Smarts is a slang term for the knowledge and intellegence every person needs to get along in life. It is are divided into two equally important catagories: Street Smarts and Book Smarts.
Street Smarts are based mostly on common sense and include things such as the ability to interact well in social situations, argue a point in order to get your way, or even lie your ass off if necessary and not get caught while still being able to recognize when someone else is lying.
Book Smarts are more about the knowledge and experience that are developed in school as a kid as well as throughout life. Much of the knowledge that is attributed to book smarts comes from reading (hence the name), but a large amount of it also comes from simple observation of everyday situations.
Jimmy used his street smarts to talk a cop out of giving him a speeding ticket.
Herold used his book smarts to impress the neighbors by quoting Shakespeare.
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