In the early 1990s Andy Grove, then CEO of Intel, addressed a management meeting which I attended. Addressing the East Coast management meeting, he sat in his tiny California cubicle and streamed video to the attendees. Before the advent of Google and the project to digitize books, Mr. Grove predicted that the internet would be like having the Library of Congress at your fingertips. His prediction has come true. We now have a torrent of information more voluminous than the Library of Congress. What is lacking is wisdom to interpret this torrent.
Confusing Information, Knowledge and Wisdom
We confuse information with knowledge and knowledge with wisdom. A short trip to the dictionary:
Information: the communication or reception of knowledge or intelligence
Knowledge: (1) the fact or condition of knowing something with familiarity gained through experience or association (2) acquaintance with or understanding of a science, art, or technique
Wisdom: a. accumulated philosophic or scientific learning b. ability to discern inner qualities and relationships
These words are sequential: information leads to knowledge, knowledge properly applied leads to wisdom. I submit that the internet supercharged by search engines does not move the meter past “information.”
CNBC creates an expectation that a glut of information conveyed through catchy sight and sound is meaningful. Breathless announcers countdown to the 8:30 AM unemployment numbers, new home sales, the Case Shiller Home Price Index, the ADP Employment Report, the Consumer Price Index, the Baltic Dry Index, preliminary GDP results, retail sales, etc. The Wall Street Journal website provides a myriad of national and global market indices. Financial websites such as Yahoo, Marketwatch and Google only add to the economic information overload. The media is capable of showcasing a wide variety of experts knowledgeable in their field, but displaying little, if any wisdom.
Commentators in both old and new media were happy for their fifteen minutes of fame. But in the new media age, Andy Warhol’s fifteen minutes have been reduced to thirty second sound bites.
Wisdom and the 2008 Financial Crisis
A thoughtful observer of the 2008 financial crisis could have foreseen that there were major imbalances in the US and global economy.
- The US ran huge trade deficits.
- Manufacturing moved off shore to low wage countries
- Credit, on every level, was too easily available.
- Wall Street created fiendishly complex derivatives incapable of valuation.
- Congress and the administration outdid each other cutting taxes while increasing expenditures.
- Family incomes were stagnant.
- Interest rates remained at absurdly low levels.
- States ran deficits during boom times, lowered taxes and cut back on funding pension liabilities.
In other words, something was horribly wrong.
Despite the claims of many financial and political establishment leaders that “no one could see this coming,” many did. Commentators such as Michael Shedlock, Bill Fleckenstein, Karl Denninger and a small band of others were able to connect the economic dots. Why? These commentators possessed wisdom. They examined the entire economic picture, thought about the effect of the imbalances and extrapolated the economic harm from these imbalances. To do so and achieve wisdom, certain traits are required: thoughtfulness, a coherent theoretical starting point, real world experience, integrity, humility, critical thinking, a willingness to go against conventional wisdom and mindfulness of the whole. Wisdom often comes from being the lone voice in the wilderness.
Wisdom today is still in short supply. We are again bombarded with the range of unemployment, CPI, retail sales, and GDP reports, but little time is spent in the media on putting this information into context or wider perspective. Can you really rely on one month’s worth of numbers to declare a recession over? What if unemployment is really not a lagging indicator, but a precursor of greater economic harm? Why does it make a difference that unemployment dropped from 564,000 newly unemployed versus 550,000 unemployed when over 6 million people are out of work and the number climbing? Why does the stock market rebound look suspiciously like the 1930 stock market rebound?
Why do We Lack Wisdom?
We lack wisdom in our leaders for a number of reasons. We overvalue credentials, an Ivy League education, a Harvard MBA, a Yale law degree. We do not spend the same amount of time evaluating and training our workers with deliberation and care. Critical thinking is absent in our school systems and universities. We favor the business leader or politician who can deliver the quick answer and pithy sound bite. Mindfulness and humility are just not “cool.”
Before the next phase of the financial downturn hits, we should launch a financial Manhattan Project and hope that wise leaders emerge.
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