Wednesday, November 1, 2023

Stupid drives out Smart

Gresham's Law declares that "Bad-money drives out good".

The mechanism for that is pretty simple. Bad money policy causes the local currency to lose value. There is too much "nominal" currency and not enough assets and economic activity to support it. The typical scenario is that the mint creates more money to maintain the illusion of prosperity which further dilutes its value.

Ultimately, the government starts confiscating assets to prop up the currency. They also confiscate or prohibit the movement of assets, including foreign currency, out of the country.

Rich people are often intelligent enough to see which way the winds are blowing. They pre-emptively move their cash and tangible assets out of the country before prohibitions are enforced. Less tangible assets like stocks are "moved" into trusts administered in less restrictive countries.

Stupid drives out Smart

Consider the latest news about large drugstore chains getting hammered by employee walkouts.

Management is under pressure to improve financial performance in the wake of law-suite settlements following prescription opioid addictions and the subsequent O.D.s.

Bottom-lines are further pressured by massive amounts of theft in certain communities while politicians pressure management to NOT close those outlets.

Management responds by increasing pressure on employees. Full-time employees (with benefits) are pressured to work sixty-hours-a-week. Employees unwilling to do that are dropped to part-time status and lose their benefits.

Stores are understaffed. The manager is required to do their job as a manager AND cover for the absent employee.

The less productive employees often have a "card" they can play so they are not disciplined or separated from the company.

The pressure on the productive employees is relentless and keeps increasing.

The pressure ratchets up as the smartest, most productive employees see the handwriting on the wall and leave which dumps the actual work on the remaining, productive workers. Then, they too leave.

The same, identical dynamics are working in large hospitals, especially those in legacy sites in large cities. Staffing issues have become critical.

It impacts at the state level

It is even happening at the state level. California probably has more conservatives within its borders than Texas but has approximately zero representation at the State level.

Policies favor the stupid and the short-sighted.

Productive families are picking up their bags and leaving.


Copied from HERE

There is a scatter-chart making the rounds on the internet that shows the average IQ of various nations and their per-capita-domestic-product.

The first-order analysis is that the two are highly correlated. Low intelligence makes poor countries and high intelligence makes rich ones.

Something interesting happens after the IQ passes 90. It may be that a critical mass of people has been reached that can grasp concepts like compound-interest. Stupid policies compound. Smart policies compound. The only difference is direction.

If you look more closely at the chart you might notice that the data is not a straight line but is a "hockey-stick". That suggests that something else is at play.

It might be that if you have an I.Q. of 120 and you live in Addis Ababa, Ethiopia that it might behoove you to move to Berlin or London or Myrtle Beach. With an I.Q. of 120 you have more options than your neighbor with the I.Q. of 85 and you likely can compute the economics of moving. This applies quadruple if you are not a member of the ruling, Kleptocracy family and times-ten if you are a woman.

The United States benefited HUGELY from this phenomena. Many of the scientists who worked on the Manhattan Project, for instance, were not born in the United States.


  1. When stupid and politically protected drives out the smart, WELL look at South Africa for a real time example of a mostly modern nation quickly reduced to shambles, poverty and theft of the copper in the power grid.

    Seems the last two years South Africa has EXPORTED more copper than their refinery capacity.

  2. ERJ, I read of the proposed walkout yesterday. My question at the time (still is) what do they expect to happen? If the company is already in a bad financial state (even through the corporate malfeasance), the market will only bear what the market will bear. It is not as if, faced with financial woes, they will suddenly double down on spending more. That is independent of loss due to shrinkage, which seems to be an increasing issue.

    Fair to say that it seems - in the short term - stupid money drives out the smart money. But only for a time. That situation simply cannot exist. I am assuming that in the not too distant future I will read of "Drug store deserts" and every one will be surprised at the outcome.

  3. Dunning-Kruger effect, The one's who are affected with the belief of inflated IQ, are usually pushy and arrogant. The ones with high enough IQ to know that they don't know it all, will just move on (it is impossible to argue with stupid). Unfortunately we have reached a turning point in the ratio that I am afraid we can not reverse. And I believe it is our school system to blame , at least since the 1960's. Bob in B.R.

  4. "Rich people are often intelligent enough to see which way the winds are blowing". I disagree. It was my experience being in the title insurance business for 50 years that the super rich are tipped off to what direction the winds are going to be made to blow by the corrupt commission collectors in all levels of government. I would find myself involved in large commercial transactions that I couldn't figure why they were happening until the new tax laws, or various regulations , federal-state-local, were put in effect. Then it became apparent and the "little guy" on the other side got the short end and never saw it coming. It has become totally corrupted. I'm glad I'm out of everything. Other than that I totally agree with you.---ken

    1. I tend to agree. Rich people may employe or require the services of "smart people" especially in the financial arenas. Having worked with some trust fund babies, I doubt their IQ's were any higher than average and their drive was less. Grandpa may have been a house on fire but the grandchildren sure are not.

    2. "From shirtsleeves to shirtsleeves in 3 generations......" I've seen it manifest many times.

  5. Read La Griff du Lion's smart fraction theory. He suggests that there is a non- linearity around 110IQ.

  6. It looks as if the rate of change of productivity as IQ increases is not only increasing and variable but also that the phenomenon approximates some logistic function. If so, the curve will level off as IQ becomes very high, say 150.

    This ought to make sense if you think about it. Productivity won't and can't increase to infinity as IQ goes up. We are finite beings with finite intelligence and finite resources. It's not true that 2+2=5 (implying, as did the commies of USSR, that humans can overcome all natural limits.) Moreover, extremely intelligent people tend to develop an interest in higher matters than the acquisition of property and indulgence in desireable sense objects, which is low, vulgar, worldly, ignoble, unworthy, and unprofitable.

  7. Interesting post of the dynamics of large chain stores in diverse areas circling the drain. You my wish to rethink your reasoning on the smart fraction immigrating here, though. What’s coming here isn’t 120 IQ,. That’s one standard deviation, more or less, from the western norm. The one SD in Somalia is about 80 IQ.

  8. It seems to me that IQ in the poorer parts of the world will be lower partly as a factor of education. Also the kids that work at things like cobalt mining never get a chance to develop mentally. Subsistence cultures do not have their production show up in a dollars and cents form to add to the GDP!

  9. Gresham's law actually relates to the behavior of people when presented with two different currencies pretending to be the same. Think silver quarters and dimes after 1964! You will hoard the silver and spend the adulterated slugs in dressed money's clothing.

  10. @Anon 1016PM: IQ affects how well you can be educated, the only way it is increased by education is if the test is seriously flawed. Good IQ tests are made to remove cultural bias for that reason.

    Someone with an 80 IQ can be tutored forever without making them able to succeed as a machinist or engineer.

  11. @Drive-by Shooter: When you start getting into UHIQ range you are talking about 1 person in 1,000 or even lower proportions. Individuals may be really smart but there aren't enough enough of them to make a significant difference except in specific fields.

  12. Remember, culture and values matter, too.


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