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The Pundits are Wrong; Duh….. February 23, 2009

Posted by shaferfinancial in Finance.
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Typically the only academic studies that get mass media attention are the ones that some pundit decides to use to prove his/her ideological viewpoint is correct.  Here one for all of them: Philip Tetlock looked at 82,361 predictions from mass media pundits and ……surprise…… these predictions were mostly wrong.  And the ones least likely to be right were the predictions coming from the most popular pundits.  You know those folks that seem to be on every TV channel, every blog, every media outlet….yea those guys and gals…..were spectacularly wrong.

Part of the explanation is the old hedgehogs and foxes argument.  Hedgehogs know one big thing and apply that one thing everywhere, express supreme confidence in their forecasts, and dismiss everyone else as idiots.  Foxes know many things, make bottom up arguments using an array of facts and doubt the power of the big ideas for prediction.  But hedgehogs make good pundits because they are so sure of themselves, invite controversy by dismissing other ideas and people, and have a singular story to tell.  So they are what we hear from the mass media.  I mean how quickly would people turn to another channel if a pundit always started with a “I don’t know” or “I am not sure” statement.  Hedgehogs, despite their self-confidence, are much poorer prognosticators than the foxes of the world.  When a fox makes a prediction it is usually nuanced with lots of “I’m not sure, because XXXX might happen…” thrown in.  So the mass media seeks out the hedgehogs to present to their audience, and the hedgehogs are mostly wrong.  So the audience is actually dumber after watching/reading these famous pundits.

Just  another reason to think for yourself and ignore the mass media!



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