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Smart is complex. It is an ability to perceive, assess, process, and adapt. It requires an open mindedness that many disregard or aren't quite capable of. Setting limitations for oneself or others, for example, is in most cases not smart (an exception here would be a toddler playing in a dangerous manner, for example) because it narrows down the scope of their potential.
It's the result of a lot of things - parenting, teaching and hard work with possibly a bit of genetic component. The biggest component is hard work. I see students improve their knowledge and skills all the time by using their time well. That is smart to me.
Picking the right parents helps. I came from a dumb (but hard working) side and a smart side. I'm not very smart in some things, but I'm brilliant at recognizing my shortcomings and compensating. I was also pretty, so I was able to elevate my children's gene pool.
Blend of Book Smarts, Street Smarts, and Common sense.
...and we have a winner! Great definition. Folks with goodly amounts of academic knowledge, practical knowledge, and moral knowledge (as I would call those three things) will always be the smartest folks in the room.
I will add that someone who is able to read, and retain, large amounts of information will be able to be peceived to be smart, whether or not they are. Like the dumbest guy who graduates from medical school, or the dumbest lawyer, is still a doctor or a lawyer.
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