Incentives matter. We do
what we do for various reasons, but normally there is some sort of tangible
reward on offer that we value. For this reason, I have always been a fan of the
idea of meritocracy. That we should structurally reward excellence, because
that will let resources flow to where they will be used best. I am losing my
faith in meritocracy. The Dunning-Kruger effect is a cognitive bias where we
have illusory superiority. Where people with substantial, measurable, defects in
their knowledge lack the expertise to recognise that deficit. On the flip-side,
as people become aware of just how complicated things are, the confidence they
project tends to understate their relative competence. Meritocracy incentivises
us to fake it till we make it. It incentivises superficial looks at our areas
of ignorance. It places ego front and centre. We aren’t solving joint problems.
We are performing. As a fundamental investor, I am bigger believer that in the
long term it is what you actually do that matters. That requires real honesty.
A and B are the same colour
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