Often times, learning something new can be exasperating. This is especially true when mastering a novel skill – a new language, a way of cooking, or finances. When you are learning something new, there is a period of time where our skills may actually become worse than when you first started. Then, over time, your skills improve and you start the ascent up the learning curve and go on to achieve mastery. According to Seth Godin, marketing expert and author of The Dip, rewards flow disproportionately to those who achieve mastery.
When I first started investing, I knew next to nothing about how the financial markets work. On my first several attempts to learn the markets, I lost money. Gradually, by the third or fourth investment, I found myself doing much more research, reading investment books, and formulating strategies. As time went on, my investment strategies started to become more refined and the investments started to accumulate. It may take losing in the beginning in order to learn the lessons of success. This is our tuition into the university of new knowledge.
In economics, this concept is known as the J-Curve. Its application can be seen across several industries including private equity, global trade, and biotechnology. The initial outlay of time and energy is followed by a dip into the learning trough.
This type of downward learning is what Josh Waitzkin, world champion chess player and author of The Art Of Learning, calls “investment in loss”. This early investment is a necessary step to internalize the fundamentals of whatever skill you are trying to acquire. In your case, you are trying to master personal finances.
Many people begin the descent into the learning dip, never to surface. People who choose to feed off of learning and stick with the learning process eventually begin to absorb the concepts they are studying. Learning successful financial behaviors will help you begin the ascent to greater riches and knowledge. While in the throes of learning, you may be tempted to abandon your commitment to sound personal finance. Stay the course. Remember the J-Curve and ask yourself, “Where do I want to be?”
The answer is, of course, on the positive side of life.