Legendary investor Warren Buffett was once asked a simple question; “How to become smarter?”
His answer was equally simple. Buffett held up stacks of paper and said “read 500 pages like this every week. That’s how knowledge builds up, like compound interest.” In another interview he commented “Look, my job is essentially just corralling more and more and more facts and information, and occasionally seeing whether that leads to some action. And Charlie—his children call him a book with legs.”
As a student, this information is neither new nor groundbreaking. Since childhood we have been generously peppered with advice on how reading helps and how we all should develop a reading habit. However, where most students flounder is not why one should read but rather how to be an effective reader.
What to read?
Reading a wrong book or article has a dual negative impact. It not only eats up the time which could have been used to read a much more enriching book but it often also has a detrimental effect on developing a regular reading habit.
As a student of finance and capital markets, it becomes really difficult to choose what to read. What most students do not realize is that reading more and more technical books does not help the cause. The purpose of reading is to widen our horizon and develop a variety of mental models which can help us make sense of complex situations developing around us. Therefore reading about a variety of disciplines is a must. Also, reading about differing thoughts on the same thing helps. Reading fiction rarely helps (though there are some glaring exceptions) and it is more a form of entertainment rather than a tool to gather knowledge.
Some basic recommendations to start off a reading habit for undergrad students are given below.
How to read?
Save time, read what is important. As simple as it sounds, it is not easy to become a world beater just by reading. That kind of transformational knowledge requires intense and constant reading over decades if not years. However it also requires you to read smart instead of just reading hard. The first thing to do is to put a price on your time. You should only read stuff that you feel will actually add value to you. The first skill to develop is to skim quickly through a book and take a decision on whether you actually want to spend the time to read it in detail.
Identify the central idea. Second skill to develop is to identify the central ideas of the book quickly. The way most no fiction books work is they discuss an idea and then elaborate it with evidence. Once you realize the central idea, you can easily skip the evidence part and save time.
Focus on facts The third skill to develop is realize the difference between facts, judgement and opinions. You should note the facts and largely ignore judgements and opinions. In fact one should look for ideas in any book. New ideas which make sense should be internalized.
Create mental models The last skill of reading is the ability to form mental models. Whatever you read, the ideas have to be converted into mental models, which you can then apply in a variety of situations you face. The idea of reading is to make you capable of forming your opinions by looking at the facts rather than relying on someone else’s opinions. Therefore your ability to convert these ideas into mental models which can be applied to assess various situations is the important last step to become a champion reader.
How to Read a Book by Mortimer Adler is a good place to start developing these skills.
This article is authored by Ronak Gala. He is the co-founder at Leap Up and Pararthya Capital.