Experience has taught me to pay much more attention to people with street smarts than with academic pedigrees. In college, I never spoke to even one professor. I felt I was way too stupid to waste their time. And I certainly didn’t want to let them know just how dumb I felt I was. This is not false modesty. I was allowed to waive taking second year Algebra in high school, and enroll in an art course. The school agreed that there was no sense in my flunking Algebra since probably there was no way I’d ever be in a career that required knowledge of math. Ah, the accidental nature of life. Accidental in that I was pushed into the investment business, to discover, after I had been at it for several years, that it was mostly about human nature, not math. Warren Buffett is arguably the best investor of the last fifty years. Sure, he’s brilliant, and can rip apart balance sheets and income statements. But his real brilliance is in his common sense. Three of his biggest holdings are Proctor and Gamble, American Express, and Coca Cola. He holds his investments generally for years, not months and weeks. Why are these companies favorites? Proctor and Gamble produces products you use and throw out and need to buy again: soap, razor blades. American Express sells you goods and entertainment and travel, all based on their high-end credit cards. Coke sells you Coke and other consumer brands. Their reach is global. Common sense. On Buffett’s part. Contrast this simple approach with many economists. One of the biggest hedge funds in the world imploded near the end of the Twentieth Century, in 1998, to the tune of $4.6 billion, and threatened the stability of financial markets. The hedge fund employed ghant programs, computer generated, orchestrated in part by two directors of the fund, both winners of the Nobel Prize for economics. The Federal Reserve had to come to the fund’s rescue to prevent systemic chaos.
Some years ago, another Nobel Prize winning economist rented a beach house right next door to us. He even looked like a professor, rumpled hair, not quite like Einstein, but close, He dressed as if he reached for his clothes out of the laundry pile, in the dark. He was sweet though, as if he were always lost in mathematical dreams of his own. I often watched him approach his house, a slow shuffle to an outside deck, one step up from the ground. Every time he went to step up, he tripped on the step. Every time. He also made the mistake to call me for help raising several windows and opening wine with an old-fashioned corkscrew. He smiled at me and shook his head as if ordinary routines of life were beyond him. “He doesn’t know if he’s afoot or on horseback,” I said to my wife. “And I was afraid to talk to professors? The Emperor’s New Clothes.”
This observation has been underscored for me many times when we’ve been at academic dinners or cocktail parties. At these gatherings I have never heard one word by anyone about sports, novels, television, movies, the stock market, or families. I have only heard discussions of politics, Op Ed issues, institutional gossip, and sticking daggers in various backs. In other words, the real stuff of life, our daily concerns, fears and joys, were ignored.
My recent case of being careful about assumed genius took place right before the economic meltdown three years ago. I was invited to a small dinner, hosted by two directors of a public company. The evening was to introduce the firm to new, potentially significant clients for the company as they expanded services in the city. I sat next to two other guests, the CEO of a bond mutual fund company and the president of a large real estate empire. After a five-course dinner, our two company directors did a dog and pony show, smug, sure of themselves, convinced they knew more about everything than anyone in the room. Both directors had been in Washington in their careers, almost at cabinet level. Insiders. They went on like Frick ‘n Frack about the wondrous job the company was doing. One of my new friends, the real estate mogul, handed me a folded piece of paper. I opened it. He had written, “Neither of these guys would know an ordinary American if they tripped over one.”
What I’m preaching here is that so called genius helped to get us in this economic mess. Just months after this fancy dinner, the parent company of the two speakers plunged eighty percent in price, partly on the enormous leverage put on its balance sheet. Greed and stupidity, masked in intellectual brilliance, too often, in my experience, sinks the ship.
Take common sense and street smarts over graduate degrees, as you wend your way through a world that increasingly wants to complicate, not simplify.
So what can you do to guard yourself, and your money, from people who preach from on high, and who also really know what’s best for you? A few judicious questions that others will probably never ask, might help. You want to discover if these Mensa types actually ever worked with real people. One is, ‘What jobs did you have in the summers in high school and college?’ Also, ‘Did you ever have to make a payroll, paying employees in a business you ran?’ And maybe the most important, ‘What have you learned from the failures you’ve had in life, the times you screwed up?’ These questions will personalize the brilliant ones. They’ll get the geniuses down from high horses, down and dirty. And, if the answers are not forthcoming… don’t buy it. Or them.