The Better Letter: Say What?! (Part 8)
If we want to make better decisions, we’re going to – broadly speaking – do some science.
This week brings the eighth installment of my series on making behavioral finance actionable. The previous seven are linked below.
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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. Instead, we are much more like lawyers, grasping for any scrap of purported evidence we can exploit to support our preconceived notions and allegiances. Doing so is a common cognitive shortcut such that “truthiness” – “truth that comes from the gut” per Stephen Colbert – seems more useful than actual, verifiable fact.
What really matters is that which “seems like truth – the truth we want to exist.” That’s because, as Colbert puts it, “the facts can change, but my opinion will never change, no matter what the facts are.”
Examples aren’t hard to find.
Based on Jane Austen’s epistolary novel, Lady Susan, eventually published more than 50 years after her death, “Love and Friendship” is a witty black comedy of manners and machinations that feels as though it has more in common with Oscar Wilde than the author of Sense and Sensibility. “Facts are horrid things,” Lady Susan (played by Kate Beckinsale) shrugs, dismissing culpability for her latest scandalous actions, which included sleeping with another woman’s husband. Hearing Lady Susan insisting her having been unmasked as a duplicitous scoundrel is everyone’s shame but her own is a masterful and, in context, hysterical tour de force.
Mere “horrid” facts will not deter Lady Susan from that which she wishes to communicate. And at least she didn’t read other people’s correspondence.
By comparison, consider the man who would become our second president. When making his defense of British soldiers during the Boston Massacre trials in December of 1770, John Adams (played by Paul Giamatti in the clip below) offered a now famous insight: “Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.” Legal Papers of John Adams, 3:269.
The late Sen. Daniel Patrick Moynihan once made a similar claim: “Everyone is entitled to his own opinion, but not to his own facts.”
Facts, then, can be either “horrid” or “stubborn.” But which? And what of the difference? The best method we have for making that sort of evaluation is science. If we want to make better decisions, we’re going to – broadly speaking – do some science.
That’s the subject of this week’s TBL.
Do Some Science
Being human, we all want our lives to be easy. We want formulas to plug in, systems to follow, and outcomes to be assured. Instead, making good decisions requires hard work, mental acuity, and the willingness to adapt when things (inevitably) don’t go as planned.
When I was a kid in the 1960s, plenty of people were telling me to question everything, but the implicit (and erroneous) suggestion was that I reject everything. Instead, I try to honor the past without being bound by it. We should always explore and learn, combine thoughts from multiple sources and disciplines, and try to think nimbly because the need for new approaches is ongoing; and we should test and retest our ideas.
Our psychological make-up together with our behavioral and cognitive impairments conspire against us in this regard. Even when we recognize these problems generally, we typically miss them in ourselves. If we are going to succeed, we’re going to have to ask questions and keep asking questions. As my late father used to tell me, it’s what you learn after you think you know everything that really counts.
Asking such questions in a systematic way is what science is all about. The Oxford English Dictionary defines the scientific method as “a method or procedure that has characterized natural science since the 17th century, consisting in systematic observation, measurement and experiment, and the formulation, testing, and modification of hypotheses.”
What this means is that we observe and investigate the world and build our knowledge base predicated upon what we learn and discover, but we check our work at every point and keep checking our work. It is inherently experimental. To be scientific, then, our inquiries and conclusions need to be based upon empirical, measurable evidence, at least to the extent possible.
Galileo’s life and work became a scientific watershed in this regard. Most fundamentally, Galileo’s greatness was a function of his unwillingness to take anyone’s word for it. He checked others’ work, made it his work, and then checked his own work. As such, he is the key to experimental science, an expression that is now redundant, thanks in no small measure to him. When Galileo read Aristotle and his assertion that heavier objects fall faster than lighter objects, he checked it out himself (which, astonishingly, neither Aristotle nor anyone else to that point had apparently bothered to try).
Thus, the scientific method can and should be applied to traditional science as well as to all types of inquiry and study. In that respect, for example, plumbing can be a scientific endeavor.
The great scientist Richard Feynman (who was also more than a bit of a creep in this area) even applied such experimentation to hitting on women. To his surprise, he learned that he (at least) was more successful by being aloof than by being polite or buying a woman he found attractive a drink.
This approach to figuring out what has gone on, is going on and will go on as a matter of objective fact — the essence of the scientific method — is demonstrated in the 1993 television film “And the Band Played On.” In a crucial scene early on, researchers at the Centers for Disease Control meet in 1981 to discuss the statistics of a deadly virus — that we later learn to be HIV — sweeping through the gay community. To that point, nobody had been able to come up with a decent explanation for what they had been observing.
So, the boss walks into the meeting and asks, “All right, what do we think? What do we know? What can we prove?”
That concept ends up being a running theme in the movie and gets to the heart of the scientific endeavor. What do we think? What do we know? What can we prove?
These categories can be bit loose, of course, with distinctions based upon the nature and quality of the evidence. Moreover, “proof” in science doesn’t have the certainty that it can in math. We could be wrong, at least in theory, even when we’re really, really sure and can demonstrate something factually.
In this context, then, “know” is less sure or (more likely) really sure but where we don’t have all the data we’d like to support it. As in the movie, “I can’t prove that the sun isn’t going to turn into a bran muffin next Tuesday, but after 20 years of doing this I know what I know.” Stuff in the “think” category includes things I believe to be true but am not entirely sure of.
