Hi Tom,

Thank you for sharing your thoughts about the importance of experience. It is my opinion that experience is a very misunderstood concept. I tend to think of experience as a combination of knowledge, memory, intuition, and wisdom. For me each of these words has a very specific definition, and therefore meaning. [So we could be in agreement, but just think of the nomenclature differently.] When people use the word 'experience' they are usually indirectly mapping it to one of the preceding four factors. Experience can lead to increased knowledge, for example, so long as the person learns from her experiences. Experience can also increase memory as a routinized process creates a well worn pathway between knowledge and the application of that knowledge. So, for example, the more experience you have with discounted cash flow analysis, the easier it is to remember the 'Gordon Growth Model' and how it helps to estimate terminal value. Experience, and especially the knowledge function, can really help people to map the sensation they get from their intuition. As an example, if you are experienced with currency volatility as caused by changes in energy prices, then chances are you can respond to your intuition in a much more informed fashion than if you had never traded commodities before. Experience is also frequently mentioned in close proximity to the concept of wisdom. However, I think this is due to a limited understanding as to what wisdom really means. I think of it as the degree to which your mind is in accord with reality. A by-product of this is a minimization of emotional, prejudicial responses to events. But see experience could lead you to deploy a heuristic that has worked in the past because a current situation seems so similar to one you have experienced previously. Here, relying on past experiences may be the unwise choice. So I think that experience and wisdom are two different things. Of the preceding, I think experience is best related to knowledge, rather than to the other three variables.

So if you agree with the bulk of the paragraph above then I think you will see that experience is a separate quality from decisiveness. Experience with choices (such as investment choices) can minimize anxiety. However, there are also many examples of experience leading to increased emotional responses. An example would be the lack of capital investment on the part of corporations globally subsequent to the Great Recession. Many of them have in the back of their mind the recession, which leads some to feel anxious, and to have lower capital investment. If you disagree with that example, then scale it down to the individual investor level where many investors are reported to have left equity markets permanently. In conclusion, I think experience can help with decisiveness, but I think they are very different qualities. Primarily what is missing from the concept of experience is 'choice.' Whereas, decisiveness puts the emphasis squarely on choice, not knowledge, memory, intuition, or wisdom.

With smiles,

Jason