Skepticism
Less than 24h after publishing our rant on Economic models, we get John Kay’s brilliant piece in our inbox – “A wise man knows one thing – the limits of his knowledge”. It is the ultimate summary of the many dangers of modelling in general, not just in economics – among which dangers we count over-complicating things, but most importantly over-estimating a model’s value as predictive/forecasting tool. In fact, as the article argues and as we’ve seen countless times, we tend to over-estimate models even in their ability to analyze the past, especially if one is asking the wrong questions. We also cite a few quotes by Taleb and an article on Edge.org by Emanuel Derman.
“Nothing substitutes for thinking”, as Munger and Buffett have said, and someone has also said that “not everything that counts can be counted, and not everything that can be counted counts.”
A New Yorker article called “The Mark of a Masterpiece” is quite an enjoyable reading, particularly after watching “Who the #$&% Is Jackson Pollock?”. While 99.9% of the articles written on this subject will basically repeat the same story, the author goes a few steps beyond and provides a great example of what investigative work is. The similarities between the job description of an analyst and that of an investigative reporter have been mentioned several times in internal postings and discussions, but we’ve also dealt with it here at Buysiders.com. Quotes, comments and links inside.
The doctor profiled in this NYT article met Amos Tversky (who worked with Daniel Kahneman on prospect theory) and became a different type of doctor – “perhaps the leading debunker of preconceived notions in the medical world”. The real benefit of reading this article is that it shows what skepticism, curiosity, intellectual honesty and the drive to find some kind of “truth” can accomplish in any field, especially one that lends itself to empirical examination/ fact checking. Great reminder of PART of the required mindset of an analyst.
We have put together a small collection of links regarding competition and corporate strategy as defined by Harvard’s Michael Porter. As this blog will always remind readers, “take it with a grain of salt”! No matter how famous the expert, how “make-sense” his arguments, always check, search for contradictions and weaknesses and then make up your own mind.
Your skeptic mind is keeping you away from the best cocktail parties? This TED talk by Dr. Shermer of Skeptic.com could be your ticket out of this conundrum. Actually, getting invited to TED would be your best shot, but we’ll settle for humor.
