> “Don’t buy stocks when the P/E ratio is over 20” was a good lesson to learn from the 1970s when interest rates were 7%, the Fed hadn’t yet learned what it’s capable of, and most businesses were cyclical manufacturing companies vs. asset-light digital services. Is it relevant today? At a broad, philosophical level, yes. In practical terms, probably not. In the same sense, buying stocks at all seemed like nothing but speculation in the 1920s because corporate disclosures were so opaque. By the 1970s that had changed, and you could begin to make rational, calculated long-term decisions that put the odds in your favor.
The funny thing is that exactly this kind of talk was all the rage leading up to both the 2000 and 2008 crashes. The boom makes it impossible to imagine what the bust will look like, and vice versa. Most people are utterly incapable of seeing 180 degrees through the business cycle. They simply can't do it and rather extrapolate current conditions to infinity.
This is a big part of boom/bust cycles. They are spaced out by just enough to entice a new group of greenhorns who ever more loudly beat the new paradigm drum. Then this new class learns that the business cycle is in fact immortal. But for many, it's a short-lived lesson.
And that part about making "rational, calculated long-term decisions" is amusing. Because it's during the boom that companies start to engage in accounting shenanigans. The book-cooking will all come out in the next bust, just like it always has. 100x + price-to-earnings multiples will cover a multitude of sins.
As Warren Buffet allegedly said, it's only when the tide goes out that you find out who's been swimming naked.
The problem is we're all now dependent on stock market performance to make retirement feasible. Employer guaranteed defined-benefit pension schemes are dead.
My uncles pension scheme was structured to pay out 1.5% of his final salary, inflation adjusted for the rest of his life, for each year he'd worked. He worked at one company his whole career, from age 18 to age 55, when he retired. Factoring in his mortgage, which he paid off prior to retirement, his disposable income never even dropped when he retired.
Exact figures don't matter too much, but to achieve that with a defined-contribution pension you need to invest something in the range of 15%+ of your gross salary for 30 years and achieve a 7% above-inflation annualized investment return. And it won't be final salary but career average.
> The problem is we're all now dependent on stock market performance to make retirement feasible.
Which seems a bit convenient for the wealthy. I think it was intentional, to align the interests of pensioners with the wealthy.
It seems to me that pensions are one thing governments can do a good job at, because companies may fail but the government is much less likely to be unable to pay retirement benefits. They may need to renegotiate the benefits but they won’t go to zero. And if companies fail the government provides a pension of last resort anyway.
Either way, we have set up a system where those with assets are slightly in the majority (65% home ownership, probably similar number with 401ks or stocks [1] 56%) and so will continue to vote themselves benefits at the expense of those who haven’t already acquired assets.
People who can retire are wealthy. They have a claim on [10, 20, 30] years of an income stream in the future. This can either be a claim on future tax revenues (public pensions) or on return to capital previously invested (private pensions). Most people have always worked til they died and it seems unlikely that the system where people work for 30-40 years and then get 30-40 years of pension will last.
I don't think it's scarcity, I think it's just reallocation of workforce, due to technological advancements. Those 5% can now produce equivalent or more to what the 95% used to produce. And because of that, people are able to focus on other work.
>It seems to me that pensions are one thing governments can do a good job at, because companies may fail but the government is much less likely to be unable to pay retirement benefits.
Illinois and New Jersey beg to differ. Granted checks haven't bounced yet but it's pretty clear weird stuff is gonna happen and either pensioners or taxpayers will get screwed bad.
Yeah middle class homeownership is bullshit. Middle class stock ownership is less obviously good or bad, because the 0-sum nature of land is not present.
When one gets right down to it, ownership is a too strong stuff. Total Control for eternity which is then sold in finite time in practice? Woah there, why so many infinities? "Rent" has a bad rep, but the problems of rent have to do with it being backstopped by ownship --- i.e. private landlords. "Rent all the way down" is good and conceptually simpler as their are no crazy cancelling out infinitis or whatnot. It's a system of flows that more accurate tracks how the "real economy" works.
Of course, it is important there is still leverage, futures markets, etc. etc. of various sorts to push along history, but full ownership is too much a sledgehammer.
So, what then? The state owns all the land and all company stock? Non-middle-class persons own all the land and all company stock?
