Kanye West went on CNBC last week to discuss why he terminated his contract with the Gap:
We’re only getting one side of the story here so it’s difficult to tell exactly what caused the rift here but Kanye is sure there is only one person who could have fixed the struggling retailer. West told Sarah Eisen, “They have one individual that could save the Gap.”
He was referring to himself, of course.
When asked what went wrong with their partnership Kanye replied, “I’m not going to argue with people that are broker than me about money.”
That’s a good line. It’s kind of funny. It’s also terrible advice.
I understand why Kanye thinks this way.
Everyone tells the guy he’s a musical genius. He created billions of dollars in his apparel deal with Adidas. The guy is a billionaire. Why would he ever take advice from people who aren’t billionaires?
I have some thoughts on this:
Even the best at what they do rely on others to get better. The idea that you can become successful enough that you can stop leaning on others for advice is a recipe for disaster.
The greatest athletes of all-time rely on coaches, trainers, dieticians and managers to help them succeed.
Michael Jordan had Phil Jackson.
Tom Brady had Bill Belichick.
Tiger Woods had multiple golf coaches.
Serena Williams always had a tennis coach.
I know financial advisors who have their own financial advisors.
Expertise doesn’t come from a specific net worth, IQ score, age or level of experience. Just because you’re successful doesn’t mean you should stop taking advice from other people who aren’t nearly as successful as you are.
Nothing fails quite like success. You could argue the more successful you become, the more advice you should seek from others. If nothing else, it’s good to hear from a wide range of sources to ensure you don’t get too full of yourself.
A study on persuasion gave a difficult set of questions about markets and investing to two different groups. One group had been the victims of financial fraud while the other group had not.
Surprisingly, the group that had fallen prey to financial scams had a much better average score than the group that had not been the victim of financial fraud. The authors of the study concluded, “Everyone gets taken. But it’s the most sophisticated ones who are taken the most.”
Why is this the case?
In a word — overconfidence.
Successful people are prone to bad decision-making because they have become successful.
Doctors and engineers often make poor investors.1 They assume their success and intelligence in one field should automatically translate into the markets, often to disastrous results.
The problem with becoming uber-successful is you begin to believe that success was entirely your own doing without realizing how much luck, happenstance and good timing were involved.
I’m not saying successful people don’t work hard. Most successful people work very hard. But simply being successful in one endeavor does not guarantee success in another.
Experts are often prisoners of their preconceptions. Philip Tetlock is an expert on experts, having spent years studying pundit predictions on politics, markets, the economy and more.
Tetlock came up with 5 ways preconceptions shape an expert’s view of reality:
1. Experts can talk themselves into believing they can do things they cannot.
2. Experts are reluctant to admit when they’re wrong and change their minds.
3. Experts fall prey to hindsight bias (I knew it all along.)
4. Experts fall prey to confirmation bias (only looking for evidence that supports their strongly held views).
5. We’re all pattern-seeking creatures, even the experts.
Everyone is susceptible to behavior bias but there are generally two ways in which those biases manifest.
For people who don’t know anything, it’s their naivete that gets them in trouble. For the people that know too much, their recklessness is often caused by the fact that they’re so intelligent.
Josh Wolfe always says, “Failure comes from a failure to imagine failure.”
Even the most successful people fail from time to time.
Self-awareness is the first thing to go when you become famous. Jon Hamm and George Clooney are both on record saying they count themselves lucky to find success later in life.
Hamm once said, “The road to celebrity is littered with people who got too much too soon and weren’t equipped to handle it.”
It’s difficult to retain self-awareness when you become successful because no one in your life will tell you no. No one will tell you that’s a bad idea.
Jason Zweig once asked the legendary investment thinker Peter Bernstein some of the most important things he had to unlearn throughout his career:
That I knew what the future held, I guess. That you can figure this thing out. I mean, I’ve become increasingly humble about it over time and comfortable with that. You have to understand that being wrong is part of the process. And I try to shut up at cocktail parties. You have to keep learning that you don’t know, because you find models that work, ways to make money, and then they blow sky-high. There’s always somebody around who looks smart. I’ve learned that the ones who are the most smart aren’t going to make it. I don’t know anybody who left investing to become an engineer, but I know a lot of engineers who left engineering to become investors. It’s just so infinitely challenging.
This is why learning should be a life-long conquest. That way you keep figuring out just how much you don’t know.
Don’t Take Personal Finance Advice From a Billionaire
1Not always but ore often than not in my experience.