Unconventional Wisdom

Imagine you are soccer player about to make a single penalty kick. The odds are in your favor as roughly 75 percent of penalty kicks ends up into the goal post. The ball travels at 80 miles per hour after it leaves your boot. At that speed the goal keeper need to guess the direction of your kick and fling his body in that direction. If he guesses incorrectly then your odds go up to 90 percent.

If you are right-footed kicker then your strong side is the left side as you can generate more power with accuracy. The keeper knows this and that’s why for a right-footed kicker the goal keepers jump toward the kicker’s left corner 57 percent of the time, and to the right only 41 percent.

Given this statistic which side will you kick? If you follow conventional wisdom then you will either kick right or left. But if you follow unconventional wisdom then you should kick straight as the keeper stays in the center only 2 out of 100 (57 percent left; 41 percent right).

Everyone knows this statistic. But only 17 percent of the kicks are aimed at the center. Why? Excerpt from Think Like A Freak

Picture yourself standing over the ball. You have just mentally committed to aiming for the center. But wait a minute – what if the goalkeeper doesn’t dive? What if for some reason he stays at home and you kick the ball straight into his gut, and he saves his country without even having to budge? How pathetic you will seem! Now the keeper is the hero and you must move your family aboard to avoid assassination. So you reconsider. You think about going the traditional route, toward a corner. If the keeper does guess correctly and stops the ball – well, you will have made a valiant effort even if it was bested by a more valiant one. No, you won’t become a hero but nor will you have to flee the country.

Most of us are willing to stick on to the conventional wisdom even though the probability of success is very low. As Buffett tells – Failing conventionally is the route to go; as a group, lemmings may have a rotten image, but no individual lemming has ever received bad press.

But few people are bold enough to take the unconventional route. Let us look at some of the long held conventional wisdom and how very few thought differently and changed the game forever.

1. Earth is the center of the universe

For a very long time everyone believed that earth was the center of the universe. Nicolaus Copernicus (1473–1543) was a mathematician and astronomer who proposed that the sun was stationary in the center of the universe and the earth revolved around it. At that time Copernicus’s idea was very controversial and unconventional. It was the start of a change in the way the world was viewed, and Copernicus came to be seen as the initiator of the scientific revolution.

2. Heavier objects falls faster than lighter objects

If I drop a bowling ball and a tennis ball at the same time from the Empire state building which ball will hit the ground first? Let us assume that there is negligible air resistance. Aristotle a famous greek philosopher told that the heavier object will hit the ground faster than the lighter object. If we take Aristotle words then the bowling ball will hit the ground first. People believed this for 2000 years. Why? They took conventional wisdom for granted. But this is not true. In the year 1589 an Italian physicist named Galileo Galilei proved that both the balls will hit the ground at the same time. His unconventional wisdom made him the father of modern science.

3. Universe consisted entirely of the Milky Way Galaxy

Until 1929 everyone believed that universe is static and unchanging and milky way is the only galaxy. In 1929 Edward Hubble an American astronomer changed it all. He observed that the universe was expanding and milky way was not the only galaxy. As of today there are around 200 billion galaxies. His unconventional wisdom paved the way for discovering Big Bang theory.

4. You need a designer to create human beings

Until 1859 the conventional wisdom was that there needs to be a designer to create human beings. In 1859 Charles Darwin, naturalist and geologist changed it all by coming up with the theory of evolution by natural selection. Given below is the original description of the Natural Selection algorithm by Charles Darwin.

If, during the long course of ages and under varying conditions of life, organic beings vary at all in the several parts of their organization, and I think this cannot be disputed; if there be, owing to the high geometric powers of increase of each species, at some age, season or year, a severe struggle for life, and this certainly cannot be disputed; then, considering the infinite complexity of the relations of all organic beings to each other and to their conditions of existence, causing an infinite variety in structure, constitution, and habits, to be advantageous to them, I think it would be a most extraordinary fact if no variation ever had occurred useful to each being’s own welfare, in the same way as so many variations have occurred useful to man. But if variations useful to any organic being do occur, assuredly individuals thus characterized will have the best chance of being preserved in the struggle for life; and from the strong principle of inheritance they will tend to produce offspring similarly characterized. This principle of preservation, I have called, for the sake of brevity, Natural Selection.

