Behaviouronomics: On Intelligence

Yogi Berra famously said, “In theory there is no difference between theory and practice, but in practice there is.”

Whenever one starts learning about a new field of knowledge or begins acquiring a new skill, the first confusion is always this — what’s the right combination of theory and practice?

You can devour a hundred books on swimming but nothing happens until you jump in the water. At the same time, just splashing around won’t get you anywhere unless you know the theory about how humans swim, how to move in the right way.

We’ve all acquired many skills over our life time. Some basic skills like speaking and walking are either biological or a product of our environment. Other skills which might have looked impossible for pre-historic man — like reading, writing, cycling, driving — are also so common today that we rarely pause to deconstruct how we acquired those skills.

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Most skills that a modern knowledge worker survives on are a combination of physical and mental patterns. I am calling them patterns because a skill is necessarily an activity where the action (mental of physical) is pretty much automatic and rarely requires conscious intervention.

For a pattern to trigger, it requires certain context — a pre-condition — to exist so that the relevant muscles/neurons can begin firing in a certain way and materialize the action which we call skillfull movement. That context can also be called as domain under which the pattern, the skill, gets established.

However, the downside of this pattern is that it’s so dependent on the context that even a slight change in the context can result in the pattern failing to fire.

All this sounds too abstract?

A simple way to explain it would be to draw your attention towards the fact that chess being primarily a game of strategy, most chess players (contrary to what’s often shown in movies) aren’t necessarily good strategists in real life. The module in their brain, that creates strategies for a game of chess, remains switched off while thinking about real life situations.

Nassim Taleb, in his book Antifragile, writes –

Some people can understand an idea in one domain, say, medicine, and fail to recognize it in another, say socioeconomic life…humans somehow fail to recognize situations outside the contexts in which they usually learn about them…Imagine someone capable in learning languages, but unable to transfer concepts from one tongue to another, so he would need to relearn “chair” or “love”, or “apple pie” every time he acquires a new language. He would not recognize “house” (English) and “casa” (Spanish) or “beyt” (Semitic). We are all, in a way, handicapped in a similar way, unable to recognize ideas when presented in different contexts. It is as if we were doomed to be fooled by the most possibly superficial part of things, the packaging, the gift-wrapping paper around the object.

Which means, the so called idea of intelligence is quite contextual. Someone with high IQ is merely skillful in solving certain kind of problems — the ones that define the IQ tests.

Jeff Hawkins, in his book On Intelligence, argues that the brain is a mechanism to predict the future, specifically, hierarchical regions of the brain predict their future input sequences. Perhaps not always far in the future, but far enough to be of real use to an organism.

So calling someone intelligent is quite an incomplete description of his/her mental abilities. Intelligent about what?

An intelligent athlete, say marathon runner, isn’t someone with mathematical prowess. However, when it comes to moving his body in a way that minimizes the energy spent (and chances of injury) and maximizes the desired physical output, he’s intelligent, isn’t he?

But this does not necessarily mean that he will also be an excellent figure skater. However, because this person is athletic and fit, he will probably perform much better on other physical tasks than an individual who is less coordinated and more sedentary. We could say that he has high kinesthetic intelligence.

So, athleticism is like a general intelligence where you limit the scope to physical activities.

Similarly, when we talk about the ability to think and make better decisions, it should always be accompanied by defining the scope, the boundaries. And there lies the rub.

We, as human, find it hard to draw the jurisdictional boundaries. Reason? In the real world, there are no clear jurisdictional boundaries which is in stark contrast to how we were (and are still being) taught in our schools and colleges. The problem isn’t that our learning was compartmentalized into clearly defined knowledge bodies (physics, chemistry, mathematics, etc.), the problem is that those lines separating the subjects weren’t very useful.

When new investors enter the capital markets, their approach is similar to what they’ve been taught in school, i.e., look for specific bodies of investing knowledge — value investing, technical strategies, momentum/growth investing, etc. No wonder most new investors lose money even after being in the market for years.

The missing link is often this idea of building a general intelligence about money and investing. And how do you do that? By expanding your curiosity beyond the artificially defined boundaries of investment knowledge.

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