Roubini and Taleb are always predicting disaster. This time they happened to be correct however if you predict a crash for long enough you are bound to be right. A better example would be the guys who shorted housing and made tons of money.
I’m not going to stand for Taleb and Roubini here, but Taleb published a whole book in 2007, one year before the crisis, where he clearly explained why Fannie Mae was, despite what the experts of the time claimed, about to blow up.
Now, how is it that all these economists, given that they had the correct explanation, could not recognize it?
It is not just that mainstream economists can’t make predictions. It is worse than that! If you give them the proper prediction, with all the factors involved, they won’t be able to recognize it!
Mainstream economists have a terrible track record at predicting booms and busts. And what good are your predictions if they don’t include booms and busts?
Edwardsays:
Hey Daniel et al. If you haven’t read this, you will probably enjoy it a great deal:
Largely agree, but let me add that there is survivor bias here.
What you’re seeing is an outcome of the naive optimism of entrepreneurs followed by only looking at successes. Outsiders don’t know how hard the problem is that they’re trying to solve, and a few of them succeed anyway through sheer determination and dumb luck.
If your point is that disruption often comes from outsiders, totally agree with that. But keep in mind that there are huge numbers of failures there, and, if you walk that path, the most likely outcome is that you’ll be one of them (most startups, for example, fail).
But, if your point is that the best way to be creative and find improvements is to ignore experts, don’t think I agree, though it might depend on what you mean by experts. If experts means data, well, then I definitely think you should listen to experts. If experts only means speculation or opinion by people who have been in the field for a long time, then, right, ignoring that often is a way to find fruitful ideas others have overlooked or passed over.
I found that many people you referred here are some experts in different fields. Could this lead to the conclusion that we should try to borrow ideas from other fields?
Michelesays:
My personal academic experience is to not follow any person that defines himself expert. 🙂
I always interpreted that behaviour as a moment of intellectual tiredness.
Anonymoussays:
Daniel, people will not take a person seriously if that person makes false claims several times. The person might eventually say something useful but it is a clear waste of time to spend time in finding if such person has said anything worth taking seriously.
Let me give an example in CS: there are many cranks who keep claiming that they have solved P vs. NP. I have seen several ones, some even published. Yet all of those that I have checked are incorrect for difficult to find by trivial errors. Now at some point some crank might find a solution to the problem, no one thinks that is impossible. However the likelihood of it is small and the amount of work needed to find such a needle in a really huge haystack is enormous. Do you expect complexity theorists to spend their time reading and trying to find that potential needle? I don’t think so.
Now that is how you seem to expect economists to treat the work of these two guys. They have made so many incorrect claims and continuously so that they are not taken seriously any more by experts.
For every person who ignored expert advice and was rewarded with a huge, game changing sucess, there are probably thousands of people who ignored expert advice and got burned badly. Last I checked, my fridge didn’t have an internet connection, eventhough there were plenty of startups in the 90s who were betting on internet grocery shopping ;-).
This doesn’t mean that you should follow expert advice blindly. If there is some part of the expert advice that truly doesn’t seem to make sense, the you should definitely experiment with trying it “your way”. But you should do so very carefully, and constantly evaluate “your way” against the expert’s way.
Often, it’s not so much about ignoring expert advice, as following the advice of the experts whose knowledge is most applicable to your situation. If you are an amateur club-level tennis player, following Roger Federer’s advice is probably not right for you, because you are not a top-level international player. But following the advice of a pro who has successfully coached hundreds of players of your level is probably right (and his advice will be very different from the advice that Federer might give).
Mehmet Suzensays:
You are confusing, innovation and creativity with ignorance. Producing or showing a distinct and original thing in any field does not imply that a person doing that is ignorant or what makes his/her achievement possible were ignorance. George Orwell used that expression, “ignorance is strength” to show that how oppressive regimes operates against its subjects. It has noting to do with innovation!
> However, original thinkers like Nouriel Roubini and Nassim Nicholas Taleb did predict it with accurate arguments.
Their hedge funds have also failed or been sold, and Dr Doom kept on predicting doom past 2008. Even a stopped clock…
Roubini and Taleb had, as the saying goes, predicted 14 out of last 5 crises: they kept talking about those for like ten years.
Roubini and Taleb are always predicting disaster. This time they happened to be correct however if you predict a crash for long enough you are bound to be right. A better example would be the guys who shorted housing and made tons of money.
@Steve @Alex @Anonymous
I’m not going to stand for Taleb and Roubini here, but Taleb published a whole book in 2007, one year before the crisis, where he clearly explained why Fannie Mae was, despite what the experts of the time claimed, about to blow up.