Sounds like a great way to force everyone except the wealthy elite into poverty cycles. Maybe there is a reason that those countries that implement what you are talking about (no property ownership) are locked in either perpetual poverty or perpetual war against their own citizens.
Doing away with property ownership is a great way to join the ranks of the third world.
> It's already that way in the US, the percentage of paid off home owners is ~29%.
That 29% is a huge chunk of people; to put things in perspective US presidents win elections with a lower percentage of support from the population.
> I don't know why some people consider themselves "owners" of assets the bank actually owns, but it's normal in the USA.
Because they actually have equity in that asset, and that equity might be the majority? For example, they bought the house for $500k, then ten years later they owe $350k but the realisable value of the house is $800k. If the house is turned into cash, they own more of the cash than the bank does.
Also, because there is a clear path to ownership[1]? You aren't at the whim of the landlord - upgrade (or not) your property whichever way you feel is best with very little interference from the actual "owner" (i.e. the bank). If you have complete say in how an asset is used, and when it will be disposed off, and who may use it, that sure looks like ownership to me.
My residence, for example, will, at the current trajectory, be completely paid off in 24 months or less. My monthly costs drop dramatically at that point, which can be the major goal when "buying" property.
The bank owns the debt on the money that was used to buy the house, which is not the same as the house by any stretch. Having the deed to a house comes with a lot of strong legal protections.
The problem with the current situation is if the stock market gets too divorced from reality, it won't matter if the stock price is high or not. There will be physical shortages of goods. The stock market is supposed to represent capital formation where people set up systems to produce stuff in the future. If the stock market gets too broken, those systems won't be in place and stuff won't be produced.
As a tangential aside it is fun to imagine how an animal perceives shopping - humans walk in to a shop, picks up some stuff, and walk out. It seems very communal. Some humans get in trouble when they pick things up and walk out but it isn't obvious why. They get called thieves. The humans know a bit more than that - the trick is a complex system of bookkeeping, represented by money, to track who is entitled to how much of what. The bookkeeping only matters if people trust that it accurately represents entitlement. If the trust is lost there is hell to pay.
I'll admit that one of the things that makes me nervous about the Roth, and not taking your tax advantage now instead of later, is that in an extreme situation, the government could renege on the promise of tax free gains and distributions.
They can't renege on the tax advantage they already gave you with a traditional.
Which was one of the issues with defined benefit plans. They were structured around long employee tenure. Move around every few years and you basically got no pension most of the time.
I personally think it's unfortunate that most people won't have defined benefit plans any longer. (I'm glad I'll have one from a long-ago 10+ year job whenever I decide to start collecting.) But it's hard to get away from the tenure requirements unless you make the system portable and then you're basically creating a shadow social security system.
In the UK the law was changed such that people were given the freedom to transfer out of their defined benefit schemes, and most were paid handsome lump sums for doing so because the schemes were desperately underfunded and wanted people out
How does paying a handsome lump sum to leavers help make them less underfunded? If the handsome amount is less than the value of the pension, rational people would leave it in there. If it’s more than the current value of the pension, rational people would take it out and the pension fund is thereby left worse off, right?
Just guessing, but, lump sum may be more than the current amount that the person has contributed, but less than what the pension guarantees but may not be able to attain. That is, person may have put in 100k; and a payout is 150k. That seems like a loss, except the pension may also be built around assumptions of 7% growth in that 100k per year; in reality it may be seeing only 3% growth. Better to get it off the books than have to service it in 30 years. And for the individual, better to get more and be able to invest it elsewhere, than to risk it in a pension that may go under or otherwise be unable to meet the level of return you expect. So, win/win.
Defined benefit were typically paid in by the company. That's the thing that makes them attractive. As an employee you do nothing and, when you retire, you potentially get a nice check every month. I've known people I worked with in a past life who had even totally forgotten about the benefit.
But you're probably basically correct. It's a lump sum that's likely a significant payout but less than the computed actuarial value that would have to be paid out.
The financial planning is the same, the difference is just in who takes responsibility.
The bottom line is that many people had this as a benefit and now very few do. What's unchanged is most people spend less time thinking about their pension throughout their lifespan than they do about almost anything else you can imagine, but they really should be because it's all on their shoulders now.
