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Game Theory #3: Rich Dad, Poor Dad

Predictive History

22m 40s2,890 words~15 min read
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[0:00]Today we look at the question of success. Okay? The question is, who succeeds and why? Okay. So, we we've done a lot of research, and we've discovered that people who succeed, um, succeed for certain reasons. So, there is a Columbia psychologist named Walter Mischel, and he devised a very famous experiment called the Marshmallow Test. And the marshmallow test, it's very, very easy, okay? So imagine a room, I invite a four-year-old or a five-year-old to come into this room. And I have a conversation with him or her. I ask them, how's your mother? What do you like to do? And it's a very good conversation. Then, suddenly, I get up and say, I'm really sorry, but I need to go across the hallway for another meeting, but I'll be back, okay? So just wait for me. And here, I'll make you a deal. Here's a marshmallow. I'm going to put a marshmallow in front of you. And you can have it right now. If I come back and the marshmallow is still there, I will give you two marshmallows. Okay? And, and then, uh, Walter Mischel he goes away. And he goes behind the room and forsee through mirror, he's able to see the students as they struggle to contain themselves, because obviously they want two marshmallows. And there are some students who can, in fact, resist the temptation to eat the first marshmallow, and they have a second marshmallow. But then there are others who cannot. And Walter Mischel will spend 50 years just tracking them, okay? What he discovers is this: the students who who resist the temptation, who get the second marshmallow, they are much more likely to do better in school. They have higher test scores. They have better careers. The careers are more stable. They get promoted in their careers. They're much more able to find a stable relationship. Um, they avoid jail. They avoid drugs. They avoid alcohol. They're more lean. They're more fit. They live longer. Better teeth. And those who cannot resist and eat the first marshmallow right away, they have the opposite effect, okay? And so, the idea is that for Walter Mischel, success means delayed gratification. And all this means is that people who succeed are capable of long-term planning. To succeed today, I will make sacrifices necessary, okay? So right, so if my friends are playing outside and I need to do my homework, well, I'm going to say, come do my homework, okay? So long-term planning. What he calls delayed gratification. Or a much more simple way of saying this is the idea of self-control. Right? Or the idea of emotional regulation. You're able to keep your emotions in check. If you're angry, you're able to calm yourself down. Okay? And so we've tried, we know about this, and that's why in school, we focus on the idea of emotional regulation. Teaching you how to better control your emotions, how to do long-term planning. Okay? So that's one theory of success. Another theory of success comes to us from another psychologist named Carol Dweck. And she's at Stanford. And she wrote a book called Mindset. Okay? And what she tells us is that those who succeed in life have a growth mindset.

[4:22]And those who fail in life have a fixed mindset. Okay? And it's not hard, okay? The idea is resilience. Those who have a growth mindset, if they fall or they fail, they say to themselves, this opportunity for me to learn. So I'm going to think about what I did wrong. Next time, I'll do better. And then the fixed mindset are people who cannot accept the idea of failure, who think that it's because they're not capable of improving and therefore they give up, okay? So those of a growth mindset, if they fail, they try harder. Those who have a fixed mindset, if they fail, they just give up. And so, the idea of resilience, okay? Pretty simple, right? The third idea of success comes to us from K. Anders Ericsson, who is a Swedish psychologist, and she wants to know why certain people are able to succeed as musicians or athletes. And he creates the idea of deliberate practice.

[5:44]Okay? So, what he found is that people who want to become athletes or musicians, they work really hard. They practice every day. But the people who succeed practice strategically. Okay? So those who, uh, work hard just work a long time. But those who work strategically have a plan. The plan is this: What are my goals? How can I achieve these goals? And then, how do I improve my plan? Okay? So they're examining their own practices. And they're trying to figure out where the weaknesses are, where they can improve, then set a plan on how to improve, and then they follow this plan. And if this plan helps them improve, they stick to the plan, but if the plan doesn't really work, they change the plan as well, okay? So this is the idea of self-reflection. Or self-assessment. Constantly thinking about how you are as a student and figure out, figure out how to improve your own learning strategies. And what K. Anders Ericsson discovered is that if you do this, you'll succeed at anything. And this is true, okay? And the reason why we know it's true is there are two American psychologists named Dunning and Kruger. And they something Dunning-Kruger effect. And so, what they did was this: they ran an experiment. They have 500 students in a psychology class, first-year university. They made every student take an IQ test.

