Welcome back!
Thanks again for being here.
I think this podcast is just about a year old now.
And I still kind of consider it an experiment.
Even though this is episode, I don't know, 37 or something like that, but it's still been a lot of fun, so thanks again for listening to this.
This episode is about things that might seem helpful and beneficial, but can very quickly backfire on you.
Most people will die after about three days without drinking any water.
But drinking too much water can be equally dangerous.
Water intoxication is deadly.
It kills people every year.
And in fact during rigorous training in the military, there are about a dozen soldiers every year on average who are hospitalized for drinking too much water.
Maywest said, too much of a good thing can be wonderful.
And that might be true for some things in life.
Maybe you can never be too healthy, too happy.
There can never be enough gold retrievers in the world.
Maybe that's one of them.
But in so many cases, the thing that helps you can be taken to a dangerous level.
There can be too much of a good thing in a lot of things in life.
And since it's a quote unquote good thing, not an obvious threat, the danger of having too much of a good thing can creep into your life unnoticed.
It makes it particularly dangerous.
Take intelligence. And when I say that, I'm talking about book intelligence, the kind of thing that will show up on your SAT scores or your GPA, I'm not talking about street smarts or wisdom.
I'm talking about what we traditionally think as school smarts, book intelligence.
Now how could someone possibly be too intelligent?
Sounds ridiculous. And of course there's going to be so many people.
You be most people would say like I would love to be smarter.
I would love it if my brain worked a little bit better than it does today.
That seems great. And it's true, like I want to be smarter of course, but there are downsides that are so easy to overlook.
How do you get to a point when you realize that you could have been more successful in life if you had just been a little bit dumber?
I think it's crazy as that sounds.
It's actually a pretty common thing.
And it pans out in life in a few big ways.
Number one. Every smart people can fool themselves with elaborate stories about why something happened.
Robin Williams, the great actor comedian, was a terrible student in school.
During a macroeconomics class at the College of Marin where he attended, Williams' final paper contained a single sentence to his professor.
It just said quote, I really don't know sir.
Now of course he failed that test.
But the irony is I think that is the right answer to most economic problems.
There is so much that we not only don't know about the economy, but can't know.
Because in complex systems like the stock market and the economy, they behave the way they do because human emotions and shifting social preferences just can't be distilled down to a clean formula.
And so in a situation like that where the reason that the economy is going this way or the stock market is going that way is just a random fluke of what 7 billion humans interacted the way they interacted today.
If you can't know exactly why something is happening, then saying I really don't know is the right answer.
And humility is a superpower in that situation that prevents overconfidence.
But if you are very smart, it makes it very difficult to harness that humility because you want to put your big brain to work.
And the mental horsepower that you have allows you to create complex stories and elaborate models of cause and effect.
And worse, if you believe that complexity equals intelligence and intelligence equals accuracy, then you actually favor the explanation that strains your brain the most.
If I asked you, why did the stock market fall a quarter of a percent last week?
The average person will shrug their shoulders and walk away.
They know that they don't know.
They don't have an answer.
But a very smart person will show you their yield curve model and tell you about their evaluation analysis and then offer an opinion about whether they think that performance will continue.
They'll give you a very elaborate answer as to why the stock market fell last week.
And among those people, the ordinary person or the very smart person, who do you think is more likely to be stricken by overconfidence over time?
It's obvious. I've come to believe that part of the reason that professional money managers produce such lousy returns is because it's specifically because the industry attracts such intelligent people.
And they're too smart for their own good.
There is a very fine line between intellectual rigor and believing your own bullshit.
And I think very smart people are at way more risk for the ordinary folks might be.
Number two, the second point is that being very smart makes it harder to listen to people who are less credentialed than you, even when they might have the right answer.
Being smart is almost like a tribe in itself.
And like all tribal affiliations, it becomes harder to view outsiders as equals.
So the amount of time and money and stress that it takes you to get a college degree, or to become a senior vice president at your company, or to win a prestigious award, can lead you to believe that others who lack those accomplishments cannot offer valuable insight.
Because if you did take those people seriously, you start to question why you put so much effort into your credentials to begin with.
It's a pretty reasonable path to go down to think that.