Here in the UK it seems we have a whole generation a couple of decades away from retirement poverty.
If history is any indication the answer to both of those were "they were wrong" and "caused severe financial issues to the company, if it didn't bankrupt them entirely"
Exactly, the point of the comment being that generous defined benefit pension schemes probably aren’t some paneceal solution that capital is now withholding, but that they were at best a burden and at worst a lie.
How are individuals supposed to have it any easier, though? Should people just be forced to work until they drop? Or does everybody now need to be some kind of financial genius in order to make retirement work?
Tax the zillionaires, pay the individuals more, and the executives less. "Robber baron" used to be an insult and a sign of disapproval. It was a popular term.
In much of the western world, people set aside ~10% of their paycheck to a pension fund, which then invests it in relatively solid options (stocks, real estate, bonds, with a risk profile that adjusts over time as the worker ages).
If you do that throughout a career - keeping the same fund between employers - you have an independent source of income for retirement. By giving significant tax benefits to not withdrawing this money early, most people who worked most of their careers will be set for retirement.
> After a lifetime of saving, the average UK pension pot stands at £61,897. With current annuity rates, this would buy you an average retirement income of only around £3,000 extra per year from 67, which added to the maximum State Pension, makes just over £12,000 a year, just enough for a basic retirement lifestyle.
Source[0]. £12K is $16K USD/yr
There are also some sobering statistics on PensionBee[1]
The company you work for will give X% of your salary each month to Willis Towers Watson or whoever, who invest huge sums of money on behalf of people like you.
Then you move jobs or the start-up fails or whatever, but your old money is still with Towers Watson, hopefully earning a decent return. You contribute to a pension in your new job too.
When it comes to retiring, you cash in your contributions from the pension fund (possibly having done some amalgamating and tidying up from the various jobs you've had) for some class of annuity and possibly a lump sum. All going well, it should be enough to live on in retirement.
If you're working and aren't contributing to a pension, I would strongly recommend it.
The state. Is our physical economy not capable of taking care of old people?
The monetary economy and real economy are less delinked than the populists think, but sometimes....c'mon people. If we can't pay for our old people what does that mean? Saving the money for later is an abstraction, we are not literally stockpiling canned food and adult diapers.
Ultimately if there is is a problem taking care of retirees, it is because we continue to let this ridiculous healthcare system exist. And honestly, I am not sure that is actually a limiting factor, or just a stupidity.
Frankly, as a huge net importer there are very few clear material limits --- port of LA problems have more to do with rate of change or imports than absolute amount. China, Germany, S. Korea, etc. could just stop exporting to us and all hell would break loose here, but it would be pretty weird there too.
Back to retirees. Let's not beancount our way to poverty. To paraphrase Keynes, if we can do it, we can afford it. On the flip side, if don't do it, then we will loose what capacity we had in that area.
If only there were some sort of entity "above" corporations that governed, in some sort of way. They could provide security for society. Nope, that could never work.
Government is not a magic box that just solves problems. It is full of people who are just as flawed and selfish and short-sighted as those running corporations. Look no further than the gaping fiscal hole that is Social Security for evidence of government’s ability to “provide security for society”.
Yep. If you pay very close attention, research, move things when necessary, etc. That's either a cool hobby or a second job.
Here's the thing, most humans find it less than scintillating to devolve ALL their activities to some sort of spreadsheet or algo optimization. World of Warcraft is fun for most until the end-game where discovery and imagination is ripped away and all that is left is actuarial tables and dice rolls.
The social contract between WesternCorp™ and their employees that involved a pension (or, conversely, through a Union), was an unfortunately brief period of history fueled by the tragedy of WWII (this is naturally an incredibly deep topic with many nuances that I'm shamelessly glossing over).
My humble and super-simplified opinion is that the PTSD of WWI fueled the subsequent Great Depression (Versailles, etc.), allowed the build-up to the global cataclysm of WWII, and when the emergent Super Powers were two complete divergent theories of government who had both been surprise attacked just a few years previous...there might be some feels.