Now, how is it that all these economists, given that they had the correct explanation, could not recognize it?
It is not just that mainstream economists can’t make predictions. It is worse than that! If you give them the proper prediction, with all the factors involved, they won’t be able to recognize it!
Mainstream economists have a terrible track record at predicting booms and busts. And what good are your predictions if they don’t include booms and busts?
Hey Daniel et al. If you haven’t read this, you will probably enjoy it a great deal:
http://www.amazon.com/Being-Wrong-Adventures-Margin-Error/dp/0061176052
Largely agree, but let me add that there is survivor bias here.
What you’re seeing is an outcome of the naive optimism of entrepreneurs followed by only looking at successes. Outsiders don’t know how hard the problem is that they’re trying to solve, and a few of them succeed anyway through sheer determination and dumb luck.
If your point is that disruption often comes from outsiders, totally agree with that. But keep in mind that there are huge numbers of failures there, and, if you walk that path, the most likely outcome is that you’ll be one of them (most startups, for example, fail).
But, if your point is that the best way to be creative and find improvements is to ignore experts, don’t think I agree, though it might depend on what you mean by experts. If experts means data, well, then I definitely think you should listen to experts. If experts only means speculation or opinion by people who have been in the field for a long time, then, right, ignoring that often is a way to find fruitful ideas others have overlooked or passed over.
prediction must be backed up by theory and models. In that respect, roubini fails. However, there are many other economists that have actually predicted the crises many years back and that is based on some economic theory and models. See “Who are these economists anyway”
http://www.google.fr/url?sa=t&rct=j&q=who%20are%20these%20economists%20anyway%20galbraith&source=web&cd=1&cad=rja&ved=0CB8QFjAA&url=http%3A%2F%2Fwww.nea.org%2Fassets%2Fdocs%2FHE%2FTA09EconomistGalbraith.pdf&ei=y3GWUO2XFdKDhQfB94DYCA&usg=AFQjCNExyLA5AP60NFJuH88vEx-jPdW7xw
and
for a more complete list see ““No One Saw This Comingâ€: Understanding Financial Crisis Through Accounting Models”
http://mpra.ub.uni-muenchen.de/15892/
I found that many people you referred here are some experts in different fields. Could this lead to the conclusion that we should try to borrow ideas from other fields?
My personal academic experience is to not follow any person that defines himself expert. 🙂
I always interpreted that behaviour as a moment of intellectual tiredness.
Daniel, people will not take a person seriously if that person makes false claims several times. The person might eventually say something useful but it is a clear waste of time to spend time in finding if such person has said anything worth taking seriously.
Let me give an example in CS: there are many cranks who keep claiming that they have solved P vs. NP. I have seen several ones, some even published. Yet all of those that I have checked are incorrect for difficult to find by trivial errors. Now at some point some crank might find a solution to the problem, no one thinks that is impossible. However the likelihood of it is small and the amount of work needed to find such a needle in a really huge haystack is enormous. Do you expect complexity theorists to spend their time reading and trying to find that potential needle? I don’t think so.
Now that is how you seem to expect economists to treat the work of these two guys. They have made so many incorrect claims and continuously so that they are not taken seriously any more by experts.
I agree with Greg Linden’s comment.
For every person who ignored expert advice and was rewarded with a huge, game changing sucess, there are probably thousands of people who ignored expert advice and got burned badly. Last I checked, my fridge didn’t have an internet connection, eventhough there were plenty of startups in the 90s who were betting on internet grocery shopping ;-).
This doesn’t mean that you should follow expert advice blindly. If there is some part of the expert advice that truly doesn’t seem to make sense, the you should definitely experiment with trying it “your way”. But you should do so very carefully, and constantly evaluate “your way” against the expert’s way.
Often, it’s not so much about ignoring expert advice, as following the advice of the experts whose knowledge is most applicable to your situation. If you are an amateur club-level tennis player, following Roger Federer’s advice is probably not right for you, because you are not a top-level international player. But following the advice of a pro who has successfully coached hundreds of players of your level is probably right (and his advice will be very different from the advice that Federer might give).
You are confusing, innovation and creativity with ignorance. Producing or showing a distinct and original thing in any field does not imply that a person doing that is ignorant or what makes his/her achievement possible were ignorance. George Orwell used that expression, “ignorance is strength” to show that how oppressive regimes operates against its subjects. It has noting to do with innovation!
Nice article. Completely agree with you.