People's knowledge often tends to be quite shallow. Many of the individuals we meet can't explain the basic concepts that affect their lives or professions. Is this a blessing or a curse?
Smoke and Mirror
When we browse social media platforms like LinkedIn, we see highly skilled individuals proud of their work, exuding confidence. There's no need to doubt their abilities for even a moment. They are truly experts in their field. Throughout my career, and even before that when I was studying or naively believing I could make a living from running fast, I've met many such talented people.
Thankfully, my leg injury at the age of 17 taught me a valuable lesson - I'm not only not special, but I'm actually quite average - me, myself and I
Yet, I’ve seen the pattern over and over again.
A well-known property investor spent a decade teaching about the benefits of rent, only to discover during a live interview that 80% of his portfolio's growth didn't come from rent at all. In fact, it was just 2% annually before taxes. All those books, seminars, and YouTube videos he shared were based on this misconception.
I believe my field, software engineering, has been declared automated about three or four times during this and the previous year. Jokes aside, it might actually happen one day, but recently, there have been thousands of bold claims with predictions only spanning one, maybe two, quarters.
And let's not even start on the economic predictions for 2023. Predictions about CPI (inflation), country growth, or human behavior were incredibly inaccurate. Assuming a return to the average could actually earn someone a lot of money. I'm looking at you, magnificent seven, ahem, one.
Yet, when these predictions, opinions, and "facts" were made, they were presented with absolute confidence. There's a reason for this: such behavior is handsomely rewarded.
Gamification of Evolution
One might think making bold claims is risky, and it probably was in the past. We tend to worry about the opinions of the group we belong to. There's a lot of discussion about why we evolved this way. The benefits of staying with the group were huge, and evolution adapted us accordingly. However, we shouldn't criticize too harshly - after all, we're still here.
The confidence people have in their beliefs is not a measure of the quality of evidence but of the coherence of the story the mind has managed to construct - Daniel Kahneman
Being cautious can be very beneficial when facing potentially dangerous situations. Also, being adventurous has less benefit when the potential rewards are small or short-lived. We're not used to rewards that grow and last over time. Just like evolution favored safety, we now tend to aim for big wins because they last, while failures are often not fatal. In the end, can we really remember who made an odd prediction three years ago? It's not rare for a board member or a politician to harm a company just to get a short-term gain. Moreover, we often see the same people on another board later, as the public and investors tend to forget.
The penalty often doesn't exist, especially when comparing benefits to penalties. The incentives are clear. There's another aspect to consider as well.
Your streets, Our tenements
Lasting and growing rewards are possible thanks to the advanced society we have built and all cherish. I'm not worried about my apartment being raided tomorrow, so I save on maintaining my two-handed sword and lean towards taking risks when making personal Monte Carlo. Truth be told, I have inherited all these miracles: safety, education, and most importantly, clean toilets - a top predictor of wealth accumulation worldwide. OK, I made that up, but the absence of sewers could quickly undermine many benefits.
Just like in physics, interesting questions arise when we push things to their limits. Many things just don't add up anymore, and we search for better theories to be proven later. Rewards outgrow an individual or a family. The leverage provided by society is boundless compared to a single life. However, the consequences of leveraging are not and are often impacting billions of people.
"Privatize gains and socialize losses" - a saying from someone clearly very wise
Understanding the reward system is crucial for navigating both personal and professional life. In this case, ignorance is far from bliss. One could find inspiration in the gaming landscape, which often maximizes fun by tweaking the rules. However, many great multiplayer games become unenjoyable because the original purpose of gaming has been overshadowed by a reward system designed for user retention. Players don’t want to be merely retained; they want to enjoy the game. This is where the arms race begins.
The lesson here is clear: know the motivations of everyone you're dealing with. This helps you avoid going against the flow and other unpleasant situations. Plus, understanding motivations can give you insights into what might happen next. Some people suggest that if we don't understand something, we should "follow the money" - the ultimate business motivation. Incentives are everywhere, not just in the professional world, both given and chosen. We should be careful to not pick the wrong ones.