Not being an economist, the small-S socialism that created the foundation coming out of the Depression which allowed the US to be the "arsenal of democracy" was slowly eroded by the worst excesses of capitalism, increasingly allowed and then accepted as normal because to protest would be to side with "them". Drunk on the irrational profits from WWII and the hyper-growth of the early post-war years, "Us vs. Them" of the Cold War was good business AND good patriotic politics. When you start to think those irrational margins are the norm, and they start to shrink, you do what you think is required to keep them aloft. With that mindset, sustaining a pension fund for a workforce that is decades out of employment can hardly be thought of as something that is increasing shareholder value (there was a time when a lot of the shareholders were also employees).
To be a savvy investor in the stock market requires both attention and treasure. The partnership between business and employee, always contentious (good!), during the Pax Americana emerged from innovation by firms like Kaiser, the G.I. bill mentality and the Marshall Plan. It ended with us recklessly dunking on a broken Russia for 15 years while "maximizing shareholder value" and ignoring the implications. The US dollar is now pegged to the value of our military to back it (rather than the intrinsic value of our production), which means we spend stupid amounts of blood and treasure while backsliding on the principles that built the Pax Americana to begin with.
At the end of the day, why should it be necessary for a citizen of the most dominant power in human history to toil their whole lives without some well-intentioned guidance and support so that it doesn't end in misery?
> World of Warcraft is fun for most until the end-game where discovery and imagination is ripped away and all that is left is actuarial tables and dice rolls.
You’re overstating the difficulty of investing for retirement. A simple Vanguard target date fund is all you need. Set up a monthly automatic contribution and that’s it. More control is possible but not necessary for decent returns.
most humans find it less than scintillating to devolve ALL their activities to some sort of spreadsheet or algo optimization.
Happy to be the exception that proves the rule: as an undergrad my friends and I would often have to resort to a spreadsheet that allowed anonymous ranking of activities to decide what to do to maximize fun.
> Employer guaranteed defined-benefit pension schemes are dead
What do you think those funds invest(ed) in? If stocks and bonds don't perform well, how do those funds continue to make their payments? The shift to individual plans shifted responsibility, hurt some efficiencies pensions could get because they can plan for the mean, not the p95, and decoupled retirement from employers, improving the labor market. All in all, it's somewhat mixed, but what hasn't changed is where the money comes from.
Employer run schemes are/were supported by the business. The theory went that yes, they invested the pension funds in the market, but the business itself would always be there to contribute to cover the shortfall.
> the business itself would always be there to contribute to cover the shortfall
This is problematic because companies aren't eternal, and stock performance is somewhat liked to economic conditions, so if stocks are struggling, the company might be struggling, making the pension obligations a double-whammy, actually putting the health of the company at risk.
These days, in the US, there seem to be a lot of romantic notions of pensions, and I'm not against them per se, but having them managed and tied to employers was a really bad idea.
You could argue that having any kind of benecits at all tied to your employment is a bad idea... Yet Americans love to do that with healthcare
I'm not convinced having the average person manage their own retirement fund choices is any better. They lack bargaining power and they lack the savvy to make wise choices for the long term
Yes. The current p/e ratio of the S&P 500 is 29.59. Prior to November 1998 it never hit that high in the prior century. So what has the S&P 500 history been since then?
It kept climbing from November 1998 until the dot-com crash started in spring 2000. By Jan 2003 it hit 29.59 on the way down and went down to 17.46 in April 2007.
Then the subprime boom started really going and it climbed to 27.58 by July 2008, hitting 122.39 in May 2009. By October 2009 it was back down to 20.33 and by September 2011 it was down to 13.01.
Then it started its climb again. It was at 22.04 October 2019, before they were talking about Covid even in Wuhan. It hit 39.26 in December 2020 and is now back down to 29.59.
As the poster says, in 1999 and 2000 and in 2007 and 2008 we were hearing about how we were in a new paradigm unmoored from the old reality and so forth. At the end of the day, the economy always came crashing back to earth. In October 1999, the book Dow 36,000 was published echoing a lot of this sentiment. The Dow was 10336 the day before the book came out, then it went down to 7591 by September 2002. In February 2009 it was at 7062. We just finally hit 36,000 DJIA this month (before going down again).
> They simply can't do it and rather extrapolate current conditions to infinity.
