The Better Letter: Say What?!
Making Behavioral Finance Practical. Part Two: The Misinformation Milieu
I watched Mike Krzyzewski’s first game as Duke’s coach (a win over Stetson) from the stands in Cameron Indoor Stadium as a student in 1980 and his last Duke game in this year’s Final Four (a horrible loss to the School that Shall Not Be Named) on television. I watched a huge percentage of the games in-between, one way or another.
Coach K is an icon, and widely regarded as perhaps the best college basketball coach of all-time. He is the winningest college basketball coach of all-time. But when was hired 42 years ago, he wasn’t even generally considered to be in the running for the job.
During the entire month-long coaching search, Krzyzewski’s name never appeared in any North Carolina newspaper as even a long-shot candidate for the job. No radio station nor any television station suggested him as a possibility.
Then-Duke Athletic Director Tom Butters insisted that he was getting the “brightest young coaching talent in America” to lead his basketball program (video from the hiring news conference here – notice how “Krzyzewski” is repeatedly mispronounced in the report) when he hired Coach K. There was no live coverage of any kind. The local morning paper had reported that one of “three Ws” – Bob Weltlich of Ole Miss, Old Dominion’s Paul Webb, or then-top Duke assistant Bob Wenzel – was going to get the job.
Instead, Butters hired the West Point graduate, then just 33 years old and coming off a losing season at his alma mater. Butters had ultimately listened to Bob Knight, who told him that Krzyzewski had his own good attributes without the bad. The headline in The Chronicle (Duke’s student newspaper) was “Krzyzewski: This is Not a Typo.” Ironically, the local afternoon newspaper got the scoop several hours before the press conference, but it was after deadline and there was nowhere to report it.
This story seems quaint today, with the idea that a major college basketball hiring could remain unreported and largely secret until the press conference and that the coach hired had not even been considered a candidate is appropriately presumed to be impossible in this digital age.
Obviously, times have changed.
Today, information is ubiquitous. We carry essentially all the world’s knowledge in our pockets and we would be wise to assume that every action and every conversation is being recorded.
That reality has consequences – consequences I’ll discuss in this week’s TBL, part two (part one is here) of my series on making behavioral finance practical.
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Thanks for reading.
The Misinformation Milieu
Over half a billion years ago, the very primitive life forms that had existed on Earth for about three and a half billion years were simple, blind scavengers. But in an astonishingly short period of time, via what has been called the Cambrian Explosion, there was a sudden and dramatic growth and change in biological species. Organisms developed new body shapes, new organs, as well as new predation strategies and defenses to counteract them.
How and why this happened, especially as if all at once, has been paleontology’s greatest mystery.
According to the “light switch” hypothesis offered by Oxford zoologist Andrew Parker, it was an increase in the clarity of seawater that led to the evolution of eyes and thus to the advent of this explosive change. When your enemies can see you, and vice versa, the dynamics of those relationships change dramatically, providing an impetus for all kinds of evolutionary adaptation toward hunting skills, armor, pursuit, evasive techniques, and the like.
Whether or not Parker’s hypothesis ultimately holds up, his approach makes great intuitive sense and offers real explanatory power, both about the past and (seemingly, at least) about the future. Daniel Dennett of Tufts and Deb Roy of MIT, analogizing to Parker’s “light switch,” point to the society-altering consequences of digital transparency.
The internet has made the world much smaller and more decentralized. Global-scale communication is now possible by any individual – no status or standing required. Moreover, digital communication and information access is lifting the veil around many institutions and sources of information that were once shrouded in mystery. This explosive change, they argue, will transform 21st Century culture no less than the Cambrian Explosion transformed paleontology.
“We can now see further, faster, and more cheaply and easily than ever before — and we can be seen. And you and I can see that everyone can see what we see, in a recursive hall of mirrors of mutual knowledge that both enables and hobbles. The age-old game of hide-and-seek that has shaped all life on the planet has suddenly shifted its playing field, its equipment, and its rules. The players who cannot adjust will not last long.”
In the seven years since Dennett and Roy’s article appeared, their general optimism about this development (“Easier access to data has enabled new forms of public commentary grounded in comprehensive empirical observations”) seems overstated, at the very least.
They conceded that this “new transparency will lead to a…proliferation of tools and techniques for information warfare: campaigns to discredit sources, preemptive strikes, stings, and more.” That said, Dennett and Roy claimed that “news organizations and political analysts that spin selectively grounded stories are going to face an increasingly difficult existence.”
As if.
Misinformation and its dissemination are the key drivers of our “post-truth” age.
Even mundane and uncontroversial facts can be difficult to ascertain. Reality is messy. Infinite data points make it messier. And we’re messy, too. “The heart is deceitful above all things,” as the Scripture says.
