Cipolla wrote that you keep the total number of idiots low without exception, because no matter how many idiots you think you are surrounded by, there are always more. The reason for this is the skewed assumption that people associate smart people with a job title, education level, or other characteristics that are supposed to prevent stupidity. Let`s take a look at Cipolla`s five fundamental laws of human stupidity: Declining societies have the same percentage of stupid people as successful ones. But they also have a high percentage of defenseless people and, Cipolla writes, „an alarming spread of bandits with shades of stupidity.“ When investing, the problem of investor „stupidity“ is exacerbated by various biased assumptions. Individuals assume that when the media publishes something, superficial factors such as work, education level, or other characteristics of the commentator indicate that they cannot be stupid. We therefore attach credibility to their opinion as long as it confirms ours. This is called „confirmation bias.“ There is no defense against stupidity. The only way for a society not to be crushed by the burden of its idiots is for the non-stupid to work even harder to make up for the losses of the stupid. If you draw parallels with the environment and some people try to compensate for other people`s, Cipolla was not far from the truth. This law also introduces three other phenotypes that, according to Cipolla, coexist with stupidity. First of all, there is the intelligent man, whose actions benefit both himself and others. Then there is the bandit who favors himself at the expense of others.
And finally, there are the powerless, whose actions enrich others at their own expense. Cipolla imagined the four types along a diagram as follows: Cipolla postulates that stupidity is a variable that remains constant across all populations. Every category you can think of – gender, race, nationality, education level, income – has a fixed percentage of stupid people. There are stupid university professors. There are stupid people in Davos and in the United Nations General Assembly. There are stupid people in every nation of the earth. How many of us are stupid? It`s impossible to say. And any hypothesis would almost certainly violate the first law anyway. No matter how many idiots you suspect you are surrounded by, Cipolla wrote, you are invariably weak. This problem is exacerbated by biased assumptions that some people are smart based on superficial factors such as their job, education level, or other traits that we believe preclude stupidity. This is not the case.
Cipolla died in 2000, just one year after two psychologists at Cornell University in the United States wrote a study titled Unskilled and Unaware of It: How Difficulty in Recognition One`s Own Incompetence Leads to Intried Self-Assessments. Without mentioning any form of the word „stupidity,“ it serves as an illuminating and disturbing complement to the Basic Laws. Bandits? Think of the Balkans. On the other hand, a stupid person is extremely rare. Apart from my former colleague, who assured me that Hiroshima took place during the Vietnam War, I didn`t think of anyone. But this brings us back to the first law of stupidity: everyone always and inevitably underestimates the number of stupid people in circulation. Stupid people, Carlo M. Cipolla explained, share several identifying traits: they are abundant, they are irrational and they cause problems to others without having any obvious benefit for themselves, thus diminishing the general well-being of society. There is no defense against stupidity, argued the Italian-born professor, who died in 2000. The only way for a society to avoid being crushed by the burden of its idiots is for non-stupids to work even harder to make up for the losses of their stupid brothers.
The fundamental laws of human stupidity are ancient. The definitive essay on this topic is more recent. It was called The Basic Laws of Human Stupidity and was published in 1976 by an Italian economist. Cipolla postulates that stupidity is a variable that remains constant across all populations. Every category you can think of – gender, race, nationality, education level, income – has a fixed percentage of stupid people. In 1976, a professor of economic history at the University of California, Berkeley published an essay describing the fundamental laws of a force he perceived as humanity`s greatest existential threat: stupidity. Cipolla wrote the laws in simple language. They resemble natural laws – a seemingly fundamental feature of the universe.
Here they are: Cipolla calls it the golden law of stupidity. A stupid person, according to the economist, is a person who causes problems to others without having a clear benefit for himself. Uncle couldn`t help but post fake articles on Facebook? It`s stupid. The receptionist at your hotel who keeps you on the phone for an hour, hangs up twice and always manages to ruin your reservation? Stupid². Constant stupidity, however, is the only coherent thing about stupidity. That`s what makes stupid people so dangerous. Cipolla explains: This is the golden law of stupidity according to Cipolla. A person who causes a problem to others without having a clear positive result for himself is apparently stupid. Cipolla says there are three other phenotypes that coexist with stupidity. Next week, I`ll tell you how some physicists, inspired by Cipolla`s work on stupidity, have found a better way to choose politicians.
They applied some modern mathematics to an ancient Athenian principle of democracy. The result: governments that produce more effective laws that benefit society. Cipolla called this the golden law of stupidity. A stupid person, according to the economist, is someone who causes problems for others without having a clear advantage for himself. The result is that „stupidity“ diminishes the general well-being of society and there is no defense against stupidity. According to Cipolla: According to Cipolla, stupid people share several identifying traits: they are irrational, they are abundant and they cause problems to others without having any obvious benefit for themselves, which decreases the well-being of society, like a disease. The professor also argued that there is no defense against stupidity. Cipolla believes that stupidity is a variable in all populations that remains constant. Whether it`s gender, nationality, race, education level, or income, they all own a percentage of stupid people. That is, there are stupid university professors and stupid people in the United Nations General Assembly. In all the nations of the earth there are stupid people, but it is impossible to give a figure; And if you do, you are violating the first law.
Let`s take a look at Cipolla`s five fundamental laws of human stupidity as they apply to investing and markets today. Professor Carlo M. Cipolla has taught at several universities in Italy and for many years at the University of California, Berkeley. He has also written books and studies on watches, weapons, monetary policy, depression, faith, reason and, of course, – he is an economist – money. His essay on stupidity encompasses all these other topics and perhaps the whole human experience. However, what has always separated the big investors from all the others is that they have acted independently of the „herd“. They have discipline, strategy and a drive to succeed. „Greed“ and „fear“ are far more powerful in our investment decisions than „logic“ and „discipline.“ „The traditional explanations for believing in an investment tooth fairy who leaves money under the pillow are optimism and pride: hope springs forever, and each of us thinks we are better than other investors. There`s another reason so many investors believe in magic: we can`t handle the truth. Image by Vincedevries on Wikimedia, licensed under CC-BY-SA 4.0. People who have experienced one or both of the last bear markets now understand the importance of „time“ in relation to their investment goals.
People who were close to retirement in 2000 or 2007 and were unable to cope with subsequent market declines may have had to postpone their retirement plans indefinitely. Stupid people, Carlo M. Cipolla explained, share several identifying traits: the fact is that a stupid person is more dangerous than even a bandit.