This is what I think more people should be paying attention to. I keep seeing the FIRE(financially independent; retire early) people talk about the returns they have gotten the past 100 years, not taking into account that the first 50 of those years saw tremendous growth, and the last of those 50 years saw tremendous stagnation and debt that doesn't seem sustainable.
The world's first billionaire was Rockefeller in the early 1900's. By 1970 the world's richest man was Hughes, who had amassed a fortune of $2.5 billion. In 70 years the number doubled. Since then in the next 50 years the world's richest man is now Musk, with a wealth 100x that of Hughes at $290 billion. In 1970 the minimum wage was $1.70 compared to today's $7.25, an increase of 4.2x. 100x vs 4.2x.
When you extrapolate that growth out another 50 years, the world's richest man ends up at $25 trillion. Minimum wage would grow to $30/hour. Another 50 years further, $2.5 Quadrillion, minimum wage is now $125/hour.
It's ludicrous. Have we been boiling frogs the past 50 years? If the wealthy at those price levels tried to sell even 1% of their wealth/year the system would crash. So it's clear from my standpoint that those growth levels will simply not happen. How does it break? Does it break with minimum wage growth? Does it break with everything going to 0? Something else happens?
What happens when interest rates are unable to fall further? Are we already at the end of the ball? How much higher can it go?
The value of USD is not constant. Either you adjust the 1970 values to today’s dollar, giving you $17B for Hughes’ fortune, or you index the $100B by the minimum salary giving you 23B vs 2.5B, a less than 10x increase. Not unreasonable considering the global scale business can have today.
> Musk, with a wealth 100x that of Hughes at $290 billion
I've never really understood this kind of net worth valuation. Since most of that value is tied up in Telsa stock, he's only worth that as long as he keeps doing what he's doing. In a way he's a slave to his net worth (not that I would mind being in his financial position).
If, tomorrow, Elon throws his hands up and decides he's had enough and wants to exit his position, there would be significant downward pressure on TSLA price not just from his huge sell orders but from the panic of investors wondering why Elon is quitting. (Ex: TSLA was down 15.4% the week of his recent sale of $6.9B which was somewhere around 3% of his holdings). I'm also not sure how cap gains taxes are being factored in to, well, anyone's net worth calculation.
A more meaningful measure of net worth is probably assets excluding stock in one's day job (or include the stock at a massive penalty depending on the dependency of the company on said person). Which would still probably be billions for Elon.
This was a fair comparison - the same exact thing was true of Hughes and Rockefeller.
But your argument is actually my argument. The past 50 years wealth inequality has grown, and we are now starting to see liquidity issues where for their particular stock. But if we let this trend continue, sometime in the next 100 years, if they intend to sell and use their wealth for some utility, it will have a either have a liquidity effect on the entire market, or/and have substantial wage inflation as a result.
>This was a fair comparison - the same exact thing was true of Hughes and Rockefeller.
Agreed, but then Hughe's et al net worth are wrong imo as well. If you or I give a two week notice our net worth probably doesn't drop a cent. If some (but importantly not all) UHNW people quit on short notice their networth drops an order of magnitude or more. I presume it can be done with a very long term and carefully managed exit strategy, and I'll assume that's what bill gates did with nothing but the knowledge that he served as a board member long after stepping down as CEO.
I suppose my only point is that these top N networth lists are irrelevant at best, and it would not surprise me if significant wealth utility is actually held by people with lower public visibility (inheritors, private company owners, private investors, dictators, etc).
>> What happens when interest rates are unable to fall further?
We are there. QE is the next thing. I think they understand now that raising interest rate quickly will kill the housing market like in 2007. So they need inflation while slowly raising rates.
Why is it that property / houses seem to end up so overvalued and then interest rates become such a crisis?
It's weird to me that as a society, it's such a priority to borrow huge amount of money to buy property we cannot afford, then end up in this situation where the worst thing ever would be to put up the interest rates and force everyone to lose their shirt.
The main reason for this is very simple. It's because housing is considered a "safe asset", and this means that lenders are willing to lend at low rates for housing purchases; they think that if you fail to pay, at least they'll get the house, and it's very unlikely to go down. This is why you can borrow money with a mortgage for 2~3%, while borrowing money to buy, say, food, costs 20%.
