"You’re too smart for your own good." How quickly we dismiss that snide accusation as revealing the ignorance and probably the intransigent know-nothingness of the accuser. But could there be a grain of truth in there?
If you believe in the "curse of knowledge," a phrase apparently invented in a 1989 paper published in The Journal of Political Economy, we may in fact on occasion know a subject too well: Too well, that is, to be able to think creatively or in an innovative fashion about it. According to this article in the Sunday NYT business section, it takes thinking unlike that of those trained in the particular discipline at issue to generate innovative approaches. Andy Grove sums it up nicely, capturing the tyranny of conformity to the common wisdom: "When everybody knows that something is so, it means that nobody knows nothin’."
Personalizing this phenomenon to our profession, I’ll take the liberty of renaming it the "curse of expertise," because, after all, don’t we all consider ourselves experts in our chosen domains? (I sometimes presume I’m an expert in the domain of "the economics of law firms," as "Adam Smith, Esq." is notably subtitled, but I try to catch myself before I go too far down that road—and you should call me on it if you think I have.)
The "curse of expertise" can condemn us to recite what we’re comfortable with, to feel altogether too smug about our familiarity with the landscape, and to unconsciously disarm our mental defenses against cant, or worse–to arm to the hilt our mental defenses against unconventional thinking. It can also lead to thinking and behaving only for the benefit of those presumably already initiated into the particular inner circle of expertise: The author offers this wonderful example:
"I have a DVD remote control with 52 buttons on it, and every one of them is there because some engineer along the line knew how to use that button and believed I would want to use it, too," Mr. Heath says. "People who design products are experts cursed by their knowledge, and they can’t imagine what it’s like to be as ignorant as the rest of us."
Our DVD remote has 59 buttons; I just counted.
Separately, but also in the Sunday Business section, the always-wonderful Peter Bernstein, an economic historian par excellence, tells an amusing tale on himself dating back 50 years to New Year’s Day, 1958, when he was invited to speak at the Harmonie Club here in Manhattan to offer his views on the economic outlook for the coming year. (If you’re not familiar with Bernstein’s work, by the way, you’re in for a real treat: His 1998 Against the Gods: The Remarkable Story of Risk is, alone, enough to cement any one man’s reputation as an insightful and gifted raconteur.)
But back in 1958 he utterly botched his forecast by, in his coinage, "postcasting—extrapolating past experience instead of seeking change in future experience." Considering the bad economic news headlining the end of 1957 (unemployment up by 50%, the stock market down nearly 15%, industrial production down, etc.), he as a child of the Great Depression forecast gloom and doom.
In fact, the country was on the verge of an historic transformation in the dynamism of the economy, as reflected in a sea change in the valuation of the stock market: By the end of 1958, stocks had risen so much that the dividend yield on common stocks would fall below the yield on long-term Treasuries. It has, of course, never since reversed that relationship. Talk about faith in the future….
What did he miss?
It’s very hard for human beings to recognize truly changed environments. So, today, as we gape slackjawed (yours truly included) at the wreckage of the sub-prime/credit crunch, our surprise at the mess, and the as yet uncharted magnitude of the mess, is directly traceable to our not recognizing, starting 18 months ago or so, that things were changing.
Inflation, particularly in the bizarrely mis-named and fundamentally conceptually baffling so-called "non-core" components of food and energy, was rising. Productivity increases were losing momentum. Housing prices were, lo and behold, not appreciating or even starting to slip. Mortgage delinquencies were rising.
But, blinded by the strong run of prosperity from 2002 to 2007, we assumed the Fed could do no wrong, that home prices would continue to climb to the sky, that unemployment would remain at historically low levels, that the stock market would continue its snorting bull ascent as far as the eye could see, etc., etc.
Putting these two stories together should inspire you to:
- Every once in awhile, abandon your comfortable byways of thinking.
- Invite some perfect ignoramuses in and try to explain why you’re doing what you’re doing; let them ask the brilliantly innocent questions children tend to ask. ("What’s a CDO, Daddy? No, I mean really, what’s in there and why would you want to buy or sell one?")
- Be, not too smart for your own good, but too foolish. For your own good.