Even today theory of evolution is not accepted by everyone as it goes against conventional wisdom. In the book The Blind Watchmaker – Richard Dawkins summarized this concept beautifully.

Paley’s argument is made with passionate sincerity and is informed by the best biological scholarship of the day, but it is wrong, gloriously and utterly wrong. The analogy between telescope and eye, between watch and living organism, is false. All appearances to the contrary, the only watchmaker in nature is the blind force of physics, albeit deplored in a special way. A true watchmaker has foresight: he designs his cogs and springs, and plans their interconnections, with a future purpose in his mind’s eye. Natural selection, the blind unconscious, automatic process which Darwin discovered, and which we now know is the explanation for the existence and apparently purposeful form of all life, has no purpose in mind. It has no mind and no mind’s eye. It does not plan for the future. It has no vision, no foresight, no sight at all. If it can be said to play the role of watchmaker in nature, it is the blind watchmaker.

5. High risk – High reward

Even today the conventional wisdom is that you need to take high risk to earn high reward. Warren Buffett, Chairman of Berkshire Hathaway thinks unconventionally and he tells that you should take low risk for earning high reward. In an article promoting value investing he writes

The exact opposite is true with value investing. If you buy a dollar bill for 60 cents, it’s riskier than if you buy a dollar bill for 40 cents, but the expectation of reward is greater in the latter case. The greater the potential for reward in the value portfolio, the less risk there is.

One quick example: The Washington Post Company in 1973 was selling for $80 million in the market. At the time, that day, you could have sold the assets to any one of ten buyers for not less than $400 million, probably appreciably more. The company owned thePost, Newsweek, plus several television stations in major markets. Those same properties are worth $2 billion now, so the person who would have paid $400 million would not have been crazy.

Now, if the stock had declined even further to a price that made the valuation $40 million instead of $80 million, its beta would have been greater. And to people that think beta measures risk, the cheaper price would have made it look riskier. This is truly Alice in Wonderland. I have never been able to figure out why it’s riskier to buy $400 million worth of properties for $40 million than $80 million.

6. Education stops at school

After finishing graduation everyone will be happy. There are two reasons for this (1) They will start earning (2) They need not read another book in their life time. It is very unfortunate that conventional wisdom assumes that education stops at school.  Charlie Munger, Vice Chairman of Berkshire Hathaway thinks unconventionally. He once commented that “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.”

Closing Thoughts

From all this my takeaways are (1) Do not believe in conventional wisdom blindly (2) What is being told is more important than who tells it (3) If there is disconfirming evidence against conventional wisdom then pay special attention to it.

7 thoughts on “Unconventional Wisdom

  1. unconventional Wisdom – worth reading.
    All your posts are fabulous,categorized,well researched.

  2. Jana,
    Great post as always. What you have pointed out from history of bodacious people taking the unconventional route and changing our outlook significantly. As human beings, there are still many unknowns and I’m certain that there will be many more unconventional theories and hypotheses in the future which will radically change the human outlook on a variety of topics.

    I was especially struck by Item #2 from your closing thoughts. Very often, I make the mistake of blindly believing who tells it as opposed to making the effort to deconstruct what exactly is being told. Thanks for the reminder!

    Keep up the great work!


  3. Very structured post Jana. Thanks for sharing.

    I guess another theme emerging here is of “Inventive caused bias” which is why people choose the conventional path.

    ‘‘Most managers have very little incentive to make the intelligent-but-with-some-chance-of-looking-like-an-idiot decision. Their personal gain/loss ratio is all to obvious; if an unconventional decision works out well, they get a pat on the back, and if it works out poorly, they get a pink slip. Failing conventionally is the route to go; as a group, lemmings may have a rotten image, but no individual lemming has ever received bad press.’’ ~ Warren Buffett

    “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally” ~ John Maynard Keynes

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