In this post, I’ll debunk some common misconceptions many people believe are true. We’ll delve into the truths behind 13 commonly held beliefs, and by the end of this post, you’ll be well on your way to becoming a more informed and skeptical thinker. These are 13 things that people commonly think are true but aren’t.
1. That Warren Buffett personally owns the stocks that the media talks about him buying and selling.
You might have heard about Warren Buffett’s latest stock purchases or sales, but the truth is that he has only personally owned Berkshire Hathaway stock for the majority of his tenure as its Chairman and CEO. The other stocks you hear about are part of Berkshire Hathaway’s portfolio, not Buffett’s personal investments or stocks he owns in his own portfortlio.
2. The U.S. dollar is backed by gold.
Contrary to popular belief, the U.S. dollar and most national currencies are not backed by the U.S. treasury or Federal Reserve gold reserves. No precious metals are backing the U.S. dollar at all. The currency’s value is based on trust and the strength of the country’s economy, and faith in its government.
The United States stopped allowing other central banks to convert the U.S. dollar to gold on August 15, 1971. This was when President Richard Nixon announced the “Nixon Shock,” which effectively ended the Bretton Woods system of fixed exchange rates and took the U.S. off the gold standard. This meant foreign governments could no longer exchange U.S. dollars for gold. The U.S. dollar became a fiat currency, and inflation increased in the 1970s.
3. It’s a 50-50 chance whether a coin lands on heads or tails.
While it seems like an even chance, the reality is that the odds of a coin landing on heads or tails aren’t exactly 50-50. Various factors, such as the coin’s design, material, and the way it’s flipped, can influence the outcome. However, the difference is usually negligible, so it’s still close to an even chance.[1]
4. That mortgage debt is canceled if the bank the payment is made to goes bankrupt.
If you think your mortgage debt will disappear if your bank goes under, think again. Mortgage debts are considered assets; if a bank fails, these assets will be sold to another financial institution. So, you’ll still owe your mortgage to whoever takes over the loan.
5. Shoplifting is covered by insurance for retail stores.
Many assume that retailers don’t suffer significant losses from shoplifting because insurance covers it. In reality, most insurance policies only cover certain types of theft, such as burglary of significant assets or large ticket items like cars or insured jewelry. Shoplifting losses are typically absorbed by the retailer, leading to higher consumer prices. Shoplifting isn’t covered under commercial or property insurance.
6. The Wright brothers made the first flight in an airplane.
While the Wright brothers are often credited with the first successful flight, other contenders for this title exist. Gustave Whitehead reportedly flew a powered aircraft in 1901, two years before the Wright brothers. Additionally, Alberto Santos-Dumont made a public flight in Paris in 1902, which some argue should be considered the accurate first flight. The issue remains up for debate.[2]
7. When briefed on those suffering in her kingdom, Marie Antoinette replied ‘”Let them eat cake.”
This famous quote has been attributed to Marie Antoinette, but no solid evidence supports it. Likely, the phrase was simply a story illustrating her perceived indifference to the French people’s plight during the French Revolution.
8. Legendary stock trader Jesse Livermore died broke.
Despite his incredible success in the stock market, it’s widely believed that Jesse Livermore died penniless. However, this isn’t true. Although he did lose most of his fortune late in his career, Livermore still had a substantial estate at the time of his death. After one of his comebacks, he set up a trust to ensure he would never be broke again. According to books on Livermore, he had untouchable trusts and cash assets totaling over $5 million at his death.[3]
9. The United States is a democracy.
The United States is often called a democracy, but technically, it’s a constitutional federal republic. The critical difference is that in a democracy, the majority rules directly. In a republic, elected representatives make decisions on behalf of the people through the filter of the Bill of Rights and the Constitution. In a constitutional republic, voters can not vote away the rights of others, no matter how popular a movement becomes.
10. You only use 10 percent of your brain.
This popular myth suggests that we only tap into a small portion of our brain’s potential. However, scientific research has shown that we use much more than just 10 percent of our brains. Various tasks and activities engage different parts of the brain, meaning that we use virtually all of it over time.
11. We have only five senses.
Most people believe that humans have just five senses: sight, hearing, taste, smell, and touch. However, we have more senses than that, including:
- Proprioception: This is the sense of body position and movement, allowing us to know where our limbs are in space without looking at them.
- Thermoception: This sense allows us to perceive temperature changes in our environment and within our body.
- Nociception: This sense enables us to detect and perceive pain, warning us of potential harm or injury.
- Equilibrioception: This sense, also known as the vestibular sense, helps us maintain balance and spatial orientation through the inner ear’s vestibular system.
- Interoception: This sense makes us aware of our internal body states, such as hunger, thirst, and the need for elimination.
12. Bulls hate the color red.
The common belief that bulls become enraged by the color red is a myth. Bulls, like other cattle, are colorblind to red. The movement of the matador’s cape, not the color, triggers a bull’s aggressive response in bullfighting, not the color red.
13. The rich don’t pay taxes.
The statement “the rich don’t pay taxes” is inaccurate. In many countries, including the United States, the tax system is progressive, meaning those with higher incomes pay a more significant percentage of their income in taxes. The top 1 percent paid 42.3 percent of the total federal income tax in 2020 while receiving 22.2 percent of the total adjusted gross income.[4]
The confusion about whether wealthy individuals find loopholes to avoid taxes comes from not understanding that the wealthy don’t have jobs and paychecks to pay income taxes on, as most live off their business income, capital gains, and cash-flowing assets. This gives them more control over how much income to create from their assets. The rich have taxable events like capital gains and the income they choose to pay themselves from their business or sell stock.
Key Takeaways
- Warren Buffett owns only Berkshire Hathaway stock, not the individual stocks mentioned in the media.
- The U.S. dollar is not backed by gold or any other precious metal.
- The odds of a coin landing on heads or tails are not precisely 50-50.
- Mortgage debt isn’t canceled if the bank goes bankrupt.
- Retailers’ insurance doesn’t typically cover shoplifting losses.
- Other contenders contest the Wright brothers’ claim to the first flight.
- Marie Antoinette likely never said, “Let them eat cake.”
- Despite losing a significant part of his fortune, Jesse Livermore didn’t die broke.
- The United States is a constitutional federal republic, not a pure democracy.
- We use far more than 10 percent of our brains.
- Humans have more than just five senses.
- Bulls are not angered by the color red; the movement triggers their aggression.
- The rich do pay the majority of taxes.
Conclusion
As we’ve seen, many common misconceptions exist that people often accept as fact. By questioning these beliefs and digging deeper, we can separate truth from fiction and become more informed. Remember to approach new information with a healthy dose of skepticism, and you’ll be less likely to fall for these and other myths in the future.