[7:44]And then, after they took the IQ test, they asked each student, how do you think you did on the IQ test? Do you place in the top 5% or the bottom 5%? And it turns out that no one got the the ranking correct, okay? So those who were in the top 5% in terms of IQ, thought they were maybe in the top 20%. Because for them it was easy, so they assumed everyone for everyone else it was easy as well. But what was, um, dramatic is that those who scored the lowest thought they were average, okay? So the worst 5% in the class, thought they were in the top 50% or just average. And the easy, and the reason why is, those people who are stupid lack the capacity to know they're stupid, okay? So, what Dunning-Kruger discovered is that the hardest part of being a student is to assess yourself properly, to know exactly where you stand and how to improve. Those who are stupid are often the most confident in the world, and that's what, what's called the Dunning-Kruger effect. And this is, this helps us explain why the world is why it is. Because often the people in power are stupid, they don't know they're stupid, they're more confident, and they do stupid things, like Donald Trump, okay? All right. All right. So, now we have these three theories, right? We have self-control, we have resilience, and we have self-assessment. And which, and so as educators, as schools, what we can do is devise strategies and curriculum to help students all succeed, correct, right? The problem is that when we actually try this, it doesn't work, okay? Okay? If you take a bad student and you teach him self-control, resilience, and self-assessment, the student doesn't actually get better. The reason why is, okay? And this is a very important idea for you guys to remember is that correlation does not equal causation. Okay? You guys, you guys need to remember this. Just because things are correlated, does not mean they cause each other. So I'll give you an example. We know that successful people, they get up early in the morning, okay? They get up at 4:00 in the morning. But just because you get up at 4:00 in the morning, does that mean you succeed? Okay? Just because you work hard, just because you're resilient, just because you have growth mindset, does not mean you succeed. But if you're successful, you'll get up early in the morning because you're you are more motivated. If you are successful in life, you will have more self-control. You will have more resilience. You'll be more humble, okay? Does that make sense?

[10:55]So if you're rich, guess what happens? You become successful. And therefore, you will have growth mindset, self-control, deliberate practice. Okay? Does that make sense? But just because you have growth mindset, develop practice, and resilience does not mean you succeed.

