The Better Letter: Say What?! (Part 5)
The great mistake – thinking “I’d know”
The Code of Hammurabi, the ancient Babylonian law code, which dates to 1772 BC, addresses the rights of prostitutes, who are often said to be engaged in the oldest profession. Others vie for the honor.
Doctors say it’s them since God performed surgery to make Eve out of Adam’s rib. Engineers say they were first because, before that, God created order out of chaos. The computer department confidently claims the nod, asking (rhetorically), “Who do you think created the chaos?”
And lawyers will undoubtedly sue the computer people, certain that they are the true chaos specialists.
Lost in that debate are the advertisers, perhaps because the first advertiser was the Serpent in the Garden of Eden, and his best trick has been convincing most of us that he isn’t real, and the story isn’t true. His first product representation was of an apple, an icon of which, with Eve’s portion bitten out, is still proudly displayed on many of his products today.
Ironically, advertising is often just lying, because man-made products don’t sell well when the pitch is merely the truth. The Uniform Commercial Code recognizes this reality by providing an exception to its otherwise blanket requirement of honesty and fair dealing for “sales puffery.”
Put another way, everybody talks their book. It may or may not be fraudulent, but it isn’t quite true. It’s spin, exaggeration, hyperbole, aggrandizement, embellishment and, sometimes, outright falsehood.
Significantly, for our purposes herein, sometimes the advertiser’s intended victims believe every word of the pitch and, sometimes, the advertiser believes every word of it, too. We are all sure of stuff that isn’t true. That’s the thrust of this week’s TBL, the fifth in a series on making behavioral finance actionable.
Part Two: The Misinformation Milieu
Next week, I’ll begin to offer some potential remedies for the behavioral and cognitive biases and maladies that plague all of us.
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Thanks for reading.
The Great Mistake – Thinking “I’d Know”
Ignaz Semmelweis was the 19th Century obstetrician who discovered that the often-fatal puerperal (“childbed”) fever, then common among new mothers in hospitals, could essentially be eliminated if doctors simply washed their hands before assisting with childbirth. After observing that a particular obstetrical ward suffered unusually high instances of the disease and that doctors there often worked in the morgue right before aiding in childbirth without washing their hands in between, Semmelweis speculated that “cadaverous material” could be passed from doctors’ hands to patients, causing the disease. He thereupon initiated a strict regimen at his hospital whereby all who would assist in a birthing must first wash their hands with a chlorinated solution. Death rates plummeted.
Semmelweis expected a revolution in hospital hygiene because of his findings. But it didn’t come.
His hypothesis, that there was only one cause of the disease and that it could be prevented simply through cleanliness was extreme at the time and ran counter to the prevailing medical ideology, which insisted that diseases had multiple causes. Despite the obvious practical demonstration of its effectiveness, his approach was largely ignored, rejected, and even ridiculed. In other words, ideology trumped facts, even within the scientific community.
Things got so bad that the (understandably) complaining Semmelweis was dismissed from his hospital post and harassed by the medical community in Vienna, forcing him to move to Budapest.
The story gets even stranger from there. In Budapest, Semmelweis grew increasingly outspoken and hostile towards physicians who refused to acknowledge his discovery and implement his protocols. Vitriolic exchanges ensued, in medical literature and in letters, and Semmelweis was eventually lured to an asylum where his opponents had arranged for his incarceration. He was beaten severely and put in a straitjacket. He died within two weeks.
The Semmelweis approach only earned widespread acceptance many years after his death, when Louis Pasteur developed the germ theory of disease – which offered a theoretical explanation for the Semmelweis findings – and Joseph Lister, acting on the French microbiologist’s research, practiced and operated using hygienic methods to great success. Accordingly, Semmelweis is now considered a hero, a pioneer of antiseptic procedures, and something of a martyr.
Psychiatrist Thomas Szasz (highly controversial himself) summed things up aptly.
“[I]t can be dangerous to be wrong, but, to be right, when society regards the majority’s falsehood as truth, could be fatal. This principle is especially true with respect to false truths that form an important part of an entire society’s belief system. In the past, such basic false truths were religious in nature. In the modern world, they are medical and political in nature.”
A group of the leading scientists of the day saw a conclusive demonstration that their care regimen was wrong and that many lives could easily be saved with a simple hand-washing protocol. They rejected the discovery and rejected the protocol.
I’ll bet they were smug and self-satisfied when they did.
Today, the “Semmelweis Reflex” is a metaphor for our reflex-like tendency to reject new evidence or new knowledge because it contradicts our established norms, beliefs, or paradigms. Jess Zimmerman says it’s this: “By the time my friends told me I shouldn’t, it was too late for me to listen.”
We’re going to be wrong a lot. That’s a given. Accordingly, we can’t hold onto our ideas too tightly. Instead, we need to be on a constant hunt for error. When we find it, we need to admit it and fix it, rinse and repeat.
But that’s really hard to do.
We tend to think if our ideas – even strongly held, important ideas – are contradicted, we’ll change our minds. We expect education, science, and critical thinking to save the day.
We’re the heroes of the stories we tell ourselves about ourselves. We’re convinced of our own genius and self-righteousness. We’re overconfident. And none of us is as smart as we think.
And if we do somehow change our minds, we’re also – all of us – emotional, confabulating, unreliable narrators who overwrite our memories to make them consistent with what we believe now. We were right all along, you see.
Motivated reasoning afflicts us all. And, the smarter we are, the more likely we are to succumb to it – we’re smart enough to come up with a plausible explanation for how and why we’re right, despite disconfirming evidence.
