Generally a few billion dollars, Daniel Gross says, in a short Slate piece:
The real alchemy of finance is to endow those skilled at finance to wield authority in adjacent or even unrelated areas. That's the general theory of Davos, bankers sharing their theories about nonbanking subjects. Stick around and you'll hear a lot of conventional wisdom on globalization, climate change, poverty reduction, financial crisis, but it somehow sounds deeper and more weighty because it's delivered by an extraordinarily wealthy CEO, a private equity executive, or hedge fund manager rather than by a journalist.
His case-in-point is George Soros, who we listen to on topics ranging from U.S. politics to philosophy, even though his views in these areas may not be unusually insightful.
The truth is we listen to rich people on a range of issues not for their insights but because a billionaire is in a position to actually implement the conventional wisdom. Is Bill Gates the most original voice on education reform in America? No, but whatever he does believe, banal or not, matters, because if he wants to make a difference he can.
Still, Gross's point is well taken: expertise is context-specific, and billionaires rarely have the most interesting things to say.
“The truth is we listen to rich people on a range of issues not for their insights but because a billionaire is in a position to actually implement the conventional wisdom. Is Bill Gates the most original voice on education reform in America? No, but whatever he does believe, banal or not, matters, because if he wants to make a difference he can.”
I think that another more influential but less sophisticated (in my opinion) reason that we defer to the opinion of billionaires is simply because it’s an easy way out- it’s a heuristic, a hack designed to save time when you don’t have the mental bandwidth to decide what to think for yourself, in the same way people use social proof and defer to what the masses believe. If you are an expert in a certain field, you care what the expert says because it actually has the power to affect you, but also because the opinions of the many people who aren’t as well-informed as you will be influenced by the billionaire’s opinion.
Do you have other examples of billionaires’ uninteresting opinions?
Brett — agreed. And no other example comes to mind at the moment, but there
are others….
My observation of the small number of extremely wealthy people I’ve known is that their wealth makes it harder for them to have good ideas. Many people will defer to them or listen to what they say with great interest, even when they’re saying something stupid or uninteresting. This is not good for improving or self-evaluating your ideas. Alternately, a small minority of people they come into contact with are foolishly combative, which is also not helpful. Neither of these problems is impossible to solve, of course, but it is a burden most of us don’t face.
A similar phenomenon occurs with University Professors, an area where I have much more experience. I discovered that with each promotion I got there was a noticeable increase in how well my ideas were received. Eventually, I gave up tenure, in order to write a book; it was extremely noticeable how much less interesting my opinions became to other people.
Excuse the linkage, but I’ve written some more on this topic here:
http://michaelnielsen.org/blog/a-bias-towards-power/
http://michaelnielsen.org/blog/the-curse-of-busy-ness/
I wrote a little too hastily: my observation is that wealth makes it harder for them to have good ideas OUTSIDE the area they work in. Inside the area they work in they are often subject to all sorts of demands that push them very hard, and help refine their ideas.
Great post Ben. This one is really right out of the playbook of your recommended book this month, Influence, in the chapter about Authorities.
Vast wealth is like the white coat for a doctor; it’s a symbol of authority. And more often than not, we accept the word of authorities as final. It’s just as Brett described, a mental shortcut.
I’m a Warren Buffett fan, but I’ve often wondered why so many will ask him for advice on relationships or dieting or some other random topic that is not in his realm of expertise. His advice on how to stay healthy (in my words)? It doesn’t matter what you eat, (spinach or cheeseburgers) so long as your calorie intake is below your daily caloric requirement.
This is a special case of what you might call (and someone else might come up with a better name) “assumed expertise transferance.” In other words, we assume that because someone has demonstrable expertise in one area, that it transfers to others. The most egregious example of this is the moralizing of music and movie celebrities; but we do it with anyone who is well-known, and it is not just related to celebrity: articles about global warming often cite surveys showing that “scientists” in general agree with certain results, as though they had actually analyzed them (I have asked around about this. Anecdotally, it seems that they just assume that other scientists do their jobs – they have not actually read the papers).
Your posts are spot-on, Michael.
I agree with Ben about the posts. It’s an interesting litmus test to see how those people react to criticism. For example, Steve Jobs is deferred to a lot- his powerful and charismatic personality make people revere his ideas and opinions but it’s said that he really respects someone who will call bullshit.
I’ve got an example, and I love the guys writing on investing and business, but – Warren Buffett’s on politics.
I wonder if a Russian billionaire would get the same automatic deference at Davos.
Hereabouts they’d listen to cousin Dmitri, Russian expatriate billionaire, hold forth on 1928 Bordeaux or the pros and cons of different mega-yachts, and I’m sure would defer to his opinions on the finer points of radiation poisoning, but I suspect the instant he started maundering on about the IMF and the World Bank it would be a snoozefest in the salon.
PS: I agree Michael Nielsen’s points in his posts are well taken.
But, it goes both ways. I turn on the news channel, and the reporter may interview someone on the street (literally) wiht a question like, “do you feel that the US is winning in Iraq…?” Of course, the person who is accosted with this question probably knows nothing about what is happening in Iraq from their position as a account executive in New York City, but we politley listen to the newscast irregardless.
My point is that “rich people” (i.e., billionaires) are generally in a better position to have something to day than someone on the street. For the reason, when Sir Richard Branson of Virgin speaks, people listen. Likewise, when George Soros speaks, people will listen. The presumption is that the view from their offices and perspective as a “billionaire” may perhaps hold greater vantage than the person on the street.
I would rather listen to billionaires speak than layman…
High Networth Individuals (HNI) are always a sitting duck for the Bankers that show up at WEF at Davos. They need business from enterprises owned by the HNI’s and vice versa. It’s got so much to do with furthering business interest of one another than what their utterances actually merit. Most of them mark their presence at Davos to make sure they get to exchange cards and fatten their Rolodexes than to make a real difference. To hell with world, ecology or politics, it’s just improvement in earnings (EPS) for the HNIs and upkeep of job for the Bankers and CEOs that really matter in the end.
There is also the fallacy that the wealthy have got that way because of some good sense on their part,some even believe their own godlike powers,when its often just a huge amount of luck.
As i understand,Warren Buffett ended up loaded,because he kept to simple rules,while others didn’t – it could also have led to poverty.
Although we may also listen to their advice on a different subject,because it might reveal some personal approach to life that often had sealed the deal before any business plan was put forward.