Three Types of Intelligence
The Psychology of Money with Morgan Housel
Morgan Housel explores how rapid AI advancements are shifting the value of human skills from analytical and technical abilities toward creative, practical, and soft skills. He argues that
Key takeaways
- Jensen Huang (NVIDIA CEO) argues that students forgetting long division and multiplication tables doesn't matter because AI will handle analytical tasks, prompting a shift toward discovering new skills.
- The finance industry has cycled from valuing salesmanship in the 1920s to mathematical analysis post-1950s, and is now returning to prioritizing soft skills like communication and emotional coaching due to AI accessibility.
Main topics
- AI impact on cognitive skills and education
- Cyclical nature of professional skill valuation
Notable quotes
try to get a kid to do long division right now. The multiplication table is starting to be forgotten.
Conclusion
The episode concludes that as AI automates analytical tasks, human value will increasingly rest on
Transcript preview
Speaker 1 (0:00) you Speaker 1 (0:06) It's tempting to believe successful investing means constant action, but often the opposite is true. Davis Advisors has spent decades demonstrating that discipline, research, and patience can be more valuable than frequent trading. Through Davis portfolios, the team invests with conviction in businesses they believe can create lasting shareholder value. If that approach resonates with you, visit davisadvisors.com. Before investing, you should carefully consider the investment objectives, risks, charges, and expenses. The prospectus or form ADV contains this and other information. You can obtain a current prospectus or form ADV by calling 1-800-279-2279. Investing involves risks, including possible loss of principal. All right, welcome back. One of the things I've talked about here before is the idea that most good news in the world happens slowly. It's a slow compounding over time that takes years and decades for good news in the economy and the world to... make an impact on your life. The opposite of that is bad news usually happens very fast. It happens overnight. It's things out of the blue that you can't avoid and terrorist attacks and car accidents. But good news tends to be slow. Like most rules, there are exceptions to this. And sometimes the exception proves the rule. And I think there's a version of that happening right now with AI, where in literally the last 90 days, the improvements in the AI models are visible and you can't ignore them. Like how good? chat GPT or Claude is today versus how good it was in April is materially different. And it's still, it doesn't show any sign of slowing down. I had one of these experiences in the past couple of days where I started using one of the new AI agents, where it's not a chat bot that gives you information. It can actually complete tasks for you. It can go do things for you. And it was one of those experiences that I've only had a very small number of times in my life. Where within 10 seconds of using the product, you are like, there is no way that this does not change the world. There's no way that this is not going to control your life in a short period of time in a positive way. We have technology that can just do stuff for us now that didn't exist 90 days ago. And it's astounding. Like sometimes you have these moments where you just have to like sit back and be like, I can't, I can't believe how fast. The world is changing, and we're in one of those right now. Very exciting. I'm not an AI expert, so that's my only take on this. And of course, when something is changing that fast and it's that powerful, there are downsides. The downsides to AI that everyone's been talking about in the last couple of weeks in particular is the idea that it's eventually going to end humanity, that it's going to take over the world and shut down the power grid and cause a bioweapon, whatever it might be. That's what everyone's talking about. A much... more subtle and less exciting and therefore less in the headlines risk is kind of what the slow erosion of what AI can do to people's cognitive abilities. That if and once people realize, particularly young people who have not developed a lot of those cognitive abilities yet, realize that critical thinking is not necessary to have a good fulfilling life and a successful life, you start shutting it down. And all of the learning that most of us went through early on in the pre-AI days, as in like a year ago, tends not to take place anymore, at least as much as it didn't. And if you talk to college professors and high school teachers, they will tell you how quickly and how profound AI is changing how kids learn. Including one way to summarize it is they're not learning like they used to be. There's a really good interview in the last week with... Jensen Wong, the CEO of NVIDIA, the largest companies in the world now that make AI chips. And he's talking about this idea that because of AI, students are not learning things like math like they used to. Because you and I used to go home with our homework on paper and do long division by hand. And now if you ask students to do that, they're like, why? The bot can do it all for me. Why would I need to learn this? And so here's part of the interview. I'm going to read Jensen's quote. He says, try to get a kid to do long division right now. The multiplication table is starting to be forgotten. Doing square roots, oh my goodness. Basic math is being forgotten. And then here's what he says next. He says, quote, does it matter? And the New York Times says, well, that's my question. Does it matter? And Jensen Wong says, I don't think it does. I don't think it does. And the New York Times says, but there must be another set of skills that matter. And Jensen says, oh, yes, yes, yes, but maybe not those. We're going to discover new ones, just maybe not those. And so he's basically saying like, look, yes, it's true. Kids don't learn math anymore. They can't do long division anymore. And his response is like, so what? Now, of course, you have to understand he's a CEO of what is effectively the largest AI company, chip company for AI. He obviously has a set of incentives. And also if society is falling apart because of what he and others have done. Of course, he wants to avoid that. I'm not saying he's completely unbiased in that assessment, but I think there probably is a little bit of validity in that idea of we are losing skills that we used to have. And to some degree, I'm not saying this is a black and white issue, but to some degree, if your response is, so what? Did that kind of make sense? Let me give you an example in finance. One industry that doesn't apply to everything, but 100 years ago, the investing industry. did not have either the data or the formulas to really understand how to value a stock or value a bond. And so 100 years ago, if you wanted to be successful in the investing industry, what you needed were soft skills, sales skills, how to be persuasive, how to get people excited. Your analytical ability did not matter because there wasn't even any data to analyze anyways. You just need to be a good salesman. And this is why the 1920s was by and large the era of stock frauds and scams. There were a lot of charlatans back then. And that was important. After about the 1950s, when economics and finance became very formalized academically, if you wanted to get ahead in the industry, what you needed to be was a math nerd. You needed to know the formulas and how to crunch data. And if you could do that, the sky was the limit in your career. And yes, there were salesmen and whatnot, but it was truly like the skill that really mattered more than anything was math. This predates AI. This has been true for probably 20 years now, that the math side of the equation in investing has