The Problem With Intellectuals

The Problem With Really Smart People

Source: Youtube - How money works

It’s very annoying to people who have an IQ of 160 that they can also be completely useless. But it happens a lot. - Jordan Peterson

Cognitive miserliness can cause us to be swayed by irrelevant information and our own feelings. For example, leading us to poor financial decisions when buying a house. It can also explain why apparently intelligent people can fall for fake news if they rely too much on the gist rather than the details of a statement.

There’s a growing sense that intellectuals of all stripes are producing knowledge cynically with a certain agenda in mind. And if you’re looking for the stuff that comes out of policy institutes, think tanks and the speaking circuit, you’re not wrong.

There is a problem with really smart people that is making you dumber and poorer. Social media platforms like YouTube Twitter Tick Tock and Facebook have allowed an unrestricted access to the greatest Minds in the world. It’s also let us interact with these people instead of only being able to read their curated publishing. Being able to watch hours of interviews with world-renowned Scientists or tweet directly with influential business people is amazing. But it creates five big problems. And when these very smart people start talking about investing in personal finance those problems end up costing regular people lots of money.

Problem number one is the issue of false authority

To become a doctor someone either needs to obtain a medical degree or complete a doctorate. both very difficult academic challenges that demonstrate a high level of intellect in a very narrow field. a doctorate is a project of new research that might research something that nobody outside of that specific field of Academia has ever heard of. new research is still very important. but the skills and knowledge that make it possible to publish a study of the abundance of distributions along the minor access of the galactic bulge don’t translate to making someone a genius in another field that they have not dedicated as much time to. for those of you who didn’t pause the video to look up that joke that was the title of Neil deGrasse Tyson’s PhD. Neil deGrasse Tyson is a very smart man. but he is a great example of someone who has assumed that because he is an expert in astrophysics he is automatically the smartest person in any conversation about anything. sometimes smart people can act stupidly thanks to the the people who are around us. the False Authority bias or the expert fallacy is a well-documented psychological trap that us humans frequently fall into and it’s not really anybody’s fault. a recognized expert in one field will automatically have a platform that draws people to ask them questions. the smart person will try their best to answer the questions even if they are slightly outside of their direct area of expertise.

Using Neil deGrasse Tyson as an example again he is not the world’s foremost expert on black holes. but he could comfortably answer any question the average person would have about them.

A young girl from the audience asking a question: Will a black hole be able to suck in another black hole?

Neil: oh good question it's not past your bedtime?

If the smart person gains a reputation for being able to answer people’s questions they will attract more questions from a larger audience about things that are outside of their area of expertise. Neil deGrasse Tyson is not a particle physicist. but if documentary producers want him to talk about Fusion Energy he is going to need to do his best. eventually he’s asked questions about fields that he has no expertise in. and he makes some bad takes that most people still believe because he is the smart guy on TV. the real-life Rick Sanchez with no humor about him or wit or really anything good about Rick Sanchez the only thing he has from Rick is that he’s into science and he doesn’t give a [ __ ] about anything I guess. I am sorry Neil I don’t want to pick on you but your Twitter feed and Joe Rogan appearances just make you too perfect of an example. the very smart people don’t even want to spread misinformation. but because they are smart they get asked a lot more questions which results in them giving more good answers and more bad answers. anyway Neil deGrasse Tyson might be the king of overly self-confident intellectuals. but at least he hasn’t started telling you how to invest yet. and the false Authority problem opens up four other problems that are much worse. so it’s time to learn how money Works to find out how listening to really smart people is costing us a lot of money.

Figuring out whether someone is truly a subject matter expert or full of [ __ ] can be challenging. but a basic understanding of important subjects can help you identify the false Authority bias.

Problem number two with really smart people is what we let them get away with

Enron was the greatest fraud in corporate American history. senior leadership at the company has supposedly grown it from a humble energy provider to a conglomerate with Advanced Business Systems in a range of fields making money in ways that were just too complicated for the average person to understand.

George W. Bush: you know Enron it made contributions to a lot of people around Washington DC and if they came to this Administration looking for help they didn’t find any.

A lot of investors bought this and the firm’s leadership even gained The Unofficial title of the smartest men in the room. we now know that the only Advanced systems those managers were controlling were the accounting practices that falsified Revenue figures which led to the company being massively overvalued by investors. enron’s Executives were smart people. and that meant that the average person just accepted that they were doing the right thing. a very smart person has been a central figure in most corporate frauds. Bernie Madoff was a veteran trader that was changing how money was made on Wall Street. Elizabeth Holmes was the brilliant student who dropped out of Stanford to start a biotech company. and Sam Bateman freed built a lot of the marketing for FTX around his Persona as an eccentric genius. even Charles Ponzi the original American fraudster got away with his scams because he was exceptionally good at convincing people that what he was doing was too complicated for them to understand. and that they should just give him their money and stop asking too many questions. each of these companies had industry insiders raising concerns about their business practices simply not making sense a long time before their frauds fell apart. so why do people fall for scams? well self-confidence is often a big factor that causes people to fall for scams. people who believe they are too smart or too well informed to be tricked are often quite likely to become scam victims. people also make bad decisions when they become emotional. by having a leader who was once marketed as a once in a generation genius it was easy for these companies to quell the concerns or write it off as the jealous establishment trying to raise fear uncertainty and doubt about their world-changing business. telling a Real Genius apart from someone that needs you to believe that they are a genius is the hard part. but if a company places too much attention on how smart their CEO is it’s normally a bad sign. as a Counterpoint to these examples quantitative hedge funds like Renaissance Citadel and two Sigma use Advanced algorithms to try to beat the stock market. but apart from the incredibly complex math and software engineering they employ anybody working at these firms could explain what they do to an average investor that had even the basic understanding of markets and trading.

