

  22. 1) You the man BlackJack! Nice of you to drop-by. It's always a welcome sight to see another friend from LP's tavern ;)

    2) Agree OT! I constantly remind myself why I am in the market. Cheers!


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