Future Babble: Why Pundits Are Hedgehogs and Foxes Know Best

  • By Dan Gardner
  • Dutton
  • 320 pp.

The author exposes the folly in our pursuit of certainty.

Indulge me in a guess at what’s going to be on TV later today. At some point tonight, on some cable news broadcast somewhere, someone will be invited on as a guest to speak about some pressing issue of the day. For March the big issue was the nuclear calamity in Japan, so let’s presume our guest is considered an expert on nuclear energy, or at least nuclear physics.

When the guest is introduced, her bona fides to speak on the subject will be explained (she’s a professor of something-or-other somewhere), she works at some well-connected think-tank, or perhaps she holds some suitably high post in the administration of President Whomever.

After a suitable appetizer of analysis on the last five days of activity in Japan, the show’s host brings out the red meat for our expert to consume: What’s going to happen to the damaged reactor? What will happen to the price of oil? Could an earthquake or tsunami hit the U.S. and damage us the way it did Japan?

This is the precise moment at which author Dan Gardner would recommend you turn to the hockey game on Versus. At least with the hockey game, you know that you don’t know who’s going to win until the game is over. With Japan, you also don’t know who’s going to win until it’s over, but you think that you do. If you resisted our advice to switch channels, you now have a head full of predictions regarding future events that seem more clear and helpful to your thinking than before you sat down to watch.

Our expert has explained what is likely to happen, and now our viewer, you, feel much better informed. If our expert says that fear of future supply problems will cause oil prices to spike, you brace yourself to pay more the next time you fill up the car. You silently compliment yourself on being smart enough to buy oil company stocks, because they profit when oil prices rise.

The only problem is, you’re not better informed. If the issue were something a bit more personal and pressing, like the local economy, the weather, or the chances of your favorite hockey team in this year’s Stanley Cup, you would be setting yourself up for the failure and disappointment you would feel when what you thought so certain failed to occur.

Gardner’s new book, Future Babble, is a tour through a culture of false insight, failed predictions, and foolish reliance on both. In it he takes a topic that has been much written upon in the world of finance and applies it more generally to politics and popular culture. He explains how supposed experts in those fields fare no better than their counterparts in finance. While the first half of the book is something of a slog through prophecies and predictions past that came up short (often, ludicrously short), his efforts gain more traction when focused on why human consumers remain addicted to the process.

The process of trying to glean the future from current information and insight serves a fundamental human need for certainty. This need trumps more rational beliefs that may call that certainty into question. And as anyone who has ever tried to select the color of a new car or decided to get married can attest, when emotions conflict with rational thoughts, the emotions win every time.

Gardner pays some respect to the topic of behavioral finance, although his book covers a much broader range than just finance. Being something of a financial type, I wish he had drawn more from the recent works of Nassim Taleb (Fooled by Randomness and The Black Swan) and shown how they are applicable in other areas of thought. Taleb’s work illustrated two concepts critical to Gardner’s thesis: randomness in future events is much more common than anyone would care to admit; and human history is full of unusual, unpredicted events of enormous importance.

The final point to glean from the book is that, as consumers of information, we are ultimately responsible for how we choose to act on what we see and hear. If anything, Gardner could have been harder on persons who prove themselves willing to be duped repeatedly, which is essentially anyone watching CNBC. I imagine he will not be interviewed there, unless of course he can tell them what’s going to happen to the price of oil after developments in Japan today.

Paul A. Meloan is a principal at Aegis Wealth Management, LLC in Bethesda, Maryland. He blogs on matters of personal wealth at paulmeloan.posterous.com.

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