We talk about rituals, get a primer on drinking yerba mate, talk about banks discriminating when issuing mortgages, payday loans, George Washington, enjoying the act versus the result, and flow.
1) 40-50% Down Payment on Mortgage?
2) Where to invest for rock-solid safety?
3) 529 for Grandkid?
4) About to graduate with $550K debt. Plan?
5) Where to put $90K for a year or two?
6) Different Asset Allocation Strategies for Multiple Accounts?
At the start of boxing matches and UFC fights, the referee tells the combatants to protect themselves at all times.
The myth behind the saying is that long ago, at an Olympic boxing event, they used to run them tournament style, with three fights going at once in the same arena, with the rings close to each other. The favorite to win the whole thing was winning his match, the bell rung, and he put down his hands to claim victory and move on to the next round. But the bell that rang was for a ring next to his — his round hadn’t ended, and his opponent seized the opportunity and knocked him out just as his hands went down.
Ever since, fighters have been warned at the beginning of every fight to protect themselves at all times.
Not only is this good advice for the ring, it’s good advice for life.
A little more than ten years ago a professor of psychiatry had just finished writing his book, “Annals of Gullibility: Why We Get Duped and How to Avoid It”. The irony? He was about to learn that he had invested his money in the biggest ponzi scheme of all time. What happened? If you ask me, it’s simple. He put his gloves down.
And this isn’t just about scams — many people stop defending themselves because it means they’d have to ask somebody to clarify themselves, and that can be uncomfortable. This is often as simple as being asked to take on a daunting assignment at work. The person asking you to do it may not have any idea how much time it will take you, or be aware of a similar result you could produce with 20% of the effort, but because it risks your reputation (perhaps coming off as lazy) and their reputation (not knowing the time or options involved), many people just take the punch.
This concept applies far and wide and on many issues, you have more incentive than anybody else to make sure you are protected. Mechanic says you need some expensive work on your old car? It’s very normal to get a second opinion on that, but it carries the implication that you don’t trust your mechanic entirely. Many people put down their guard at the slightest threat of making somebody else uncomfortable, despite the great discomfort it is likely to cause them down the line.
How can we combat this? Two ways.
Be honest about who you trust and who you think is excellent at what they do. They need both of those things to let you put your guard down. These types of people are invaluable, but most people rush to put people into this category and do it far too soon. But, when you have an accountant or a hair stylist or a personal trainer who you know will give you what you need and you can trust them to have your best interests at heart, you should value them immensely. They are the friend who you can ask a question to and get an honest answer. They’ll tell you if those jeans make you look a little too chonk.
The real benefit of those people is mostly overlooked, though. They are experts at what they do, and they are well calibrated (a word of caution here, most people, including ‘experts’, are not well calibrated, and that’s a requirement for trusting somebody’s judgment). When they tell you something that is surprising, you should ask for more detail and ask how certain they are.
I work with a bunch of highly competent people. We all work in the same field, but all have different specialties and experience. I’m known to frequently ask “are you sure?” or “is that right?” when somebody tells me a surprising fact. Why? I want to know if they are pretty sure they are right or absolutely damn sure and I’d be wasting my time double checking. It will often prompt them to explain the major exceptions.
In most areas of life you will not have these people, and that leads to the second thing you must learn how to do. You must learn how to figure out the right questions to ask.
A lot of people give up right away on the task of finding the right questions, because ultimately it means you’ll have to ask them, either of yourself or of somebody else — it’s hard to say which is worse!
It is easier now than ever to find the right questions to ask about anything, but that’s a double-edged sword. It’s also easier than ever to find the wrong thing that sounds just right.
The task is hard, and some people who put in the work will seem to be able to find the answer to everything (we all know that person), and it’s because they’ve developed a talent for finding the right questions to ask.
The right way to find the questions to ask is often domain specific, though there are common threads. If someone tells me about something medical or health/fitness related, I’m going to see if I can find anything on PubMed that agrees with it. Of course with that you have to learn that a study done on rats might not apply to humans, and a study using untrained college students might not apply to elite athletes. You are looking for both confirmation or disconfirmation and reasons why that might not apply to the scenario you’re looking for.
The main thing to look for is somebody who is considered an expert by many others — learn what they think. But more importantly, learn where they get their information. Find their primary sources. You can often find the root of a disagreement among experts in the source.
When you understand where the experts disagree, that’s where you can start to make your decisions. Why? If the experts disagree, there isn’t a lot of use in spending your time trying to parse those areas yourself — you’ll have years of catching up to do. Instead, find one expert or school of thought whose reasoning you can follow, understand where other people disagree, and make your decision.
A word of caution here — there are clear distinctions between the value of different experts. The value of somebody considered to be an expert by somebody I trust to have the ability to identify an expert is worth more to me than somebody with a million twitter followers.
