You Don't Know What You Don't Know

Warren Buffet has been in the news quite a bit lately, mainly for his comments about increasing the tax burden of the "super wealthy", a very controversial topic. Whether or not you agree with Mr. Buffett, it is difficult to question the intelligence of the "Oracle of Omaha".  I consider him one of the most well-spoken businessmen in history and have been known to quote him from time to time.  There is one specific quote that really stuck and changed my mindset when it comes to investing, both in the stock market and real estate.  He said "risk comes from not knowing what you are doing" and I have found that to be very true indeed.  

When I first thought about the quote I tended to disagree, arguing that investing is inherently risky.  However, the more I thought about the less my argument held, especially when considering real estate.  Make no mistake about it, I am not arguing that there is zero risk,  as we all know there is always be some risk, but that risk is lowered drastically by one thing...knowing.  I have always been an advocate for education and not just in real estate.  It only makes sense to educate yourself in whatever you are doing.  In sports you have to be educated on the rules, the equipment, and the plays.  In any job you have to be educated on your duties, the goals of the company, and expectations.  Investing in real estate is no different.

 But what does it mean to know?  The Webster dictionary defines knowing as: perceiving directly; to have an understanding of; to recognize the nature of.  When I apply that definition to myself and investing, I "know" that there is a lot I "don't know".  When I come to these realizations I make it my mission to change that, thus knowing more and decreasing my risk.  This begs the question, how does one become more educated and "know more"?  I came up with a list of methods one can use to learn more about investing:

1) Experience -  often called trial by fire.

2) Formal Education - taking classes taught by subject matter experts.

3) Informal Education - reading about subjects, talking with others, etc.

I encourage all real estate investors from the greenest of the green to the old crusty investors to continue to learn.  Challenge yourself to expose your weaknesses and work to "know more".  If you do not agree with what I have written I leave you with another Warren Buffet quote, "let blockheads read what blockheads wrote."