Uncommon “Common Sense”
“Common sense is the collection of prejudices acquired by age eighteen.” — Albert Einstein
Welcome to this week’s blog where I ruminate on how uncommon “common sense” is and importantly what may be steering us away from common sense. This is an important topic because decisions guided by common sense tend to be simpler and more effective and, in a world where common sense is rare, such decisions could give you an unequal advantage.
I recently finished a mighty impressive book called “The Goal” by Eliyahu Goldratt. At one point in the book the protagonist, during a poignant conversation with his wife, wonders about what impedes common sense, although it is largely accessible to our intuition. After a prescient prompt from his wife, he finally resolves that “common practice” holds us back from “common sense”.
“Why is it that common sense is seldom common practice?” — Eliyahu Goldratt
This otherwise unremarkable paragraph in the book livened me up. Common practice is probably the biggest hurdle to common sense. This immediately appealed to my “intuition”. My own life has been a series of hard experiences wrangling with common practice on my path to finally discovering common sense.
Here are a few examples
“Common sense is in spite of, not as the result of education.” — Victor Hugo
- Good academic education will ensure good life: Perhaps very naïve of me but for a good portion of my life, I believed that good education early on in life will continue to provide differentiated opportunities throughout one’s life. This is actually true to an extent but only to a very limited point. Good academic education’s biggest value lies in its potential to give you your first career break. After that, your career trajectory is driven by factors such as luck, lessons learnt in your career journey (non-academic education, if you may), networking etc. Formal academic education becomes a pale advantage later on in life
- Creating extraordinary value will result in extra ordinary career growth: Well, creating extraordinary value for your organization will probably help you in limiting downside to your career growth but certainly is no guarantee in creating alpha. In fact, great careers, particularly in large organizations, are built more by factors such as networking and “profile” cultivation than by actual value created. Not to say that creating value is irrelevant but it is subservient to other factors in progressing your career
- Higher Productivity will get you done more: As unintuitive as it may seem, I’m now convinced that relentless focus on productivity will result in lesser overall production than otherwise. Problems with trying to improve productivity: 1. Sooner or later, one will start improving productivity of irrelevant or lower priority items 2. Great ideas/innovation tend to arise during non-productive time. Focus on productivity (i.e., getting maximum out of your day) may preclude generation of creative ideas 3. It is almost always impossible to measure productivity — so you end up measuring a proxy for productivity and your pursuit will eventually degenerate into improving the proxy measure as opposed to the real productivity
- Running fast in training runs will result in running fast in races: Following on from the point above, running mostly fast in your training, will only increase the risk of injury and burnout and this will inevitably result in eventual sub-par race performance. A much better approach during training is to do very limited and pointed speed training runs and mostly easy and few long runs
- High Income leads to large wealth: Well, income is necessary to generate wealth. But once one starts to earn income in excess of expenses, an equal, if not more, focus on saving and investing is as important as increasing income. No level of income will be good enough if expenses keep up with it
- Financial wealth leads to happiness: A certain level of financial wealth is necessary for happiness but beyond this level, wealth does not add to happiness at all. In many cases, it may actually reduce happiness — more wealth means more time away from happiness and towards money management, more chances of losses, more fancy social activities, more non-genuine relationships etc
“Knowledge counts but common sense matters.” ― LouAnne Johnson
- Actively managed mutual funds return better than index funds: Too much literature on this already but the fact that actively managed funds continue to exist makes me wonder if our wishful belief in the ability of active managers comes in the way of common sense here — common sense being, index funds return better than actively managed funds, at least in mature stock markets. This is based on well researched and established point that Fund managers have demonstrated no particularly ability to pick better stocks than average, consistently
- Money is made in the stock market by buying and selling stocks: Actually, big money is made in waiting — buying and selling are the start and end points of making money. Too much of buying and selling of stocks (otherwise called, trading) almost always results in sub-ordinary returns, if not losses
Bottomline
“Society is always taken by surprise at any new example of common sense.” — Ralph Waldo Emerson
Common sense may be, ironically, uncommon in practice but is accessible to our subconscious in the form of intuition. I suspect that the genesis of most of our common practices is probably rooted in codifying and institutionalizing common sense but with time, these practices may not have kept up with evolving societal development or priorities. So, it makes sense to periodically examine your ingrained practices particularly if they have been handed down to you as “best practices” to discover the “common sense” aspects that they are obscuring.
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