Comments on: The difference between a good expert and a bad expert

By: Carnival of Personal Finance #148

Carnival of Personal Finance #148 — Mon, 15 Mar 2010 08:05:05 +0000

[...] With economic “experts” out there spouting conflicting advice, who do you listen to? Pop from Pop Economics tells you The difference between a good expert and a bad expert. [...]

By: Mike

Mike — Sat, 13 Mar 2010 02:33:22 +0000

Hey Pop – I really enjoy your perspective on things. Another insightful and intelligent post, as usual. What’s your day job? Rocket scientist?

By: K Smith

K Smith — Thu, 11 Mar 2010 02:49:42 +0000

If public pension funds hire experts to recommend investment positions, and they recommend buying positions in zombie bank holding companies, and the boards of trustees of the pension funds agree with the recommendations, what hope is there for the little guy?

This is what’s happening now. The FDIC is persuading experts who advise public pension funds to “invest in” zombie banks. It appears that state employees in Oregon and New Jersey will be the first to be screwed. To paraphrase Willy Sutton, “Why do I shake down the pension funds? ‘Cause that’s where the money is!”

God save us from the experts.

By: Mr Credit Card

Mr Credit Card — Wed, 10 Mar 2010 19:49:16 +0000

Kudos to you for mentioning Jeremy Grantham and actually reading what he says. More folks should read what he has say rather than just Bogle and other folks on cnbc!

By: Sharkey

Sharkey — Wed, 10 Mar 2010 17:17:35 +0000

But modern finance is still a young science. When you look at stock market data, the most reliable data sets only go back 90 years or so. So deriving accurate predictions on market behavior from that is nearly impossible. Slamming stock market experts is like criticizing a doctor from the 15th-century, before germ theory was invented. Kind of a straw man if you ask me.

Well said. Even more, think of the different monetary regimes and the various methods of investing that individuals (and corporations) have used over that time period. It’s amazing that economics can find cogent discoveries at all.

By: Rob Bennett

Rob Bennett — Wed, 10 Mar 2010 15:37:06 +0000

Slamming stock market experts is like criticizing a doctor from the 15th-century, before germ theory was invented.

Precisely so!

People need to take a step back and ask themselves “How is it that a society learns more about any subject?” It is never by adopting an attitude of thinking we already know it all. Learning always begins with a humble spirit. You have to feel that you are lacking in some way to want to learn and you have to want to learn to be able to learn.

Learning is particularly difficult in the investing realm. The reason is that investing is so scary. To invest is to put your money at risk! There is no one alive who is not scared by that thought. How do humans react to feelings of fear. Often the reaction is one of denial. “I am not vulnerable!” we proclaim. “I have figured out the answers!”

Yeah, sure we have. Our fear-based denial blocks us from learning and our inability to learn ends up making all our worst fears come true. We need to publicly proclaim that our understanding of how investing works is primitive. That’s not a sign of weakness, but a sign of confidence. It’s not confidence that we know it all — it’s confidence that we can figure it out if we all work at it together.

And we can. We’ve done it in other fields and we’ll do it in this one too. Once we get over the fear of taking the first tentative baby step of acknowledging that today we are a far, far ways from knowing it all.

Rob