In 2016, the scientist, Neil deGrasse Tyson floated an old but still stupid fever-dream of an idea for an ideal nation: “Earth needs a virtual country: #Rationalia, with a one-line Constitution: All policy shall be based on the weight of evidence.”
Funny how those making such pronouncements seem so certain the Venn diagram of “Policies I support” and “The weight of the evidence” is a single circle. But it isn’t reality. Not by a long shot.
As I often say, we like to think that we are like judges, that we carefully gather and evaluate facts and data before coming to an objective and well-founded conclusion — the best available approximation of reality. Instead, we are much more like lawyers, grasping for any scrap of purported evidence or argument we might exploit to support our preconceived notions and allegiances.
We are all purveyors of misinformation, intentionally and otherwise. And there is a lot of it. As best I can tell, there are eight basic types.
1. Fabricated content: content that is entirely made-up.
2. Manipulated content: the distortion of genuine information or imagery.
3. Imposter content: the impersonation of genuine sources.
4. Misleading content: the misleading use of information. Climate change is a real and enormous problem. However, and for example, essentially all political and policy discussions about it either deny that reality (on one hand) or are wildly misleading about what we can do about it (on the other). “For the foreseeable future, we cannot feed the world without relying on fossil fuels.” And it’s more than just food. It applies to all forms of energy, cement, ammonia, steel, plastic, and more. “A mass-scale, rapid retreat from the current state is impossible.”
5. False connection: when, for example, the headline, caption, or visual doesn’t support the content. In 2014, false claims that a police officer murdered an unarmed Black man who had his hands up contributed to nights of riots in Ferguson, Missouri. Even though the facts were clearly established by the Department of Justice (President Obama’s DOJ, I shouldn’t have to add), the lie was still perpetrated, as the example immediately below shows.
Spoiler alert: It’s no breakthrough (read the paper for yourself, here).
6. False context: factually accurate content that is shared with false contextual information. Those favoring abortion rights, for example, eagerly report that Americans support Roe v. Wade generally but fail to report that Americans also support abortion restrictions far in excess of what Roe and its progeny allow. Meanwhile, the pro-life side eagerly reports the public’s misgivings about abortion (most oppose it after the first trimester, for example) while ignoring the overall support for Roe.
7. Satire and parody: presenting humorous but false stores as if they are true.
8. Espionage/ wartime disinformation and misdirection.
“Everyday” misinformation is often a combination of these categories. Of course, there are myriad examples.
We are always compromised — often badly compromised — by cognitive and behavioral biases, noise, and the limits of our own abilities. We pay attention to the wrong information, evaluate the available evidence poorly, solve the wrong problems, and listen to the wrong people.
To be meaningful, facts require sorting, prioritization, and interpretation. They cannot stand alone. The world’s information must be filtered through inherently subjective criteria. Those criteria lead to bad conclusions and misinformation. A lot of misinformation.
We talk our books, support our tribes, see what we want to see, and remain sure that we’re objective and true. We chuckle knowingly whenever someone insists their kids are super-smart, future pro athletes, or otherwise remarkable, while remaining convinced that our kids are indeed special.
Ascertaining the truth has never been more difficult. Next week, I’ll start to look at how we might try to do that.
Totally Worth It
“Consumers particular[ly] vulnerable to financial bulls*** are more likely to be young, male, have a higher income, and be overconfident with regards to their own financial knowledge.”
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This is the best thing I saw this week; this is the best thing I read, unless it was this. The sweetest. The funniest. The fastest. The most helpful. The most horrific. The most creative. The most inspiring. The most ridiculous. The most troubling. The most bizarre. The most surprising. The worst math. A powerful conspiracy theory. Crisis response. True (sadly). Also true. Karma. Enticing marketing. Scary. Saying the quiet part out loud. Everybody talks their book. The last word.
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Allianz Global Investors got hit with a huge ($5.8 billion) penalty for fraud and misrepresentation with respect to one of its institutional funds. Because the fund was shut down (the fraud was horrific), Allianz had to transfer $120 *billion* in AUM to VOYA. The whole story is bizarre and looks surprisingly like the Orange County bankruptcy in 1994. A funny, interesting, and accurate explanation of what happened is here.
The following new song from Larkin Poe was released yesterday and it cooks.
The TBL Spotify playlist now includes almost 225 songs and about 16 hours of great music. I urge you to listen in, sing along, and turn the volume up.
Benediction
This week’s (wonderful) benediction is offered by P.J. Morton. Although he has won four Grammys as a solo artist, he’s best known for his work with Maroon 5.
Amen.
Thanks for reading.
Issue 114 (May 20, 2022)