In 1957, Sir Ronald Fisher, the British polymath and “father” of modern statistics, ridiculed the idea of cigarettes causing cancer as a “catastrophic and conspicuous howler.” Cigarette makers loved his “itch in the lung hypothesis,” the idea that cancer gives its victims an “itch” that only smoking can scratch, making cancer the cause of smoking rather than vice versa. Fisher became a recruiter for the cause, and the tobacco industry ended up funding thousands of academics to obtain research and scholars they could exploit, including at least 25 who went on to win the Nobel Prize.
Really smart scientists, mathematicians, and other experts can get things wildly wrong, even in their areas of expertise.
I’ve told this story before here, but I was at a dinner of about a dozen finance folks (and one spouse) several years ago. Everybody else at the dinner was famous or, at least, famous in a finance sort of way.
Most of you would surely recognize the names of the other finance people who were there. The man on my immediate left (I’ll call him “Mr. Value”) was with his much younger second wife. She was Russian. I don’t think she was a spy.
Responsible for the management of over $100 billion globally, Mr. Value is extremely smart and successful. Before dinner, he made a bit of a show of ordering and paying for four bottles of wine. Very expensive wine.
I drank a nice Burgundy – at least I think it was nice. I asked Mr. Value why he had chosen that particular vintage. He explained that he loved Burgundy, he had visited the winery when he and his wife were in France on a vineyard tour the previous summer, he was friends with the vintner, 1996 was a very good year for Burgundy, and buying it for under $1,000 a bottle (he had paid $995) was a real bargain.
He was a value investor!
I sweetly asked Mr. Value if he had read the research literature (see, e.g., here, here, here, and here) suggesting that even wine experts often couldn’t tell the difference between a good wine and a cheap one.
Mr. Value furrowed his brow. He looked down. He seemed to ponder deeply. Then, he lifted his head, faced me directly, and uttered just two words before turning his back to me and conversing in animated fashion with the other side of the table.
“I’d know.”
If you are sure you’ll change your mind when the facts demand it, think again. We can all think of examples of others (and especially our opponents) being certain of dubious or even clearly wrong things.
Ourselves? Not so much.
All of us will (begrudgingly) concede that we hold erroneous views. But none of us can come up with current examples.
If we are to have any hope of mitigating our tendency to bias and error, we will have to be intentional and insistent about it. And it won’t be easy. That’s what I’ll begin outlining next week.
Totally Worth It
Saturday was the 80th anniversary of the Battle of Midway – perhaps the most amazing military victory in American history.
Novelist Herman Wouk best described the importance of the battle: Three times in human history, he wrote, the navies of the East sailed out to challenge the West. And in three decisive battles – Salamis, Lepanto and Midway – the outnumbered navies of the West won monumental victories.
The victory by the greatly outnumbered American fleet is hard to believe – the Japanese were not only a much bigger force but, at that point of the war, they had much better planes, far more experienced pilots, and a far more advanced doctrine of carrier operations.
The Americans launched two groups of fighters, three torpedo squadrons, and five dive bomber squadrons, who attacked almost piecemeal. The various squadrons followed their own paths. As a result, the three torpedo squadrons attacked first – one-by-one – without fighter protection and were slaughtered. Two of the five dive bomber squadrons turned the wrong way when they got to the point where the Japanese were supposed to be and never made an attack.
It all came down to two dive bomber squadrons from the Enterprise and one from the Yorktown, which arrived over the Japanese fleet at the same time and found the air clear because the combat air patrol was largely on deck, finishing up the torpedo planes. Even then, the American inexperience showed when both Enterprise squadrons dove on the same carrier. They blasted the Kaga (while the Yorktown boys were smashing the Soryu), but the flagship Akagi would have been untouched if dive bomber pilot and squadron commander Richard Best hadn't noticed the mistake. He managed to signal two wingmen and their three planes dove alone on the Akagi – and sunk her.
Three of Japan's six big carriers were wrecked in a five-minute period. Later in the day, the American dive bombers (including Best) found the Hiryu and smashed the fourth big carrier the Japanese had at Midway (two big carriers, bloodied at the Coral Sea, missed the battle). The Americans lost the Yorktown (already damaged at Coral Sea).
Those five minutes at Midway totally turned the tide of WWII in the Pacific. On the 80th anniversary, we ought to celebrate one of the most amazing and most important military victories in our history.
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Letter to a dying friend (2003):
“My much-loved friend,
“It matters to have trodden the earth proudly, not arrogantly, but on feet that aren’t afraid to stand their ground and move quickly when the need arises. It matters that your eyes have been on the object always, aware of its drift but not caught up in it. It matters that we were young together, and that you never lost the instincts and intuitions of a pioneer. It matters that you have been brave when retreat would have been easier. It matters that, in many places and at many times, you have made a difference. Your laugh has mattered. Your love has mattered. Above all, it matters that you have been loved.
“Nothing else matters.”
Benediction
Karl Barth was the most influential theologian of the 20th Century, and the most prolific. The Barmen Declaration, of which he was the primary author, answered the threat of Nazism as few could or did. His unfinished multi-volume Church Dogmatics, alone, was 17,000 pages.
In 1962, Professor Barth visited America and spoke at Rockefeller Chapel (really a Gothic cathedral) on the campus of the University of Chicago. After his lecture, during Q&A, a student asked Barth if he could summarize his whole life’s work in theology in a sentence. Barth said something like, “Yes, I can. In the words of a song I learned at my mother’s knee: ‘Jesus loves me, this I know, for the Bible tells me so.’”
That song, as sung by Whitney Houston, is this week’s benediction.
Amen.
Thanks for reading.
Issue 117 (June 10, 2022)