When the smart guys get it wrong

Download this column for your publication or website

TORONTO, ON, Dec 24, 2013/ Troy Media/ – Looking back on 2013, I think the most salient takeaway is the often inverse relationship between intelligence and judgement. Put another way, the smart guys have a distressing penchant for getting it wrong.

The ongoing education of U.S. President Barack Obama is a case in point. Although historian Michael Beschloss anointed him as “probably the smartest guy ever to become president,” Obama keeps getting surprised by the complexities of the real world. For instance, there was his discovery that “shovel-ready jobs” were largely a fiction. And there’s the botched rollout of his signature health insurance plan, the practical difficulties of which seem to have caught him completely off-guard.

There’s also his recent ruminations on how government agencies can be slow and inefficient, even bordering on dysfunctional. Very insightful, you might say, except for the failure to connect the dots. After all, this is a man whose political philosophy and programme completely depend on expanding the role of government as regulator, socio-economic arbiter, and all-round activist player.

And Obama’s not the only smart guy with a reality problem. Take Sir Christopher Pissarides, joint-winner of the 2010 Nobel Prize in Economics.

A one-time staunch advocate of the euro, Pissarides now has second thoughts about the single currency’s suitability. Speaking at the London School of Economics a few weeks ago, he recommended that, absent a change in how the euro is managed, it should be “dismantled in an orderly way.” As he now sees it, the single currency “is creating a lost generation of educated young people.”

But here’s the thing. The euro’s vulnerabilities shouldn’t be a surprise to anyone with reasonable literacy in economics, never mind to a Nobel Prize winner. Given the productivity level differences between Northern and Southern Europe, binding them all together in a common currency, and under a common monetary policy, was always an accident waiting to happen. Still, Pissarides notes that he “was completely sold on the idea.”

Then perusing the Sunday Times the other week, I came across a piece on the downfall of Simon Lee, the erstwhile CEO of a company I used to work for – the insurance giant RSA. Although the proximate cause of Lee’s departure had to do with reserve deficiencies in the company’s Irish operation, the article’s author argued that the problem went deeper.

In this telling, Lee was paying the price for having previously snubbed the company’s shareholders by slashing their dividend. Apparently, he wished to use the money to finance expansion in Latin America, whereas the shareholders were accustomed to having most of their annual profits distributed as dividends. Lee, it would seem, forgot that he was just a hired hand.

So what makes smart people prone to doing not-so-clever things? With their combination of brains and educational credentials, aren’t they supposed to be better than that?

In Obama’s case, there were special circumstances. For one, he came to the job from a particularly narrow background, having never previously run anything other than an election campaign. For another, his ascent was marked by an unusually fawning media, something which isn’t calculated to encourage any caution about one’s own capabilities.

Beyond that, smart and credentialed people aren’t immune from the usual range of human frailties – hubris, confirmation bias, herd behaviour, and what have you. Indeed, the American commentator Joseph Epstein suggests that they may be particularly prone.

As Epstein puts it, having been a good student “is no indication of one’s quality or promise as a leader.” Learning how to please your professors requires a quick mind and a willingness to give them what they want. In other words, glib conformism.

But these abilities say nothing about character, judgement, reflection, or independence of thought. And let’s not forget that the players in the subprime real estate collapse had “master’s degrees from the putatively best business schools in the nation.”

This all begs the question of why we are generally so willing to defer to people presented to us as smart and credentialed. Perhaps our suspension of healthy scepticism is part of the problem.

Speaking of Obama, the veteran American TV journalist Barbara Walters recently remarked on the (now disappointed) expectations that he would be “the next messiah.” If that’s what we’re looking for, then we’re in big trouble.

Troy Media columnist Pat Murphy worked in the Canadian financial services industry for over 30 years. Originally from Ireland, he has a degree in history and economics.

Read more Pat Murphy

Follow Pat via RSS