On Our Minds: Using Feedback to Harness the Power of Mistakes

In my early days as a reporter, I'd perk up every time an email attachment called the playback popped up. That meant a draft I had submitted was now back for review. It would often return to me crammed with edits: crossed-out words, paragraphs rearranged, question marks peppered throughout.

Imagine a jumble of text soaked in graffiti. The editing feedback was often brutal, but it made me a better writer.

"The best lessons I've ever had came from asking someone I admired what to do and what to avoid – or being firmly told by a furious editor," a journalist mentor once told me. “Many journalists who go through their careers without bothering to seek feedback suffer enormously as a result."

Seeking feedback as an investor

Investing is no different.

In a 1992 letter to shareholders, Warren Buffett mused about his "mistakes of the first 25 years" and "amateurish behaviour" that cost him billions. For Buffett, it was his mea culpa moment. “Post-mortems prove useful for hospitals and football teams; why not for businesses and investors?" he wrote in the letter.

For investors, feedback can come in many forms, whether it's soliciting opinions from others about investment ideas or analyzing portfolio returns. People may not like what they see or hear, but there's always a learning opportunity.

Consider the various online forums on money issues, where individuals compare notes about their investing strategies. Recently, a colleague told me about an online discussion forum where people rate their portfolios. The thread — much like a collective sounding board — invites investors to share their financial goals and the reasoning behind their desired asset allocation.

After sharing his investment portfolios, one investor wrote, "Advice and opinions welcome. I've done all the self scrutinizing I can handle. And I've landed here time and time again."

Feedback is powerful. We learn, experiment and improve through appraisal and criticism. And it's everywhere.

In schools, teachers offer feedback when grading students' homework. Before product launches, app developers use beta testing to smooth out bugs and kinks. At companies big and small, employees take part in year-end performance reviews meant to foster career growth.

Origins of feedback

Feedback is most commonly understood to have its roots in the engineering world, harkening back to the Industrial Revolution. Since then, innovators have worked to refine system inputs of all kinds, monitoring how certain components interact with each other — and the larger environment. Outcomes are "fed back" as inputs, which engineers maneuver to invent new tools and machines.

That approach is called feedback loops. Look at any innovation and technology these days, and chances are that such a mechanism is at play. To engineers, feedback loops are important because they help minimize "errors," the gulf between inputs and outputs in system designs. The very discipline has underpinned modern technologies from aerospace to robotics and artificial intelligence.

Feedback as a fuel for improvement

Just like engineers, we seek feedback as a way to improve. But let's face it, constructive feedback isn't always easy to take. To embrace feedback, I've learned to take my missteps in stride. And I try not to take it personally.

Years ago, as a rookie journalist, I realized that the quickest way to hone my craft was simply to create my own feedback loop. I did so by “feeding" my drafts to editors, who sent “back" their fixes by way of revisions. And I carved out time to seek writing advice from colleagues I admired. What did you do to write that great piece? What could I have done to make my story better?

Then, I'd place printouts of my draft and the published version side by side. It felt like I was scrutinizing my own writing through a microscope. Every fix exposed my stubborn writing problems, be it clunky prose or lack of clarity. One way to become better at anything, I discovered, is to chip away at bad habits, one at a time.

Unbeknownst to me then, I was already following the post-mortem rule in my journalism career. These days, feedback culture is a key part of the corporate world and is the main subject of many self-help books. It's easy to understand why. By reflecting on what has gone wrong, we create knowledge and experience that can guide us forward. And that's always a good thing when it comes to investing… just look at Mr. Buffett.

On Our Minds is a regular feature written by RBC Direct Investing's Inspired Investor team.