Saturday Serendipity
Quote,Paradox of intelligence, Interesting find.
Hi.
Reading time: About 6 minutes
Quote
“I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther.”- Charlie Munger
The Paradox of Intelligence
Sometimes being average is better than being smart. Yes you heard that right. While there are many benefits to being smart, there is ample evidence that even they fail.
One of the most interesting things that I have read over and over again is the fact that the people who are incredibly smart end up doing stupid things. They do things which an average person would avoid. I have always wanted to know in depth why that is the way it is.
“My partner Charlie (Munger) says there is only three ways a smart person can go broke: liquor, ladies and leverage,” Warren Buffett said. “Now the truth is -- the first two he just added because they started with L -- it’s leverage.”
People take leverage usually when they are confident about their abilities to pay the leverage. So the first thing I can think about is smart people are overconfident in their abilities and do not give enough importance to the uncertainty in the world.
Overconfidence
See the bell curve below and you see that the normal distribution is such that most people alive have average intelligence and only a select few possess an IQ which puts them in the category of the top 10 or 20%
The people who fall in the bottom or top 20% more often than not know about their IQ. They know that they are smart. That’s where the first problem kicks in.
People who are smart and believe in themselves often forget the simple things and think that their ‘god-gifted’ talent should be utilised to doing something complex. I agree the world needs people like Elon Musk who are incredibly smart and are doing wonderful things. But Elon Musk is a survivor in my eyes. He could have very well been bankrupt right now. There was a combination of luck and skill for him when Tesla and Space X worked out. Elon Musk was completely fine in failing in these ventures as he thought it was important enough to at least try. But the odds of him succeeding were low.
There is a wonderful Peter Kauffman quote,
“Most geniuses — especially those who lead others — prosper not by deconstructing intricate complexities but by exploiting unrecognised simplicities.”- Andy Benoit
Genius is not intelligent. There are some people who I believe are anamolies. Like Jim Simons. The person was something else. He kept it a secret as to how he has solved the market but we know it was due to his smarts in solving complex problems.
“But being very smart makes it harder to harness that humility. You want to put your big brain to work, and your mental horsepower allows you to create complex stories and elaborate models of cause and effect. Worse, if you believe that complexity equals intelligence and intelligence equals accuracy, you favor the explanation that strains your brain the most.”- Morgan Housel
Solving problems which cannot be solved but thinking they can is a curse of being intelligent. But I think it is necessary for these people to try and innovate things which significantly improve the world.
The major takeaway I have is that smart people often overestimate their capabilities. This leads to overconfidence and them doing stupid things.
“I’ve come to believe that part of the reason professional money managers produce such lousy returns is because the industry attracts such intelligent people. They’re too smart for their own good. There’s a fine line between intellectual rigor and believing your own bullshit, and smart people are at more risk than ordinary folks.”- Morgan Housel
Another point to note when it comes to overconfidence in your own ability is the fact that when a person with ‘average intelligence’ actually might know something you do not you end up ignoring that person. (The ego kicks in)
First thing you have to do is acknowledge the fact that you don’t know everything and at any given moment the other person might know more than you. You never know. It is always good to get a fresh set of eyes. As discussed in this post.
People solving for problems on the ground level would get to know how to solve it better by actually listening to the people on the ground level.
We are not perfect. What we miss, might be obvious to others. Even if you are a person with an IQ of 160 acknowledging that you are not perfect and a fresh set of eyes does nothing to you but help is of utmost importance.
Consistency
As an outsider when we see someone smart achieving something great we expect that result to be consistent. For example, we might see people who innovate better than everyone in the market when it comes to cars. We make that person known as the ‘car genius’.
Imagine how sad it is for a person who was a genius at making traditional film cameras, or making CD’s, etc. If that person had a sense that he is the best in his field he would more likely stick to what he knew and ignore the fact that the thing they are amazing at is becoming obsolete.
This is built in human nature.
But if the rest of the world craves your consistency, you can’t.
They want you to keep doing the same thing over and over.
And you want that too, because you want to guard your intellectual reputation. You marketed yourself as an expert in a specific thing, so it’s hard to evolve into something else. - Morgan Housel
All the other ‘defaults’ or ‘biases’ that apply to us apply to them as well. As I said in the last post though what happens is that these smart people know about these biases but end up thinking they are immune to them. Nobody in this world is a ‘clear thinker’. Not you, not me, and not even Warren Buffett.
Source:
Morgan Housel : The dumber side of smart people
Title was picked up from Chatgpt on the prompt what would Frederik Gieschen title the post if he was writing it?
Interesting find
Thank you for reading,
Samvit.