Average Intelligence is Enough

March 8, 2013
By
Vault
 

“I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstandingly intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”

- William Eckhardt, New Market Wizards

JS Comment:

Warren Buffett has said something similar in regard to investing (paraphrase, “average IQ is enough”).

Markets are curious in their ability to attract both the exceptionally intelligent and the exceptionally unintelligent: Smart people tend to think “I’m top notch doing X, so why wouldn’t I be good at this,” whereas dumb people think “Ooh! Free money!”

While a lack of intelligence (being dumb) is a disadvantage for obvious reasons, being exceptionally intelligent has potential disadvantages too (less obviously so) in respect to the impact on ego.

If one is used to getting things right, or even arrogantly confident in one’s ability to do so, it can be maddening when the markets says “wrong!” for the fourth time in a row, in turn exacerbating risks of emotional meltdown.

Another reason average intelligence may be better, on balance, is because the trading learning curve can be so extended, and so brutal, that a personal ego investment in mental superiority — a need to preserve the vanity core that says “I am smarter than this” — becomes a training liability.

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2 Responses to Average Intelligence is Enough

  1. Anon on March 11, 2013 at 6:07 am

    The wait is getting longer……. for field guide part 2……….

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