What is the difference between fast knowledge and slow knowledge?  And how is that relevant to trading and investing?

We came across this distinction in a post by Abraham Verghese at The Atlantic in discussing the challenges facing newly minted MDs.  In an age “tons of information” on patients Verghese writes:

The great challenge is figuring out what is critical, what is of current importance, and what isn’t.

In short, the difference between fast and slow knowledge in a clinical setting is the difference between trusting (exclusively) the data and recognizing the mistakes that can emerge from too much, sometimes contradictory, data.  Slow knowledge recognizes the limitations of data and takes a more holistic approach.

Verghese notes that this distinction between fast and slow knowledge was first noted by David W. Orr in his 2002 book “The Nature of Design: Ecology, Culture, and Human Intention.”  There are a number of assumptions underlying the two “cultures” as it were. The following points were taken from the site Slow Society:

The culture of fast knowledge rests on these assumptions:

  • Only that which can be measured is true knowledge
  • The more knowledge we have, the better…

The worldview inherent in slow knowledge rests on these beliefs:

  • Wisdom, not cleverness, is the proper aim of all true learning
  • The velocity of knowledge can be inversely related to the acquisition of wisdom…

One can see how these two worldviews might be used to classify differences in trading and investing.  The financial world, like that of medicine, is overwrought with data.  Nearly every photograph of a trader at work shows him in front of a bank of computer screens filled with quotes and data.  However that data alone does not make an effective trader.

Brett Steenbarger at TraderFeed frequently writes about how trading is a performance discipline.  Therefore a key distinction between firms:

Many trading firms have excellent technology: fast servers, robust trading platforms, and decision support tools for traders. But do those firms also invest in learning technology: infrastructure dedicated to assist traders with their learning curves?

Mark Wolfinger at Options for Rookies recently fielded a question from a novice trader talking about “getting the hang” of trading.  Wolfinger correctly notes that any one trading options without an education is in all likelihood making a mistake.  In short:  “Learn first.  Trade later.”

There are other examples of where the notion of “slow” has emerged as a counterweight to an increasing fast-paced society.  The concept of “slow food” is a reaction to the fast food culture.  Even in finance, the concept of “slow capital” recognizes the need to nurture start-up firms as opposed to force feeding them capital before they need it.  In the financial markets a debate rages over high frequency trading and its affect on the integrity of the markets.

We have likely stretched this analogy too far and mangled it in the process.  Speed (and information) does matter in trading.  However it seems worth taking the time to think about the basis for our actions in a world awash in that information.  There is a real distinction between information and knowledge.  Unfortunately for traders and investors there is no shortcut for getting from one state to the other.