The key to science is perhaps the idea that every concept, no matter how well established, is subject to revision or even rejection based upon new or better evidence. That’s how good science works. We’re all wrong and wrong a lot even if and as our cognitive shortcomings prevent us from seeing current examples very often. If we’re going to be any good consistently, we need (counterintuitively) to commit to the idea that we’re going to be wrong a lot and to intentionally look for ways to be shown where and how.
Doing so won’t be easy. As William James famously noted, many people think they are thinking when they are merely rearranging their prejudices.
Moreover, life experience conspires to make it more difficult to adjust or amend our positions over time. The older we get, the more authority we acquire, the more success we achieve, the more prominent we become, the more admired we are, the harder it is for us to see our mistakes and act accordingly. And since greater conviction leads to greater perceived confidence, certainty, and thus credibility and success, it’s easy to continue to fool ourselves, especially when things are going well.
There’s a famous expression to the effect that it’s hard to reason someone out of a position that he wasn’t reasoned into, and there’s truth in it. It’s hard enough to influence or help alter a person’s beliefs — about economics, religion, politics, or even the Dodgers’ relative evilness — much less someone’s life commitments. But if we’re to have a chance to make better, more reality-based decisions, we’re going to have to try and to begin with ourselves.
Given what we know (even if we can’t quite prove it), we should probably start with a simple commitment, but not a commitment to any cause. Instead, let’s make a commitment to truth, wherever it leads, and to continually checking our work.
Here are four important starting points for trying to do that.
Humility. Historian John Dickson notes that, in the ancient world, honor and reputation were the primary virtues. Humility, on the other hand, wasn’t considered virtuous. It was for the lowly, not the honorable. Jesus changed that. Because we are all wrong a lot about a lot of things, science demands humility. A crucial element of science is the knowledge that we could be wrong.
Skepticism. I have written often about the explosion of the sports analytics movement, of which Bill James is the founding father. In essence, as he had always intended, what James did was to make baseball more scientific. He did so using the common scientific tools of investigation, reason, observation, induction, and testing with an attitude of skepticism. The bottom line is that Bill James tested a variety of traditional baseball dogmas and found them wanting. Demonstrably wanting.
Trial and Error. The essence of science – even reason – is trial and error. It applies equally to the theoretical physicist and to your plumber. We simply (not that it’s easy) try different stuff until it works … or works better. As Philip K. Howard argues: “How can anything good happen, if individuals cannot think and do for themselves? Rules preclude initiative. Regimentation precludes evolution. Letting accidents happen, mistakes being made, results in new ideas. Trial and error is the key to all progress.”
What Works. In my professional life, I strive to be an evidence-based investor, which I define as a relentless focus on what works, what doesn’t, and why. It’s the idea that no investment advice should be given unless and until it is adequately supported by good evidence. This idea applies much more broadly, of course, and should. If your airplane doesn’t fly, there is at least one thing wrong with or about it.
If we are going to succeed, we’re going to have to ask questions and keep asking questions. Science won’t give us all the answers, but all our good, objective answers will be consistent with the data and evidence. Thus, our processes should be data-driven at every point. Scientific thinking is reality-based. As James Thurber (and later Casey Stengel) would have it, “You could look it up.”
Daryn Lehoux’s What did the Romans Know? maintains that there is no crucial difference between the Romans’ view that garlic disempowered magnets and current scientific understanding. The garlic I am holding next to a magnet firmly “gripping” a paper clip demonstrates how ridiculous that idea is. Such a demonstration is a “killer fact,” a “stubborn” fact so decisive that honest opponents of the idea must change their minds.
The more we repeat and reiterate our explanatory narratives, the harder it is to look for “stubborn” and even “killer” facts that might question or perhaps overturn our preconceived notions and allegiances and to recognize evidence that ought to cause us to re-evaluate our priors. The facts become less and less “stubborn,” more and more “horrid.”
By making it a careful habit skeptically to re-think our prior interpretations and conclusions – by doing science – we can at least give ourselves a fighting chance to correct the mistakes that we will inevitably make. As with everything in science, each conclusion we draw must be tentative and subject to revision when the facts so demand.
Still, and as ever, for too many people too much of the time, facts and evidence simply don’t matter. As John Maynard Keynes is famously said to have said, but probably didn’t, “When the facts change [when they are “stubborn”], I change my mind. What do you do, sir?”
If you want to improve your chances of being right, you’ll do some science on the alleged facts and, if the evidence demands, you change your mind. So let’s do some science.
Totally Worth It
When he was younger, Huh had no desire to be a mathematician. He was indifferent to the subject, and he dropped out of high school to become a poet. It would take a chance encounter during his university years — and many moments of feeling lost — for him to find that mathematics held what he’d been looking for all along.
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Did you know that we have today’s post-it note thanks, in part, to church music? “Fry often used small slips of paper to mark important pages in his hymnbook, but with nothing to keep them in place they frequently fell out, causing Fry to lose his place and costing him precious time. One Sunday in 1973, during choir practice, he remembered Dr. Silver’s seminar. He wondered if he could somehow coat his bookmarks with the adhesive in a way that could help save his page more effectively, without damaging the delicate, wafer-thin pages of his hymnbook.”
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Benediction
This week’s benediction is “Consider the Stars,” by Keith and Kristyn Getty.
Amen.
Thanks for reading.
Issue 121 (July 8, 2022)