It shouldn't be surprising that when the cost of debt is very low for a particular asset class, that asset class will end up more highly leveraged than others, and will be more sensitive than others to changes in the cost of borrowing.
To make matters worse, the more that banks are willing to lend for house purchases, the more money they effectively add into the system, driving up the price of housing further, which also adds to the illusion that real estate only goes up...
And, the perceived safety of this asset makes homebuyers more willing to spend a ton of money on a housing purchase. It's how the middle class is expected to save for their retirement, after all...
Housing is also the main asset class that couples the financial world of the "asset economy" into the consumer world of the middle working class. While most people don't worry too much about the price of Amazon shares -- and if they want them, they'd be about as happy buying $1000 worth of shares whether that gets them one share or ten -- there's no ignoring the effect of real estate prices on families, peoples' lives, and savings. Governments care a lot about this and are unwilling to let the bubble pop.
Finally, and perhaps most importantly, when central banks are worried about deflation and a slowdown in the economy, they react by reducing interest rates. The hope is that this increases consumer spending, by increasing confidence in borrowing (which increases real estate prices). One of the mechanisms for this is the "wealth effect"; if people feel richer (because their house is worth more on paper), they are willing to spend more, and this consumption drives the economy. It seems that since the mid '90s, western countries have been terrified of ending up in a deflationary spiral like Japan, and are pulling that lever again and again to try to stoke consumer confidence. However, it's quite possible that it's ineffective, and at any rate, it's going to be hard to push it further than it's at now.
> What happens when interest rates are unable to fall further? Are we already at the end of the ball? How much higher can it go?
One interesting option is different policy rates for different sectors of the economy. Last year during the COVID markets crisis the ECB used[1] this type of mechanism to keep a wide availability of credit.
The TLTROs are targeted operations, as the amount that banks can borrow is linked to their loans to non-financial corporations and households.
In TLTRO III, similarly to TLTRO II, the interest rate to be applied is linked to the participating banks’ lending patterns. The more loans participating banks issue to non-financial corporations and households (except loans to households for house purchases), the more attractive the interest rate on their TLTRO III borrowings becomes.
I don’t understand the obsession with comparing the wealth of the furthest most point of the distribution tail to minimum wage, it makes absolutely no sense.
Who cares how much Musk or Bezos have? Have the government seize literally everything from them and everyone in the US could have $1k once. Despite being at the top, their wealth is irrelevant on a societal scale.
Absolutely. Here's a recent quote from John Hussman that really changed my perspective:
> "There's this notion that low interest rates justify high valuations. You have to understand what people are saying there. So let's say that I've got a security that is going to pay $100 a decade from now. And I want to get, let's say, a 6% annual return. I can say well, for that return, I would pay $55.80 for that.
> Now if I'm willing to get a return of only 2% annually, I'll be willing to pay more than $55.80; I'll be willing to pay $82. If I'm willing to get a zero return, I'll be willing to pay $100 for that security today. If I'm willing to accept a negative return, I'll pay a price over $100. That's the way valuations work. The higher the rate of return you're going to bargain for, the lower the price you have to pay.
> So when people say low interest rates justify higher prices, what they're really saying is that low interest rates justify low returns on stocks.
> So to say that interest rates are at record lows, therefore these record high valuations are OK, is identical to saying that interest rates are at record lows therefore the expected returns on stocks should also be at record lows.
> But that's not what people actually are thinking. They're thinking, no, justify means I'm going to be OK, that I'm going to earn normal returns. Oh no you're not."
The 2000 and 2008 blowups were pretty bad but back then there were still things that could be done like running deficits or lowering interest rates. We now have huge deficits and almost zero interest already during the boom. What can the Fed or government do during the next downturn? I don’t see them having any tools left to reinflate the bubble.
Really. Just give people money. It generates more benefit than it costs. Look how well billionaires did when unemployment benefits were buffed up. Now imagine if they were taxed reasonably to capture some of that toward covering the cost. People still looked for work, but they could afford to hold out for better jobs.
I agree, and when governments are worried about deflation, UBI / helicopter money, which goes to people who need it and will rapidly spend it, seems much better than lowering interest rates, which mainly inflates asset prices and benefits the top 1%. I'm not sure why it's not more commonly employed.
