"The unfortunate truth is that intelligence and experience in one domain do no necessarily translate to another domain. More importantly, IQ tests do not assess whether a person is rational. Someone can have a very high IQ and yet not be very rational. A high-IQ individual may also not have well developed skills, such as judgment and decision making." - Tren Griffin. In fact, having a high-IQ may lead to over-confidence and not understanding where your circle of competence ends.
"A lot of people with high IQ's are terrible investors because they've got terrible temperaments." - Charlie Munger, Vice-Chairman of Berkshire Hathaway. Charlie also said, "Very-high-IQ people can be completely useless-and many of them are."
An old joke about Albert Einstein illustrates this point, Einstein passed away and went to heaven where he was informed that his room was not ready yet. He was told by an angel who was responsible for new arrivals, “I hope you will not mind staying for a while in a dormitory, I’m sorry but this is the best we can do right now.” The angel then escorted Einstein to meet his roommates saying this is your first roommate, she has an IQ of 180. “That’s wonderful!” exclaimed Einstein, “we can discuss mathematics.” The angel then said here is your second roommate his IQ is 150, “That’s wonderful,” responded Einstein, “we can discuss physics,” The angel finally said here’s your third roommate his IQ was 100. “That’s wonderful, where do you think the stock market is headed?”
Being humble and thinking your IQ is a bit lower than it actually is may in fact improve your investment success.
This blog is written from ideas from Tren Griffin's book, "Charlie Munger, The Complete Investor"
-Paul R. Rossi, CFA
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