Ben Carlson has written an article about the curse of intelligence where he says thatemotional intelligence has a much bigger impact on the success or failure of investors than where they went to school or how complex their investment strategy is.
Carlson says most of the people he interacted with throughout his career are highly educated at some of the best colleges and universities in the world. Many continued their education by getting advanced degrees or prestigious industry designations. Carlson finally had a realization – intelligence can only take you so far in this world. It became apparent that the smartest person in the room isn’t always right. In fact, most of the time their intelligence works against them because they’ve become so sure of themselves and their investing abilities that they’re unable to change their mind or accept the fact that the markets don’t care what your IQ is.
Carlson points out that some of the smartest people outside the world of finance can also be terrible investors. Doctors, lawyers, and engineers are some of brightest, most educated people around. Yet his experience with many in this group (not all, of course) is that they tend to be horrible investors. This happens because they assume success or wealth in one arena (their job) will easily translate into another (the markets). Smart people are often the most dangerous in terms of poor decision-making ability because they tend to be overconfident, make things too complex, and over-think things.
Intelligent people need to realize that it’s okay to say “I don’t know” from time-to-time. And thinking in terms of probabilities can help you avoid the certainty trap in trying to pretend you always know exactly what’s going to happen. The best investors in the world have the ability to explain complex topics and strategies in a way people can actually understand them. Carlson concludes that it is always a struggle to keep things simple in a complex world. That struggle may be even more difficult for the smartest among us.
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