Of course, we're in an inflation scenario right now, but part of the reason for that appears to be that central banks are so terrified of deflation that they're way more comfortable erring in the other direction.
My only worry is that a lot of that money goes to housing. Rents go up immediately and also house prices. So we need policies to increase housing supply/density in most cities to counter this effect.
I think the trick would be to increase interest rates (deflationary, mostly for assets) and implement UBI simultaneously (inflationary, mostly for consumables). The increasing cost of debt will sink asset prices, houses most of all, while the UBI cancels out the systemic deflationary forces that result from that. I think the net effect of this would drive investment into more productive and less rent-seeking areas, incentivize a lot more innovation, and also significantly reduce the wealth gap. But that's just me.
This seems to assume that experts' advice can only be valued (or not) as an appeal to authority. But that would ignore that experts can also provide _explanations_: "This won't work because this subsystem would violate the laws of physics" e.g. -- and that explanation might then spur someone to find an equivalent subsystem without that flaw, or perhaps one would find a flaw in the initial reasoning, or whatever.
Similarly, seeing a list of past failures may inspire variations that seek to overcome the shortcoming without having to waste time first reproducing the same failure. One can try to learn _why_ it failed and use that to guide future attempts.
The advice to be wary of experts reminds me of the advice to avoid criticism while brainstorming, the idea in common being that criticism and negativity supposedly stifles creativity. However, it turns out that criticism _enhances_ the brainstorming process https://mitsloan.mit.edu/ideas-made-to-matter/should-we-allo... It seems that criticism from expertise could similarly be a boon to future advances.
I came here to write something similar: the article does not pay enough attention to changing environments. The dotcom bubble ideas that are now successful do not share the same background environment of internet availability, bandwidth, networks of datacenters, storage, powerful portable computers, and all around higher digital literacy and people used to interacting with computers. If these things hadn't changed then trying and trying again would have continued to fail with high probability.
As written, the statement by Ford is wrong, it is important to keep a kind of Tabu list detailing what didn't work in the absence of gradient information. What experts get wrong is they fail to be sensitive to dependent parameters that are not static (I know the article says something like this too but it sort of glosses over it). The problem is many of these are hard to say outside of hindsight.
Perhaps listing the requirements before launching and listing the state of those requirements after failure, in addition to the idea might form a basis for what to retry. An expert might say something like "A website for dog food and toys will never work, we already did that 20 years ago and it failed spectacularly", when they should be saying "A Website for dog food did not work 20 years ago, here were our requirements and environment, has anything changed?". But even that isn't perfect so the process can't be deterministic.
> Similarly, seeing a list of past failures may inspire variations that seek to overcome the shortcoming without having to waste time first reproducing the same failure. One can try to learn _why_ it failed and use that to guide future attempts.
To me, this is a big thing that survivorship bias overlooks, to the detriment of us all. Taking Edison's "1000 failures to invent a lightbulb" can often be more instructive than the end result, even if you're not interested in inventing lightbulbs.
> The advice to be wary of experts reminds me of the advice to avoid criticism while brainstorming, the idea in common being that criticism and negativity supposedly stifles creativity.
I think the admonition to avoid criticism during brainstorming is so that any idea, no matter how infeasible, may be put forth. As I've understood it, this period of "unfettered criticism" should be markedly short, and while ideas will be recorded for future reference (and perhaps modification), they can safely be winnowed under the harsh criticism of reality after the brainstorming session.
That said, it has been common sense for quite some time that having a "box to think in" can help foster creative solutions to escaping the box.
> I don't mind criticism, as long as it's constructive
I think the point of "criticism-free" brainstorming is that it is time constrained, and a free for all. It's precisely geared towards getting people to not hold back, to throw anything out there.
we avoid negativity during brainstorming to create psychological safety. that in turn expands the boundaries of creativity. the process doesn't end there however, which is what your criticism sems to assume, since we need to winnow down the ideas generated to a feasible subset, and then further to a pursued option. this latter part is where criticism (but not negativity) is employed to iterate toward the chosen option. literally no one argues the strawman that there can be no criticism during decision-making.
optimizing both divergence and convergence processes leads to good decision-making, not just one or the other.
