As a continuation of a theme in my previous posts, Why Don’t I Understand Everything and I Don’t Know, here’s more typing.
I’m still surprised by two things:
1 – How little we actually understand.
2 – How confident we are in our predictions.
Conversations I’ve recently had tend to be some version of Elon Musk’s “I can see into the future.” (From his interview with The Economist.)
We have enough trouble seeing into the present, rooting our beliefs in reality. As Yuval Noah Harari said: The truth is costly.
If each of us had to fact-check all of our “knowledge” down to its fundamentals, we wouldn’t get much else done. (It would require being scientists and scholars in every domain. And even then we’d get things wrong.)
It’s division of labor. We know just enough to be specifically productive — mostly to do a day job. We rely on others to figure out all that other bullshit.
Yet we operate as if we really understand the world.
We’re so proud of our guesses! Our guesses are our identities!
How often do we make claims without specifics? Without numbers?
Here’s today’s example:
A friend’s cousin claimed his 401(k) is “looking great.”
Missing: What are his goals? What assets are in that 401(k)? What’s the allocation across asset classes? How did those assets perform relative to a benchmark? Is it volatile? Is it managed? What about opportunity cost? What are the invisible fees and expense ratios? Is it pre or post-tax? Will there be RMDs? Will his marginal tax rate be higher or lower in retirement? Is it actually enough to retire on? And oh… what is the BALANCE?
Without those details, it’s only an abstract story.
And I’m saying we all do this.
We share our subjective opinions, assumptions, and conspiracy theories and call it conversation.
Person A: “Boom! Here’s my speculation about the unintended consequences of changes to a complex system delivered as expertise.”
Person B: “I disagree! My hunch is superior and declared with more machismo! I win!”
As Harold Camping said, “It is going to happen! It is going to happen! There’s no possibility that it will not happen!”
And shortly after that: “I was wrong.”
We colloquially throw around the words, “probably” or “high chance” without any calculations involved.
Okay, then. If we understand the world, the economy, and politics… and can predict the future, maybe we should all get into gambling. Sell everything we own, put it all into whatever stock or put option aligns with our prophecy.*
Maybe we don’t know as much as we pretend to? About much of anything?
*I don’t remember where I originally heard this basic concept, so I can’t take credit for it. But I like it.