Problem number three with smart people is that success is not always an indication of good advice

We know that the average person puts a heavy weighting on the advice of smart people. but even the smartest people in the world don’t know how you should invest your money. an investing strategy is a very personal thing. because it needs to consider your income objectives risk tolerance Tax Strategies and Current financial position. without knowing these it’s impossible for even the smartest investor to give good advice. the problem for a lot of people is advice can be expensive and licensed professionals are also obligated to give people cold hard truths that they might not want to hear - such as, you’re never going to get rich earning fifty thousand dollars a year. people don’t want to hear this. so they look to smart people who are not afraid to give good advice to see what they recommend. someone like meet Kevin is obviously a smart guy because he has made millions of dollars investing into real estate and meme stocks and then Millions more by talking about investing into real estate and meme stocks on the internet. the advice he gives carries a lot of weight because he presents himself as an in the note figure that is willing to teach you the secrets of becoming wealthy from humble beginnings like he did. compare this to to a boomer Like Richard from the plain bagel who is only going to lecture you about how your portfolio is never going to moon and that you should instead take your time to write out clear objectives and work those into a realistic budgeting and investing plan. obviously this guy is an idiot he still works a regular day job and doesn’t have a private jet. a lot of flashy Financial influencers have used the fact that they are rich and you are not as an indication that they are smart and that you should listen to them. and that’s that I truly believe that influencer marketing is ruining the finance industry is ruining the industry I work in. a lot of these people probably believe their own hype so to speak. and actually think that their path to success is repeatable without the advantages or Good Fortune they had along the way. the psychologist Paul piff ran an experiment at the University of California that invited pairs of strangers to play a game of Monopoly. the game of Monopoly is already a balance of skill and luck. but the researchers decided to skew that balance heavily in favor of luck. the game was rigged so that one player would start out with twice as much money get to roll four dice to move around the board faster and got twice as much money when they pass go. Paul piff’s hypothesis was that the player with the obvious Advantage would be embarrassed by the situation and try and help out the other players with a clear disadvantage. the researchers instead found the opposite. piff said in the report he published that in various ways through body language and boasting about their wealth by smacking their pieces loudly against the playing board and making light of their opponent’s Misfortune the rich players began to act as though they deserved the good fortune that was largely a result of their luck. after the game was over the researchers interviewed the winning players and asked them why they think they had won the game. The Players gave breakdowns of their strategies and best plays but none of them attributed their success to luck. in the real world the same psychological effect can happen. and people that have been given a lot of Advantage is can attribute their own action to their success and disregard their advantages. even people that have come from Humble backgrounds often got very lucky along the way to achieving success. Their audience also doesn’t want to believe that the smart person just got lucky because that makes their own success feel less attainable. people like the certainty that comes with a guaranteed result from a predefined set of instructions even though that really (doesn’t?) exists especially in the world of investing.

Problem number four with really smart people is what happens when they start believing their own hype

I have avoided mentioning Elon Musk up until now. but he is obviously Savvy in his particular field which is developing systems to scale new companies. but going back to the first problem with really smart people is that just because musk is great at building companies does not mean he has valuable expertise in all of the other fields that he thinks he does. the culture that he has built around himself is an extreme example of what a lot of smart people experience when their peers assume that anything they do will be perfect. this can do harm. because if the smart people start believing that their judgment is better than the conventional institution of the field that they have applied themselves to then they can do themselves and those around them a lot of harm. if a really smart person thinks that they are too smart to go with a Buy and Hold long-term investing strategy and convince themselves that they will be part of the one percent of people that make a profit by trading Commodities Futures that doesn’t really harm anybody but them. but smart people can work or buy their way into company leadership positions and reject the advice of their employees and consultants in favor of going with their own instincts that are obviously perfect because everybody else tells them how smart they are. their intuition is rarely better than the combined brain power of the entire company. so problems occur. and those problems also compel the very smart manager to rely on more instincts and snap decision making and less on good advice from company stakeholders.

The final problem with really smart people is when they are not that smart at all and they just use the reputation to get by on unfounded merit.

The internet is full of people that talk endlessly about their wealth and success while downplaying or completely ignoring their failures. it’s very easy to pay for positive coverage. and even reputable news outlets will run stories about people’s business success for a small fee. building up that personal branding is step one. with step two being cashing it out to promote an online course or sketchy investment opportunity. the power of smart people is that they don’t get questioned. and they provide credibility to project objects that don’t deserve any. so even if someone isn’t smart at all it doesn’t take a genius to figure out that making people believe you are very smart is very lucrative.

Now, if you still think that you are too smart for any of this to affect you then you should go and watch my video and why financial fraud has cost you your financial future even if you have never fallen for a scam in your life.