Correlation Is Not Causation

A few years have passed since I’ve blogged about investing.  I used to post more about it when I worked at a firm where I put myself in charge of writing a quarterly investment newsletter of sorts; then I’d basically copy and paste what I’d already written.

One of the themes of that prior investment writing I did was how there was little, if any, correlation between how the markets perform over long periods and virtually any other specific individual thing.  Investing history and statistics prove that if X happens, it does not impact the future of Y.

The best current example of this investing correlation mistake is people who want to correlate the political parties with stock market performance.  The fact is, there has never been a correlation between those two things.  [Note to those Republicans who still believe those things are related, you actually want a Democrat in office, because the stock market went up more during three democratic presidential terms than for any republican presidency.]

Another very broad example of this investing correlation fallacy involves technical trading, which is buying or selling based on nothing more than the grid lines on a chart. For some, these simple securities price charts signal a breakout up or down, ergo an investing opportunity.  It's amazing how many otherwise smart people believe in this type of technical 'strategy' when it has nothing to do with the underlying company.  It's stupid.

This all makes me think, what other things do people want to positively or negatively correlate that have no real correlation?  There are so many, but here are a few that annoy me:

* Scholastic grades and intelligence.

* Hours spent at the office and work.

* Owning a Fitbit (or other electronic health tracking device) and weight loss.

Post #400

This is my 400th blog entry since I started it almost 10 years ago(!)  (I'll have to throw a party in July when the actual 10th anniversary arrives.)  I'm going to do what I've done in past 'century' posts, which is to review some of what I wrote about since my 300th entry.  The time gap between the 300th and 400th is going to expose how I don't write as much as I used to -- it's taken me twice as long as the prior 100.

I wrote about several recurring annual topics, including the Berkshire Hathaway Annual Meeting (soon to be post #410), my advice to graduating seniors, RAGBRAI musings, and things for which I'm not thankful. 

I wrote about how smart people have many advantages in the world, but are disadvantaged by a lack of numbers, and so many stupid people holding them back.

I wrote about new cities and regions of the country I visited, including attending the Rose Bowl.

I wrote about how great social media technology and platforms could be, if not for the all of the people who use social media for evil and not for good.

I wrote more about our country's slow, inexorable march toward decriminalization and legalization of marijuana, which can't come soon enough.

I wrote a few more times about financial issues, and starting my own firm.

I wrote a handful of times about great songs and songwriters, a dying breed with the exception of a few hip-hop and country artists, to which I rarely listen.

Nearly 100 entries apart, I wrote about my observations at the funerals of my father and mother.

I wrote about how religion separates people (and in many cases, harms people) at least as much as it brings people together.

I wrote about the dysfunction and hatred of this decade's politics and politicians, which is in many ways related to the last item.

I wrote about how today's baby boomer parents are ruining not only their kids' lives, but society in general, with their awful parenting.

I wrote a few items of self-reflection, on what happened in the past, and what I might do differently if I knew then what I know now.

400 posts.....bring on the next 100!

Beyond The Evolutionary Lottery

There are all kinds of built-in advantages to being a natural 1) Caucasian-born 2) American 3) male.  Any one of these three gives a person a head start in life; being all three is like winning the evolutionary lottery, especially economically and socially.  I realize this, although most do not.

However, there is one thing I believe no one is naturally born with that, if attained through effort and some luck, creates a big advantage in life.  Intelligence.  (I say luck is involved because although it isn't natural, intelligence is still more likely to be attained by those advantaged, white American males who are far more likely to be educated through college.)

Smarter people are capable of doing more things in life, and doing them effectively and efficiently, and therefore they gain advantages over others.  There are tons of examples, some obvious (understanding technology) and some not so obvious (critical thinking).

Knowledge is power, whether it's at the office, at the bar, or at the neighborhood block party.  Just being able to carry on a conversation with the person standing next to you, whomever that is, can be a big plus in a variety of situations.

There is one major downside for some of the smarties out there:  Their frequent inability to grasp that they aren't always the smartest person in the room.  This brings them well-earned disregard from those they would seek to impress.  Let's just say the positive correlation between knowledge and power is sometimes offset by the negative correlation between intelligence and self-awareness.

Regardless, knowing things other people don't know is a huge advantage in a world that relies less and less on physical talent.  The best part of this is, almost anyone can do it.  (I say almost because again, it helps a lot to be born in America, home of taxpayer-funded public education and the public library.)

If only it mattered more in politics, where intelligence apparently provides no advantage whatsoever.