[11:20]Okay? So the question for us is, why does this happen? And ultimately, who succeeds? Okay? So, we know for a fact that rich people are much more likely to succeed than poor people. And in fact, what we know from macroeconomic studies is that school doesn't really matter. Doesn't matter how well you're going to do in school. If your parents are rich, you'll be successful in life. If your parents are poor, you will not be successful in life, okay? So, what's the difference? Okay? So, now let's look at parenting strategies between rich and poor. So, there are lots of differences, but let's focus on three major differences. The first major difference is that rich parents speak to their kids more than poor parents. Okay? High vocabulary, low vocabulary. When rich parents speak to their kids, rich parents will use high vocabulary, longer sentences. Poor parents will just be, no, yes, go away. Okay? Another major difference is in attitude. Okay? So, rich parents use a friendly attitude, and poor parents use an authoritarian or command attitude. So, for example, if you are a rich kid and you go and touch a stove, okay? And you burn your hand, the rich parent will say, listen, you made a mistake. Don't worry about it. Let me explain to you why touching a fire is bad for you, because you'll burn yourself and you might have to go to a doctor, and we will feel pain if you hurt yourself, okay? So the rich parent will spend a lot of time explaining to their child why this is wrong and how not to do it again. The poor parent is like, don't you ever do that again. I'll beat the crap out of you, okay? Don't do that. Pretty simple, okay? But as you can understand, the rich kid will understand that the world is safe, and that he is respected in this world, okay? Whereas the poor child will think that the world is scary, and he or she must be afraid of adults. And this carries on into school, right? Because as a rich kid, you go into school, and you think that, oh, my teacher is my friend. So you smile at the teacher, and you hug the teacher, and the teacher smiles back, and now you're friends, right? But if you're a poor kid and you see the teacher, you you're afraid to look at the teacher. You don't smile. You're you are stressed, okay? And the teacher thinks that you might be a problem child. So the problem with this is that, yes, being an authoritarian parent is effective, but it creates stress in the family, okay? It makes the child feel unsafe, and this leads to our, the third major difference between rich parents and poor parents. Rich parents offer stability, okay? Poor parents can only offer volatility. This is a very simple idea. Rich parents have money, so they can afford to keep promises. So I'm, rich parent, I say to my child, okay, next week we will go to Thailand for vacation. Guess what, next week you go, you guys go to Thailand for vacation. But if you are a poor parent, money is always an issue, so it's hard for you to keep promises, right? It's like, next week we'll go to McDonald's for lunch. But your paycheck, um, is not enough, so it's like, sorry, we can't go anymore. Okay? And now, because of these different parenting styles, we understand why um, rich kids behave different from poor kids, right? So let's look at, let's look at the idea of self-control. What is the marshmallow test? Marshmallow test is not a test of self-control. It's a test of your trust in others, right? If you believe that the teacher who goes outside, if you believe that he or she comes back and will, and will keep his or her promise, then you will not eat that marshmallow. But if you think that this teacher is lying to me, then you're not going to eat that, then you will eat that marshmallow, right? It's not really about self-control. It's about your belief and trust in authority figures, right? So if you're rich, stability, you have stability, but if you're poor, you don't have stability. So you're actually better off eating that marshmallow rather than waiting for that second marshmallow, because guess what, most of the time, you will not get that second marshmallow, okay? Do you understand? So it's not that poor kids are stupid. Poor kids are rational, and they're responding to the circumstances that they live in, okay? And resilience, right? Well, the idea of resilience is that you believe that the world will help you. Right? So if you're rich, and you believe that everyone helps you, you can be resilient, because if you fail, someone will help you get up. But if you're poor, if you fail, that probably tells you you shouldn't be doing this, okay? You probably won't succeed doing this, so you don't have, you don't have much confidence in others, okay? And the idea of self-assessment, right? Looking inward. Well, if you're a poor child who lives under a lot of stress, it's hard for you to be self-reflective, because if you look back at yourself, all you can think about is your pain and your stress. Okay? And so, from these different parenting strategies, we can now explain why different students behave the way they do. This, of course, may lead you to think, okay, well then, rather than construct our schools around self-control, resilience, and self-reflection, we should construct schools around better parenting skills, okay? Which means that, hey, let's construct schools where kids are exposed to a lot of vocabulary, uh, where teachers are friendly, and where there's a lot of stability. Okay? And we've tried this, and it's more effective, but it doesn't really work either. Why? Because the kids come in too late. A lot of their worldview is already established. Then you're like, okay, well then let's change how parents behave. And when you do that, what you recognize is that, nope, you can't change how they behave either. Okay? So no matter what you do, you end up with massive differences between the poor and the rich. The rich stay rich, and the poor stay poor. Okay? So now, the question for us is, why is this the case? Okay? And it's the case because society is a hierarchy, okay? And the hierarchy is usually divided between the rich and the poor.

[20:00]And these two worlds are night and day. They're very, very different. As a poor person, if you want to survive, you have to obey authority, okay? But if you're a rich person, the way that you get along with others, the way that you maximize your outcome is by negotiating with others, okay?

[20:34]Negotiating can also mean debate, right? So, who should be the boss? Well, let's have a debate and present different evidence as to, to figure out who's, who should be the boss. Okay? So, negotiating can also mean debate and argument. So this helps us understand, this helps us understand why different parents parent their child differently. If you're a poor parent, your responsibility is to make sure that your child knows how to obey authority, okay? That's why you command your child. But if you are a rich parent, you want your child to be able to negotiate with authority, and that's why you respect your child, and you teach your child how to debate, how to argue, how to negotiate with others.

[21:32]Okay? Because they live in different worlds.

[21:49]Another way of saying this is that according to game theory, individuals don't really matter, okay? You have to look at large groups, you have to look at large social trends.

[22:04]Okay? You cannot really change the outcome for certain groups of people like poor kids, unless you look at the overall structure in which they, they live. So, does that the, uh, the society or like does the elite that really rule the country, who really have the power, have the motivations to maintain a society that are certain degree of social mobility is allowed, but not all of them, but, but, but not, uh, really a big social mobility. So that, firstly, they can maintain their power, but second, like, they give the lower class people a hope to get into the rich class, uh, but not using like revolutions or other things that will, like, turn the society into collapse.

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