How Much Does Experience Matter?

I was scrolling on a website the other day when I saw something that stopped me in my tracks: “We have a combined 400 years in the market.” It got me thinking about experience and how much it really matters.

Spending time in the market certainly makes you a more seasoned investor, but does it make you a better one? Was Warren Buffett better at 70 than he was at 40? Is Paul Tudor Jones, at 67, a better macro trader than he was at 37?

Some time in the market can be an asset, but too much can be a liability if you lean too much on prior experiences. I wrote about this in the summer of 2017 in a post called Experience is Overrated.

In that post, I told the story of why Stanley Druckenmiller was promoted to the director of equity research in his second year on the job.

When Druckenmiller asked why he was given the nod instead of others who had more time under their belts, his boss said, “For the same reason they send 18-year-olds to war. You’re too dumb, too young, and too inexperienced not to know to charge. We around here have been in a bear market since 1968.’ This was 1978. ‘I think a big secular bull market’s coming. We’ve all got scars. We’re not going to be able to pull the trigger. So I need a young, inexperienced guy to go in there and lead the charge.”

The other employees’ formative years came in a bear market. It’s all they knew. So when the bear finally came to an end in 1982, I would imagine they thought, here we go again. Fool me once, shame on you. Fool me twice, shame on me. Fool me three times? Not gonna happen.

I get why people say “I’ve seen this movie before.” I get why people say “history doesn’t repeat, but it often rhymes.” But markets are just a little more complicated than these cute sayings make them out to be.

Experience can be valuable, I don’t want to be completely dismissive, but if it was all that mattered then BlackRock’s website would say “A combined 20,000 years of experience.”

But here’s where it can be a liability; If you’re prone to overweight the experiences you had early in your career, then you’re never gonna make it because the game is always evolving and “iron-clad” rules are constantly crumbling. To quote myself, “The greatest lesson we can learn from history is that those who learn too much from it are doomed to draw parallels where none exist.”

We spoke about this On today’s episode of The Compound and Friends with our friend Pierce Crosby, of TradingView. By the way, did you know that the second biggest website for investing in the world is TradingView? Me either.

Check out the episode below. Enjoy your weekend!