Learning is Hard

Real learning is hard and leads to fluency. Fake learning is easy and leads to knowledge.  
 

If I’m learning how to speak Spanish, I can know a lot of vocabulary, but that doesn’t mean I’m fluent.
 

Fluency is a whole different animal that reveals deep understanding.
 

For example, do you understand how a credit card works?
 

When you buy a latte with a credit card at Starbucks what actually happens?
 

A couple weeks ago I was trying to explain it someone, but I soon realized I wasn’t fluent.
 

The true test of fluency is if you can teach a concept to a 3rd grader.
 

This is called the Feynman Technique, made famous by the astrophysicist Richard Feynman.
 

The Feynman Technique is simple but very difficult in practice. This is because we use big words to mask the fact we don’t understand something deeply.
 

Back to how a credit card works.
 

The company where you put your money, called a bank, gives you a piece of plastic, called a credit card, that signals you will pay for something later. When you buy coffee from Starbucks using your piece of plastic, your bank sends the $4 to Starbucks, instead of you paying. But before Starbucks gets the money, two things need to happen.
 

Your bank has already made a promise with another company called a card network whose job it is to act like a toll booth between two banks. The most popular card networks are Visa and Mastercard.  These card networks make promises with other banks called merchant banks, who hold money for the stores where we buy stuff. So the money from your bank first goes to through the card network and then to the merchant bank and finally to Starbucks, each company taking a little bit of money along the way for their services. And then the final piece, at the end of every month, you pay back your bank for the money they sent to Starbucks. And that’s how credit works!
 

Here’s a drawing to solidify this chain in your mind if this Feynman Technique was unsuccessful.

But then, it goes deeper. What about point of sale systems like Square and other financial tech players? And what about online payments? Do these work the same way?
 

Well, here is a graphic for how credit payments work in the online world. To give you more context, Stripe is essentially an online portal that connects bank accounts. You could insert Square or PayPal into that position as well (and the logo on the bottom far-right is Postmates, a food delivery service).

The point is that real learning is hard. Once we begin digging and explaining a concept, the gaps in our understanding become glaringly obvious. This is not a bad thing, but rather it helps us clarify our thinking. All we need to do is go back to the drawing board, fill in those gaps, and try again. It certainly is a process.
 

Bringing It Back
 

This is important in investing as well. That’s why many of the great investors are great writers. By explaining themselves, they are forced to clarify their thinking.
 

Furthermore, when you really understand something you can glean insights that people with mere surface level knowledge won’t be able to.
 

For instance, Amazon recently announced a product offering to compete with a company that has been highlighted in our subscription service. Naturally, many people are nervous about the competition, but a deeper understanding of the industry reveals additional insights.
 

Amazon, maybe to the surprise of some, is the biggest cloud computing company in the world. Though it may be the best, its customers still want options to have some bargaining power. Plus, what a lot of companies have found is that running everything through the cloud carries extra compliance risk and it may not be the most cost effective in all scenarios. This means that most businesses set up what’s called a hybrid cloud, where they utilize both the public cloud and their own private data centers.
 

And Amazon’s latest announcement revealed it was getting into the hybrid cloud. This is tricky because, a lot of people will want Amazon’s offering, but at the end of the day, companies will still want options. There is a phrase for this called: vendor lock-in. In context, if you use Amazon for everything, you become locked-in and that’s not good.
 

The value of the competitor who we recommended is that it is cloud agnostic, meaning companies won’t get locked-in.
 

So you can see, a little understanding of the industry can allow you to glean insights that aren’t easily seen.
 

Call to Action
 

To really test your knowledge, try explaining difficult concepts to another person. Or if you have kids, try out the real Feynman technique! This will reveal the gaps in your understanding. Then you can go back to the information source and fill in those gaps.
 

Your challenge for next week: Learn a difficult concept then try the Feynman.
 

Possible concepts:

- Cryptocurrencies

- CRISPR

- How insurance companies calculate premiums

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