Why smart people do stupid things

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This week Judge Richard Sullivan sentenced former hedge fund manager Anthony Chiasson to 6.5 years in prison for insider trading. It was reportedthat the judge marveled at his prodigious wealth by looking at his annual income figures ($16 million, $10 million, $23 million) before commenting: “It’s hard to imagine why someone would risk all that to engage in a crime like this.”

In other words, why did such an intelligent and hugely successful man do something so stupid? Chiasson is no stand-alone idiot. He has plenty of respected company.

Remember Robert McCormick, ex-CEO, Savvis, a US-based tech company? I rephrase. Remember McCormick’s night out at Scores?

Scores is a gentlemen’s club, famous for its sexy strippers, topless dancers and bottles of champagne that each cost thousands of dollars. Apparently, a lap dance could set a ‘gentleman’ back by $10,000.

Now I am not saying that McCormick was stupid to go there.

But he certainly was a dolt to foot the bill for all his friends and ring up a tab of $241,000 in just one night, that too on the company credit card. To save his family (wife and 3 young kids) the embarrassment, he should have settled the bill quietly. But no! His stupidity was compounded by his refusal, citing fraud. After being sued by American Express, his company reached an out-of-court settlement and he was forced to resign. New York Daily News bestowed on him the well-earned title “The Lap Dunce”.

General Petraeus took everyone by surprise. This 4-star general led American forces in Iraq and Afghanistan. He was the highest-profile military officer of the post-9/11 years and was widely credited for his role in running the "surge" in Iraq and implementing a counter-insurgency strategy in Afghanistan. He joined the CIA in 2011 and last November resignedas its director citing an extra marital affair and “extremely poor judgment”. Now he stands a diminished figure thanks to one colossal indiscretion.

Rajat Gupta said it best. He lost his parents as a teenager but carved an absolutely stellar career for himself, almost iconic to many young Indians. Now in his 60s, declared guilty of insider trading by an American court and sentenced to a 2-year prison term with a $5 million fine, stated: “I’ve lost my reputation I built over a lifetime.” 

All these men are well known in their respective fields. They are brilliant. They did not get to where they were by being incompetent slackers. So what does this teach us? That the measure of intelligence is in no way a precursor to smart decisions?

Professor Keith Stanovich from the University of Toronto and the author of What Intelligence Tests Miss: The Psychology of Rational Thought has a very interesting perspective. He believes that there is a narrow set of cognitive skills that we track and refer to as intelligence that gets measured in IQ tests. BUT, this is not the same as intelligent behavior in the real world. A high IQ (which we refer to as intelligence) does not guarantee, or necessarily translate into, rational behaviour. You can be very intelligent, but that does make you rational. He’s even coined a term to describe the failure to act rationally despite adequate intelligence: “dysrationalia.” Conversely, you can be a rational thinker without being especially intelligent.

A friend of mine completely agreed. His brother, who lives in Canada, is a brilliant academician with a high IQ. But he suffers from a gambling addiction which has gotten him heavily in debt. He showed me that Stanovich’s researchreveals that problem gamblers score low on a number of rational thinking tests. They make more impulsive decisions, are less likely to consider the future consequences of their actions and are more likely to believe in lucky and unlucky numbers. They also score poorly in understanding probability. For instance, they’re less likely to understand that when tossing a coin, five heads in a row does not make tails more likely to come up on the next toss. Their dysrationalia likely makes them problem gamblers – people who keep gambling despite hurting themselves, their family and their livelihood.

Try these 3 simple quizzes. 

Test 1

A bat and a ball cost $1.10. The bat costs $1 more than the ball. How much does the ball cost?

Test 2

In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of it?

Test 3

Jack is looking at Anne. Anne is looking at George. 

Jack is married. George is unmarried. 

Is a married person looking at an unmarried person?

Answers: Yes - No - Cannot be determined

The answers

Test 1 - Is your answer 10 cents? Wrong. If the ball costs 10 cents, the bat would then have to cost $1.10, for total of $1.20. The correct answer is 5 cents for the ball and $1.05 for the bat.

Test 2 - Is your answer 24 days? Wrong. The correct answer is 47 days because on the 48^th day, the patch would double in size to cover all of the lake.

Test 3 - More than 80% say it cannot be determined. We need to know if Anne is married to answer that question. The correct answer is yes, a married person is looking at an unmarried person. If Anne is unmarried, then a married person (Jack) is looking at an unmarried person (Anne). If Anne is married, then a married person (Anne) is looking at an unmarried person (George). Either way, the answer is yes. 

By using the above examples, Stanovich and his research partner Dr Richard West believethat most of us are “cognitive misers”, employing mental shortcuts that sometimes lead to incorrect conclusions or foolish decisions. Rather than carefully evaluating the information presented or the situation before us, we skip to the solution that requires the least mental effort and gives us instant gratification. “For most of us, really hard thinking is something we like to avoid as much as possible. And yet a lot of rational thinking profits from this type of information processing,” says West.

To understandwhere the rationality differences between people come from, Stanovich thinks of the mind in 3 parts.

1. Autonomous mind: This part of the mind engages in problematic cognitive shortcuts or Type 1 processing. It happens quickly, automatically and without conscious control. This can be executed at the same time as other higher levels of processing. eg: Crossing the road and having a simultaneous discussion on the phone.
2. Algorithmic mind: This part engages in Type 2 processing - the slow, laborious, logical thinking that intelligence tests measure. It requires conscious mental effort. 
3. Reflective mind: It decides when to make do with the judgements of the autonomous mind, and when to call in and engage the heavy machinery of the algorithmic mind. The reflective mind seems to determine how rational you are.

Temple Grandin, author of The Autistic Brain: Thinking Across the Spectrum, gives her perspective on the accident at the Fukushima nuclear plant a couple of years ago. The people who designed the plant probably had high scores on tests of IQ and math skills. And then they put the backup power generator in a basement where it was going to be useless in a flood—just when they would need it most. That was a stupid move by really smart people. But you can’t say that those who anticipated the problem were smarter than the nuclear engineers, since most of the problem-anticipators would have no idea how to design something as complicated as a nuclear power plant in the first place. Dr. Grandin said when she was younger and less diplomatic she might have called the engineers stupid. But now she thinks they just have a different kind of intelligence. Or, they just don't bring their full mental faculties to bear on the problem. 

Image by Prajakta More

We are forced to engage in rational thinking on a daily basis: what to wear, where to invest, where to holiday, how to deal with a difficult boss, whether or not to have an affair. But, in addition to being cognitive misers, we also suffer from cognitive illusions and thinking biases. So when arrogance, lust, greed, and other emotions come into play, seeming intelligent people can act with head-slapping cluelessness making rational judgement the casualty. I will escape the consequences. I will never get caught. My investment will work. We completely undermine the possibility of a fallout.  

Humans are obsessed with intelligence. We test it, rank it and then judge others by where they fall on that scale. But face it, it’s a very limited concept. Just because we preen around with a smart degree or a high IQ, it does not mean that our actions are always noteworthy. Social intelligence, emotional intelligence and rational intelligence all contribute. 

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So don't be surprised when high IQ individuals overestimate their own capabilities and commit embarrassing blunders that leave everyone scratching their head. Are we not all guilty of going down a path which we later look back and say “What on earth was I thinking? How could I have been so stupid?” 

Remember, rationality and intelligence don't go hand in hand. You may score high on an IQ test, but that does not exempt you from acting like a bonehead sometimes. If anything, that should cause you to be less forgiving towards the other so-called idiots that populate this planet.  

Here's to stupidity. Something that all of us are capable of.