I have repeatedly pointed out the fact that the Wall Street Journal regularly talks about scientifically conducted tests between champanzees and market experts.
The chimpanzees toss darts at a list of hte Fortune 500 and the that is taken as a prediction of what a profit-seeking investor, a rich person in a coat and tie, should buy. Against the chimps’ dart tosses are place the costly analyses by by market experts.
No one is surprised that the results are dead even.
So does this cause one single person to value the market experts’ analysis as worth one penny less?
No way.
Ladies and gentlemen, this is cash on the barrelhead.
This is as real as reality gets.
You will not find one single person who invests real money inthe real stock market who wil deny this for an instant.
You will not find one single person who invests moneyinthe real stockmarket who would pay a stock market analyst a penny less.
No, this is NOT a matter of the analyst being right or wrong. In fact those hiring the analyst are being perfectly rational. Who cares if the professional is right or wrong? He IS the professional.
That is all that matters.
Professional futurologists are ALWAYS wrong about the future.
Who cares?
Every futurologist who wrotes a book today will be an even more professional, better paid futurologist tomorrow.
No stock market analyst ever lost a dime by being wrong.
Welcome to the real world.
Let’s take a market expert called Suburban Blitzer. Suburban Blitzer, like all analysts, predicts the market with the exactly the same precision as a pair of dice.
So?
If a suburbanite loses money by following Suburban Blitzer’s advice, he is seen as unfortunate. He has lots of company.
But what if a suburbanite loses money betting on the dart-throwing of a bunch of chimps?
You know, thought you act like you don’t, that that would be considered nuts.
So it is perfectly RATIONAL for a suburbanite to pay Suburban Blitzer lots of money, not because he is right, but because his name is Suburban Blitzer or Ronald W. Gross and Sons or Standard and Poor.
He is not right, but he is worth money.
Got it yet?
So who wants to be right?
Let me explain this another way:
It is far more important to be correct than to be right. Being correct is worth money.
So if you quote Suburabn Blitzer correctly, nobody denies that you were correct. If you lost money, all your neighbors lost money, too. Being wrong with Suburban Blitzer is correct. Losing money with Suburban Blitzer is excusable.
Losing money with a chimp makes you a laughing stock.
Do you really think the difference here is not worth money? Suburban Blitzer earns every penny you pay him.
#1 by Anonymous on 11/13/2005 - 9:10 pm
“Nobody ever got fired for buying IBM,” as office managers used to say. IBM wasn’t always the right decision, but it was always the correct one.
#2 by Hamsun on 11/14/2005 - 1:04 am
Idiot, n. A member of a large and powerful tribe whose influence in
human affairs has always been dominant and controlling. The Idiot’s
activity is not confined to any special field of thought or action, but
“pervades and regulates the whole.” He has the last word in
everything; his decision is unappealable. He sets the fashions of
opinion and taste, dictates the limitations of speech, and circumscribes
conduct with a dead-line.
— Ambrose Bierce
#3 by joe rorke on 11/14/2005 - 4:14 pm
Bob, this is a great piece of helpful information. It reminds me of what you say about people not noticing and/or people not noticing the obvious. My understanding of this is that it is costly and a mistake to use the services of a market analyst when and if investing in the stock market. It also reminds me of my attitude toward the idea of “experts.” I just don’t subscribe to the notion of “experts.” I put the word in quotes because I don’t “believe in” experts. Some folks know more about something than other folks but that is not enough for me to salute them as experts. The reason for this is that there is always more to know about the subject according to my lights. I am especially unwilling to accept the idea of “expert” witnesses in the courtroom. I realize that they exist but, in a way, I am putting them into the same category as you are putting the market analyst.