Our struggle with the 3 most important words out there…
“The overeducated are worse off than the undereducated, having traded common sense for the illusion of knowledge.” — Naval Ravikant
This is a loaded statement with a lot of wisdom in there. And if Naval says it, it’s worth spending the time to decipher what this means. If you do not know this man, I encourage you to find out about him, and most importantly, follow him on Twitter. His tweets alone can inspire your progress, your work ethic, your vision in ways, you wouldn’t expect.
‘Overeducated’ is self-explanatory i.e. someone who has spent a lot of time gaining degrees and diplomas + someone who has gained experience in a field, purely due to time spent there.
‘Common Sense’ isn’t self-explanatory even if it sounds so. If it was simple, you wouldn’t have 90% of the problems the world is plagued with. But I am sure, you get the term.
‘Illusion of Knowledge’ describes the tendency of people to think they know more than they really do. It is a dangerous thought process that is precedent to many wrong, painful, expensive, and ruinous decisions or choices made by people. For example (a very simplistic one), almost everyone who drives a car would say they know how a car works, but they really don’t.
Let’s look at a classic example —
On April 12, 1633, chief inquisitor Father Vincenzo Maculani da Firenzuola, appointed by Pope Urban VIII, begins the inquisition of physicist and astronomer Galileo Galilei. Galileo was ordered to turn himself in to the Holy Office to begin trial for holding the belief that the Earth revolves around the sun, which was deemed heretical by the Catholic Church. Standard practice demanded that the accused be imprisoned and secluded during the trial.
…The Church had decided the idea that the sun moved around the Earth was an absolute fact of scripture that could not be disputed, despite the fact that scientists had known for centuries that the Earth was not the center of the universe.
…On June 22, 1633, the Church handed down the following order: “We pronounce, judge, and declare, that you, the said Galileo… have rendered yourself vehemently suspected by this Holy Office of heresy, that is, of having believed and held the doctrine (which is false and contrary to the Holy and Divine Scriptures) that the sun is the center of the world, and that it does not move from east to west, and that the earth does move, and is not the center of the world.”
…Galileo agreed not to teach the heresy anymore and spent the rest of his life under house arrest. It took more than 300 years for the Church to admit that Galileo was right and to clear his name of heresy. — History Website
History is littered with similar examples of people making decisions that have cost millions of dollars (billions at times) or millions of lives. The fascinating thing is that these people were inflicted by the ‘Illusion of Knowledge’ Bias and that was the truth to them, it was their world, their beliefs inside of that illusion. And for anyone to think otherwise, the act itself was considered a heresy, a crime, a blasphemy, and hence attracted severe punishment as seen in Galileo’s example.
Guglielmo Giovanni Maria Marconi, 1st Marquis of Marconi FRSA was an Italian inventor and electrical engineer, known for his pioneering work on long-distance radio transmission, development of Marconi’s law, and a radio telegraph system. He is credited as the inventor of radio,and he shared the 1909 Nobel Prize in Physics with Karl Ferdinand Braun “in recognition of their contributions to the development of wireless telegraphy”.
In 1895, Marconi had many breakthroughs. He had found that much greater range could be achieved after he raised the height of his antenna and, borrowing from a technique used in wired telegraphy, grounded his transmitter and receiver. With these improvements, the system was capable of transmitting signals up to 2 miles (3.2 km) and over hills.
Marconi wrote to the Ministry of Post and Telegraphs, then under the direction of Pietro Lacava, explaining his wireless telegraph machine and asking for funding. He never received a response to his letter, which was eventually dismissed by the Minister, who wrote “to the Longara” on the document, referring to the insane asylum on Via della Lungara in Rome. — Wikipedia
Just imagine for a moment, what exactly would Pietro Lacava be thinking exactly? Was he thinking that he understands everything about sound waves or radio transmission or grounding? Or was he thinking about the absurdity of the idea? Or was he distracted with other pressing matters and commented about the asylum while in a frustrated mood?
Irrespective of the actual story, the fact remains he wasn’t willing to admit ‘I don’t know’. Though he was willing to opine on the technology with no background in the field but admitting ignorance doesn’t come easy to him, or the clergy at the church that sentenced Galileo or anyone else for that matter.
I DON’T KNOW — This needs humility, loads of it. It ain’t easy, given the fact we live in a culture where you're trapped in many ways #
Looking Good
Meeting Expectations
Scoring Brownie Points
Showing Loyalty
Fitting In
Not looking dumb
Losing respect
Blind Belief
Social Proof
These are human biases (expressed in layman terms) and there are many more. The whole list of biases may need 2 full volumes and a blog won’t suffice. But you can check this video out to understand how these biases make your brain hijack your common sense and you have no clue that it’s happening —
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This is funny to watch and I am sure you too would have seen others struggle at conversing or replying or explaining things, which would have made you judge them and look down on them. What you don’t realize is that you might be doing that too and, the painful part, exposing your own lack of understanding and expertise, which in turn makes others judge you and that costs you money, reputation, and opportunities.
The easier path would have been to think about the truth and just admit “I DON’T KNOW”. The people being interviewed in the Youtube video here know the truth but the brain’s in charge of you here and it doesn’t make a good master at most times. It’s better to use it as a servant rather than giving it full control.
No wonder Ray Dalio states in his book Principles (which inspired this blog post) “It is far more common for people to allow ego to stand in the way of learning.” or “Look for people who have lots of great questions. Smart people are the ones who ask the most thoughtful questions, as opposed to thinking they have all the answers. Great questions are a much better indicator of future success than great answers.”
2020 has sparked a transformation that will change the way we live our lives going forward. Some changes that I can see clearly are#
Banking (my current industry) is downsizing across the board, as Apps do most jobs that earlier required staff, tellers, branches, etc.
