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Bill Gates, The Beatles & The 10,000 Hour Rule

by The Wrinkle | May 14, 2010

Well the markets seem to have settled down a little, Greece got enough to tide it over, and the US recovery seems to be established.

I was also pleased to see overnight that it’s likely the US will regulate rating agencies to help limit “vested interests” and the previous system of merchant banks shopping around rating agencies to get the best rating for their offerings. In the worst of the bubble these offerings were simply junk derivatives. As the holder of the offering was paying the rating agencies to rate them, are we surprised that some sub-prime deals at the time had higher credit ratings than sovereign debt can achieve in the current “new conservative” climate.

Frankly at the end of the day a derivative is a “side bet” (ala a casino) in an artificially created market where there is going to be a loser and a winner depending on the price movement. Buyer beware, and Mr. Regulator please ensure there is transparency, so that people actually know what they are gambling on.

OK, for the last few weeks I’ve mentioned the 10,000 hour rule, this comes from a book written by Malcolm Gladwell called “Outliers – The Story of Success". This is only one of many interesting and well researched ideas put forward in this book and I would recommend it as a good read.

The theory is that if you can devote 10,000 hours to a new area of interest then you will become skilled in that area. This is hardly earth shattering, apprenticeships have obviously been around for a long time. The first point, however, is that this rule seems to overwrite natural talent and ability. Musicians are a good example. A US study showed that it was simply the amount of extra practice when they were younger (first to 10,000 hours) that determined which music students went on to become professional musicians versus accepting lesser roles as music teachers.

Let’s look at the Beatles, they travelled to Hamburg to play five times between 1960 and 1962 for five or more hours per night in the nightclub circuit, all told they performed for 270 nights in just over a year and a half. Before they broke through in a major way in 1964 it was estimated that they had performed live over 1,200 times. If that sort of practice doesn’t make you good in front of a crowd, I’m not sure what does.

This is the second element of the 10,000 hour rule, timing and being in the right place at the right time. The Beatles had a niche where Liverpool bands were getting a lot of play time in Hamburg and they used it to full advantage to build a skill base that served them well in their future activities.

There are other “sweet spots” or wrinkles if you like at various times and these are covered in the book. However I’d like to focus on one, and that’s the advent of the PC and the explosion of IT.

In 1968 the Mothers Club at Bill Gates upmarket school had a rummage sale and $3,000 of the proceeds were invested in a computer in a basement room for the students to use. At the time most computers still used the labour intensive computer-card based system. However this was a leading edge time-sharing terminal directly linked to a mainframe computer. The only problem was that mainframe time was very expensive in the 60's. However through a deal cut with the parent of another student at the school, Gates and his fellow computer club were given free mainframe time in exchange for software testing. So they could program and practice to their heart's content.

I can go on but suffice to say, Bill Gates got his 10,000 hours under his belt pretty much ahead of everyone else and went on to capitalise on it.

Bill Joy of Sun Micro Systems had a similar opportunity. Due to the vision of the University of Michigan having a similar computer set up in the early 70’s, plus a computer centre open 24 hours, and a convenient software bug that allowed him to program as much as he wanted on his own. This gave him the skill base to go on and re-write UNIX.

So if you want to re-invent what you do, find your passion, allow 10,000 hours, and hopefully time it to meet a market need.

Next week, I might blend in another stock tip; GGP is simmering along at 3.1c which isn’t bad given the recent market turmoil and easing in the oil price. I should also note that all their oil plays are onshore USA.

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