There is a big myth out there that knowledge is power, and…we throw that around a lot, and it’s actually a lie. Knowledge is only potential power. And it only becomes power when we…use it and apply it.…We can talk about principles all day long, and if we don’t apply them, it’s just potential. – Boyd Matheson
Jerry Uelesmann is an accomplished photographer and a professor at the University of Florida. He decided to try an interesting experiment on one of his photography classes.
On the first day of class he divided the students into two groups, the “quantity” group and the “quality” group.
The “quantity” group would be graded solely on the number of photos they submitted for grading. 100 photos or more submitted would earn the students an “A” with the scale dropping from there.
The “quality” group would be required to submit only one photo that demonstrated everything they had learned in class. Their entire grade would depend on the quality of that one photo.
At the end of the class Uelesmann was surprised to find that all of the best photos submitted came from the “quantity” group.
The incentives he had provided motivated them to constantly experiment with the principles and techniques they were learning. As they did this their skill increased and they produced not only a lot of photos, but some really great photos. They were required to act on their knowledge and this action increased their power to create great photos.
The incentives given to the “quality” group led them to focus more on knowledge than action. They tried to gain sufficient knowledge to create the “perfect” photo and neglected to practice their craft. Perfectionism killed their creativity and they failed to take the action that would have led to improving their skill.
Aristotle understood this principle thousands of years ago when he wrote:
Men become builders by building houses, and harpists by playing the harp. Similarly, we grow just by the practice of just actions, self-controlled by exercising self-control, and courageous by performing acts of courage.
Knowledge is only potential power. It takes action to convert that potential into actual power.
The Noah Principle
As he so often does Warren Buffett illustrated this concept clearly and memorably in one of his annual shareholder letters when he stated:
Our preaching was better than our performance. (We neglected the Noah Principle: Predicting rain doesn’t count, building arks does.)
Learning about money is great but it doesn’t do much good unless you take action on your knowledge. And the best thing is that the basics of personal finance are so easy to learn that you can begin to take action immediately while you continue learning more advanced concepts.
Commit today to start building your financial ark by doing one of the following:
- Spend less than you earn by developing and using a budget
- Make a plan to eliminate debt, focusing particularly on high interest credit card debt
- Begin a lifelong habit of saving by paying yourself first, even if it is only a small amount when you start
- As you earn more, increase the amount you save
- Start contributing enough to your company’s retirement plan to get the full match offered
It’s easy to predict financial rain because it will come to all of us sooner or later. Taking action to protect yourself from the coming storm is more difficult but a whole lot more useful. Start building your financial ark immediately so that you can weather the storm when it comes. Remember, action, not knowledge, is power.