But it's amazing what happens when you become open to the best ideas, rather than the most credentialed voices.
One of the funniest scenes from Seinfeld is the episode called Jerry at the Dentist.
Before putting the nitrous oxide mask on his patient, the dentist inhales the gas himself and he declares, yep, it's good.
The whole scene was in accident and actor Brian Cranston, who plays the dentist, he later revealed where that joke came from.
He said, quote, as we were rehearsing, I hear someone say, hey, you know what would be funny?
And I look around the set and I see a stage hand on a ladder adjusting a light.
And he goes, it'd be funny if before you gave the gas to Jerry, you took a hit yourself.
And Brian Cranston said, oh my god, that is funny.
He went on to say quote, I think a very smart CEO of any company, Bigger Small, has a policy where they listen to every suggestion and idea.
The best idea wins. That's how it should be.
The best idea wins and you never know where it's going to come from.
Now, you could see how that idea, that philosophy could become dangerous in something like medicine or nuclear physics where the cost of ignorance is very high.
So a brain surgeon should not be asking for tips offered by the hospital janitor, of course.
But in so many industries, that philosophy is not appreciated enough.
I've often wondered how many tens of billions of dollars have been paid to management consultants to solve problems.
That a low wage line worker had a solution for only because a manager who wears a suit has a hard time taking a guy with dirty fingernails seriously.
All right, number three, having an intellectual reputation to maintain can make it difficult to change your mind when you need to.
I saw this amazing stat this week.
LeBron James is now scored 40,000 points in the NBA.
And the amazing thing is that each 10,000 point increment earned during his career was earned in almost the exact same number of games.
To go from zero to 10,000 points, took 368 games.
To go from 10,000 to 20,000 took 358 games.
20,000 to 30,000 took 381 games.
And 30 to 40,000 took them 368 games.
It's this freakish level of consistency.
And that level of consistency is astounding when you see it.
And to me, that is the hallmark of true talent.
You know that's not a fluke when it's just been so consistent for the last 20 years that he's been playing.
But there is a danger in some fields when a smart person becomes known for their consistency.
Their consistency of doing some sort of talent.
And then the world evolves away from that thing.
But the person is desperate to hold on to the perceived consistency of their talent.
If a smart person becomes known as the guy who can forecast the stock market, or the woman who can predict the next presidential election, you then run the risk that you are only an expert on a version of the world that may no longer exist.
If the world evolves, you should probably either find a new area to apply your intelligence, or alter your confidence, or at least change the way that you work in the product that you deliver.
But if the rest of the world craves your consistency, then you can't.
They want you to keep doing the same thing over and over again.
And you want to keep doing that thing too, because you want to guard your intellectual reputation.
Maybe you marketed yourself as an expert doing a specific thing.
So it's hard to evolve into something else.
If you become famous for your smart ideas, but those ideas turn out to be either wrong or outdated, it's extremely difficult to move on.
And the result is a lot of very smart people, clinging to some very bad ideas.
A hedge fund manager who had a moment of brilliance and made a fortune in the 1990s might struggle to adapt, because their ego and their clients expect that hedge fund manager to keep repeating whatever worked last time.
Now, a garbage man does not face that risk.
They are much more attuned to the realities of the current world without the intellectual baggage of past accomplishments.
The biggest risk to an evolving system is that you become bogged down by experts from the world that no longer exist.
And the more evolution a system has, the more you should expect that expertise has a shelf life.
And those most susceptible to that risk are the people who you at least expect.
It's the smartest and most intelligent people who at one point flashed their brilliance, but now struggled to admit that it can't be repeated.
That's it for this episode.
By the way, if you're looking for another podcast to listen to, check out the rundown by my friends at public.com.
It's a financial news podcast that you can listen to in just five minutes, short and sweet, just like my own podcast.
In the rundown, you'll learn about the stocks that are making the biggest moves this week.
You get caught up on what happened in the global economy and figure out what's happening in the wild, always volatile world of crypto.
Maybe you'll even learn why your co-workers crypto advice is probably terrible and you shouldn't listen to it.
Each episode of the rundown is just five minutes and you'll walk away in the loop of understanding everything that's happening in the finance and economic world.
Check it out. Hope you enjoy it.
And thanks again for listening.