2. Spending Online is a joyful experience. In the last 7 days alone, I have bought 10+ books on Kindle, USD 100+ worth of supplements from iherb, stocks in the US, and made a donation to 2 education foundations.
3. Education landscape is going through a sea change. The best in their respective industries are creating courses on teachable, brilliant, udemy, skillshare and so many more. I am currently learning Stock Valuation from Steve Clapham on his website and Cryptocurrency on Brilliant. For a seeker, this is a utopia, with the options and expertise available online.
4. Every individual has become a brand on its own. A Youtube influencer is launching her own coffee label, a blogger runs his own paid newsletter on substack, a gym instructor has his own strength training books on gumroad, a college graduate provides freelancing design artwork on Upwork or Fiverr and there are tonnes of more such examples.
These are just surface-level changes that meet the eye. On the backend, systems are being developed, APIs are taking control, automation and digitization is the game, network effects are being created, it’s getting to winner takes all in many industries — in summary, SOFTWARE IS EATING THE WORLD !!
And in this shape-shifting world, where the very premise of your belief system could be extinct in few years, it becomes fundamental to become a keen seeker and a passionate learner and admitting to ignorance when need be. “I DON’T KNOW” is not a taboo or a crime. It is just insanely complex a world we live in.
If you still hesitate to admit this fact, try explaining to your kid or your family member “how does a phone work?”. Or more exciting and relevant to all “how does google maps work?” Though these 2 questions look simple or lame rather, try spending a day on understanding the technology behind these 2 basics of everyday lives. I assure you, even a week won’t be enough to actually understand what’s happening here.
As stated by Sloman and Fernbach in the book The Knowledge Illusion (emphasis added):
[O]ur beliefs are not isolated pieces of data that we can take and discard at will. Instead, beliefs are deeply intertwined with other beliefs, shared cultural values, and our identities. To discard a belief means discarding a whole host of other beliefs, forsaking our communities, going against those we trust and love, and in short, challenging our identities. According to this view, is it any wonder that providing people with a little information about GMOs, vaccines, or global warming have little impact on their beliefs and attitudes? The power that culture has over cognition just swamps these attempts at education.
This effect is compounded by the Dunning-Kruger effect: the unskilled just don’t know what they don’t know. This matters, because all of us are unskilled in most domains of our lives.
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Trust me, you don’t wanna look like Joey 😃
If we acknowledge our ignorance, an empty space in our knowledge that needs to be filled, we need to carefully consider how we say “I don’t know”. Right now, I don’t have the answer but I will find out for you. I don’t know but I know someone that does. Or simply, I’m sorry, but as much as I wish I could help you, I’m just not the right person to solve this problem. I don’t want to put your project in jeopardy.
Depending on who you are, facing this reality can either be uncomfortable, terrifying or liberating. — Shane Parish, Farnam Street
How does all this tie into Successful Investing? It’s simple, you are going to miss the bus for compounding your returns if your ego gets in the way of learning or seeking. Let me give you an example of a few questions that have consumed my colleagues/friends #
Is Bitcoin still a good buy?
Is the Tech sector overvalued or is there further room for appreciation?
Should I buy a property or rent?
Which IPO is the next one to subscribe to?
Should I use leverage for investments or get in with my own cash only?
Is this a good time to buy stocks?
Is Dubai safe enough? Will GCC survive the COVID?
These questions are tricky to answer with many possibilities in the time ahead, weighted with different probabilities. It’s like a web of events shaping the present, which changes the probabilities for these possibilities in the future.
These are difficult questions to answer precisely, irrespective of -
Your background in Finance, Marketing, or other domains
Experience in your current or previous jobs
The no. of books you have read
Who you know in the industry, locally or internationally
How many followers or fans you have
Though you will attempt to answer all or some of them, and many times you will have to, given that it’s your clients or loved ones seeking information to make an optimal choice. In these instances, don’t hesitate to say “I DON’T KNOW”. You always can go the extra mile and find out answers by seeking opinions/views from credible people or patch two people together to make their own calls.
In my case, many sources have become my Go-To for seeking opinions from highly qualified people, who also exhibit lots of humility and admit that they might be wrong on their views. That’s my litmus test for gauging whether someone’s authentic or full of his own bs.
And you will be surprised to know that many of these sources have come into my life through channels that have got nothing to do with my company/college/school/neighborhood. Some I met through Twitter, some through a podcast, some through a reference of a course online, some through my CFA batchmates, and some via my wife’s friends. It’s amazing how many doors could open up for you if you are willing to seek and open to receive.
“The universe is full of magical things patiently waiting for our wits to grow sharper.” ― Eden Phillpotts
Don’t just stop at Joey’s level of knowledge with the letter V, go to the level of understanding wherein you can explain to someone else with clarity and conviction. If you have to remember it all or mug it all, you may be swimming in shallow, but dangerous waters.
I will let Amish (Yes, the author of Immortals of Meluha and many others) sum up the message, with a few paragraphs from his new book DHARMA
The blessings of Goddess Lakshmi have increased dramatically, but Goddess Saraswati’s grace is not as easily bestowed.
‘When it’s our own character under scrutiny, the excuses become justifications. We refuse to accept responsibility. Often, we don’t even admit that there is a problem, even to ourselves. We make up stories instead of examining our own selves.
A huge chunk of success and bliss is experienced by playing long term games and a willingness to look stupid in the short term. It’s OK to NOT KNOW. It’s better to always be in the process of GETTING TO KNOW MORE, LEARN MORE, BE MORE !!!
Welcome to a new and a better you in 2021 !!! Wishing you a spectacular year ahead.
Loads of Love & Luck.
Manish