Finally, remember that we are all susceptible to the Gell-Mann effect. It is far easier to trust a person in an area we are unfamiliar with. If we hear something surprising we should see if other people disagree with that. If they do, we should want to know why.
If it seems to you like opinions are getting more extreme with less room for nuance, you aren’t alone.
As I listened to a recent Joe Rogan podcast featuring Alex Berenson and Michael Hart they brought up a related subject. Alex is an author, and had recently written a book called Tell Your Children: The Truth About Marijuana, Mental Illness, and Violence. Michael is a Canadian doctor at a medical cannabis clinic.
The podcast itself was pretty good, Joe does an above-average job of moderating and being nonpartisan, Alex does a decent job of pushing back and making good points, and Michael was just okay, clearly taking a clinician’s point of view, but occasionally being wrong on facts.
Toward the end, Michael accusing Alex of only portraying one side of the facts in his book, to which Alex says he makes it clear up front that’s what he’s doing, and that he thinks marijuana gets nothing but the good aspects discussed, so he’s giving airtime to the downsides and counterarguments. It reminded me a lot of this recent post on SSC.
This is a pattern I see again and again.
Popular consensus believes 100% X, and absolutely 0% Y.
A few iconoclasts say that X is definitely right and important, but maybe we should also think about Y sometimes.
The popular consensus reacts “How can you think that it’s 100% Y, and that X is completely irrelevant? That’s so extremist!”
But I can see why this happens. Imagine the US currently devotes 100% of its defense budget to countering Russia. Some analyst determines that although Russia deserves 90% of resources, the Pentagon should also use 10% to counter China. Since no one person can shift very much of the defense budget, this analyst might spend all her time arguing we need to counter China more, trying to convince everyone that China is really very dangerous; if she succeeds, maybe the budget will shift to 99-to-1 and she’ll have done the best she can. But if she really spends all her time talking about China, this might look to other people like she’s an extremist – that crazy single-issue China person – “Why are you spending all your time talking about China? Don’t you realize Russia is important too?” Still, she’s taking the right strategy, and it’s hard to figure out what she could do better.
I thought pretty favorably of Alex throughout, and saw him as the China analyst in the latter example, although I think he was clearly trapped in the exact same circular logic as Michael (though a separate iteration) from the first quote, above.
They both see the popular consensus as being wrong and harmful and mention “Y”, but then they each join the consensus in turn and think that the other is wrong for highlighting nuance when the story might be more complicated.
I recall from my undergraduate days a study about an experiment where they asked participants to take turns poking each other with exactly the same force. Instead of going back and forth like pillsbury doughboys, this poking quickly escalating to shoving, because we perceive force used against us as stronger than force we are using.
In this same way, people very often think they are justified in showing just their side of an argument, but are very dismayed when somebody who disagrees with them fails to meet an outrageous (in comparison) standard of impartiality.
Smart people love to nitpick, they just do, but the smartest people know when to allow for generalities and when to point out an exception. A problem that seems to be getting worse is the Big Bang Theoryization of discourse, named of course after the show that is a portrayal of what dumb people think smart people are like. The normal mode of discussion has transformed into a bunch of ridiculous nitpicking of exceptions, but that’s not the shame of it, the shame of it is that people think this is a good thing.
People see an article or a headline and the first thing they are trained to think is, what’s my hot take? Can I possibly start my response with “actually”?
They act like that nitpick proves the original point wrong, but when pressed, retreat to claiming that they were just pointing out an exception. The best comments come when someone points out an exception and says they think it is undervalued or not considered, or in fact takes the opposite position and does not intend to retreat back to the safety of just pointing out nits.
1) Financial things to do for new daughter?
2) What counts for a budget when building an emergency fund?
3) How to fix incorrect Roth contributions?
4) I have excess income, what should I do with it?
5) Balance between saving and spending?
6) Option for savings account?
7) Have $50K to invest, where to invest it?
1) Should I buy a car with all cash?
2) Roth 401(k) vs Traditional 401(k)
3) Pay down student loans?
4) Reducing commissions when moving account to Vanguard?
5) Withheld too much on my paychecks, what have I lost?
6) Roth IRA any advantage over brokerage account?
7) Converting non-deductible Traditional IRA to Roth taxes?
8) Liquidate inherited portfolio?
9) How do I get around my terrible investing habits?
10 (5!) minute long breakdown of the week’s events in markets and the economy.
Markets mixed. Bezos energy.
10 minute long breakdown of the week’s events in markets and the economy.
Markets up. Jobs report very strong, no rate hike.
10 (5!) minute long breakdown of the week’s events in markets and the economy.
Markets flat. No major economic news.
Ben Carlson on what he learned from Jack Bogle: https://awealthofcommonsense.com/2019/01/what-i-learned-from-jack-bogle/
Capitalists in the Twenty-First Century (long, white paper): http://www.ericzwick.com/capitalists/capitalists.pdf