Common sense — or wisdom — is when knowledge meets experience.
The trouble these days is that knowledge is often applied before experience. Knowledge can get captured by ideology and false prophets.
So, I was relieved to watch the vice-presidential debate and learn that JD Vance understands the problem with experts:
‘A lot of those same economists attacked Donald Trump’s plans, and they have PhDs, but they don’t have common sense and they don’t have wisdom.’
America has to return to ‘common sense economic principles’, Senator Vance said.
JD Vance at the 2023 Turning Point Action Conference in Florida.
Source: Flickr / Gage Skidmore
In our developed and complex societies, there’s a danger of hyper-education. In particular, the study of subjects that have little economic or societal benefit.
As Ecclesiastes once wrote:
There’s no end to the publishing of books, and constant study wears you out so you’re no good for anything else.
Virtue signalling and the managerial elite
Modern bureaucracies work by pushing the hyper-educated to the top. To some degree, this has also spread to our larger corporations.
That is why we see PhDs and other highly educated individuals in power. Yet the results they achieve can be misaligned with the interests of voters or shareholders.
Sometimes we end up with the ‘tyranny of the minority’.
For example, a council spends a large amount of money on an event or installation. It benefits only a tiny proportion of ratepayers. Or, worse, it upsets another group.
In government and the corporate world, we’ve seen plenty of minority celebration. The theory goes that some group or another is disadvantaged. The laws of equity say that must be addressed, even though the group’s boundaries are hazy.
Some individuals believe they can increase their own reputation and power by standing up for these groups — or at least be seen to do so.
In fact, many programmes that are targeted at minority groups may lack efficacy. By the intervention, the groups themselves are divided, or have their own individual efforts denigrated.
The wisdom of crowds
Better to reduce or decentralise the power of bureaucrats and elite executives.
The wider majority and the crowd it forms has its own wisdom.
Politicians, corporate executives, and board members who persist with virtue-signalling will eventually find themselves cast aside. At least when democracy and the market prevail.
Working at a trading desk in the global markets, we see the wisdom of crowds at least four nights a week.
Most of the time, every company listed in these markets is priced accurately according to its potential and risk.
Sometimes — especially outside the huge American market — the media shouts ‘fire’, and securities get mispriced. They sit momentarily cheaper than they should.
The efficient market hypothesis (EMH) does not work all the time.
This creates opportunity to buy valuable assets for less than they are worth. That helps create a margin of safety when building a portfolio for the long run.
Do your homework. Practise this week in and week out over the years. Then you’ll build something more valuable than book education. You’ll build instinct and experience.
Sacrifice
There is a frustrating thing with virtue-signallers and poor performers. Their actions usually have no cost to themselves.
So, you’re a spendthrift mayor in a large city? You’ll still be paid a top-echelon salary, at least for the rest of the electoral term.
Those who tend to become wealthy in an enduring way are those who sacrifice the present to some degree for the future.
A better mayor may make savings and investments in infrastructure now for future improvements.
A family may save and invest so that they build passive income and increase their income and wealth over time.
Be wary of hyper-education and solutions that don’t make logical sense at the coalface.
Stop virtue-signalling. Listen to crowds. And make some sacrifices today to build lasting value.
Are you a wholesale or eligible investor looking for common sense in the global markets?
Our individually managed accounts may present some advantages.
Regards,
Simon Angelo
Editor, Wealth Morning
(This article is the author’s personal opinion and commentary only. It is general in nature and should not be construed as any financial or investment advice. Please contact a licensed Financial Advice Provider to discuss your personal situation. Wealth Morning offers Managed Account Services for Wholesale or Eligible investors as defined in the Financial Markets Conduct Act 2013.)