In the last week and a half, I have been on four separate airplanes and in three different airports. One of the things I tend to notice more when I’m traveling is how people behave when they’re in large groups. When you observe a large group of people, say, walking through an airport terminal, you begin to notice patterns. Such patterns include speech, gestures, tones, gender, ethnicity, married, age, class, mood, etc.
Observing any singular person amongst a large group of people will usually yield less meaningful data as opposed to observing the group as a whole. I started to think about the importance of recognizing patterns as it is not an exact science, but it can serve as a way to help us formulate opinions or ideas about different things that happen in the world around us.
I’m not a psychologist, but I think all people unconsciously separate and sort people and things into categories for the sake of self-preservation. However, it’s an interesting mental exercise to consciously and actively observe what’s happening around you for the purpose of intentional thinking. Or, if you’re just bored and you have nothing to do while you’re sitting in an airport terminal.
Pattern Recognition is important because we use it in so many areas of our lives. In fact, it is so important that all school-aged children perform exercises to teach their minds how to recognize patterns. I’ve seen this multiple times over when I sit down with my children and help them with their homework. It’s usually very simple exercises at first where they’ll need to recognize a pattern and then draw the next shape or number in the sequence. For me and most adults, recognizing simple patterns like the next shape in a sequence is easy. However, recognizing patterns on a larger scale can prove to be a bit trickier.
I guess the bigger question is who cares and why is this important. As I stated previously, it’s important because most of us use observations or patterns to formulate opinions so we can make decisions. For example, every day I read 7 or 8 different newsletters and blogs from various sources in the VC industry. Taken individually, any singular newsletter or blog doesn’t hold much significance because it comes from just one source. However, collectively all of these resources combined give someone in my profession a broader look at what’s happening so that I can formulate my own assessment of what’s happening in the industry.
Outside of the raw investment data that’s reported in venture capital, a large part of the available information in the VC industry is anecdotal and requires interpretation. It’s the abstract nature of the industry that I love because no one person is 100% correct, but taken together everyone is correct. It sounds like a strange concept, but it works. It reminds me of my early days of working at Morgan Stanley and I asked a senior advisor what were some of his prospecting secrets. He politely said to me, “Nothing works, but everything works.” It took me a minute to fully digest what he meant at the time, but this has been a phrase that has stuck with me for so many years.
Performing research on a topic is typically performed in the same manner. This past week I was performing some perfunctory research on an investment manager and upon inspection of their performance numbers, the numbers looked great. This particular manager’s numbers looked even better when they were compared to other managers in their same industry. Individually, this manager’s performance is meaningless. However, when observed in a large group of managers the numbers have significance. Funny how that works, right?
This form of high-level, big-picture analysis is critically important for our daily lives because with more information we often make better decisions. I have observed there are a lot of people who tend to rely on very few sources of information when making a decision. This isn’t always wrong because the counter-argument is how much information is enough? I don’t totally know the right answer to this question because it really just depends. But I can definitively say, that more important decisions require obtaining more observations, while less important decisions require less.
Recognizing patterns by conscious observation is a fun exercise no matter what the application. Whether you’re people-watching or performing research on a fund manager, having more observation points makes the process a lot better and a lot more fun. Cheers – KM