To your point about psychological safety, that is actually reason to have an initial phase of idea generation occur individually before meeting in a group. Even a fully "positive-only" group likely inhibits divergent thinking to some degree.
Regarding groups, research challenges your claim that avoiding criticism during brainstorming "expands the boundaries of creativity", and that criticism is only useful for "winnowing down [already proposed] options." There are multiple studies showing that criticism during discussion _produces_ (not just selects) better ideas.
no one's arguing that we can't (or shouldn't) have any criticism during brainstorming, only that negativity (which can also be read as aggression) reduces psychological safety, which in turn reduces creativity. people do pull back (consciously and subconsciously) when the sting of (negative) criticism looms.
idea-focused criticism (rather than people-focused) can hone decision-making, but we still need that psychological safety to get the best outcomes. these things can both be true at the same time, and we can both succeed and fail at fostering either or both and not get the best outcome.
just as we might criticize an overly safety-oriented decision-making process, criticism-oriented decision-making processes tend to degenerate into contests of aggression, which tend to produce inferior outcomes. dogmatism in any direction doesn't help.
To put it in a nutshell: Criticism should be put forth in a "let's get this to work, together. Failure should not be feared; it's another data point" mindset.
From my experience, many of the problems can be solved by spending time on extended introspection. The problem with authorities is that they often don't have a firsthand experience of the problems itself.
What I found interesting is that the period for reappearance of “failed ideas” is roughly the length of a career. Coincidence or due to any real effect I don’t know. I wrote a little about it here:
“Don’t be discouraged by the failure of technology or approaches of the past. If the problem is still important after all this time then it’s a problem worth solving. Don’t avoid unsuccessful solutions. Avoid insignificant problems. Success this time around could be unlocked by advances in any number of unrelated disciplines.”
I went through grad school and I saw how change comes about one funeral at a time. A big shot professor that has made their name with their pet theory/work will fiercely defend it against competing ideas, and people will defer to their expertise. It's not scientific, it's egotistic. They are a wall against progress that gets removed upon death. These professors can also create a dogma through their students who also all rely on the continued success of their theory for their employment. The incentives are misaligned against accepting new theories if it means someone will lose prestige.
We tend to romanticise it, but in the end it's just another job. It shouldn't, because selling you doing science is not the same as doing science, but on the other hand social expectations are that you must have a job, so what kind of exemption were we hoping for exactly? Once you realise it's ordinary people looking for whatever ordinary people look for anywhere else everything falls into place. Some science gets done regardless, we're talking about professionals here.
Academia can be likened more to a clergy or priesthood than a job. Although academics are expected to publish, it's not like the results or output are as tangible or quantifiable compared to most jobs.
Well, it's not that. Output is quantifiable and expected, try to survive doing your thing before tenure (at least and don't). Alas, the Republic of Letters is long gone. Kind of an ought-is problem.
I don't know, I've mentioned tenure though. I know that Peter Higgs has published IIRC 11? papers and that he's talked about his former status at his departament and not being productive enough for the modern academic system.
That was about 15 books, several I've heard of, but it's unclear about academic papers at least on that web page. He's clearly making an impact with his ideas.
Why does a scholarly work need to be labeled as an ‘academic paper’ when evaluating someone’s work? Did work from the 17th century not qualify because it wasn’t published in a journal?
But that's the system we built. Starting in college you're going to spend a decade and a half studying to be a world-class expert researching a topic of your own choosing.
And as soon as you become a professor you stop doing research and start begging for research funding so others can do what you did. And no one sees the problem with this so it continues.
"If an elderly but distinguished scientist says that something is possible, he is almost certainly right; but if he says that it is impossible, he is very probably wrong."
It is unfortunate -- sometimes very smart people try good ideas, but the world isn't quite ready yet so they fail, move on to something different, and write off the old idea.
That's more than a little ageist. Age has little to do with it. I've worked for--and been managed by--thick-headed, egotistical 20-somethings and stodgy older folks alike.
Youth who think they're forging new territory usually aren't, but there are plenty who think they are and have an arrogance about it that is insufferable.
> Youth who think they're forging new territory usually aren't
But that's part of the point of the article: The territory actively changes, so even if it's the same location in some sense, it's still new territory, ripe for exploration. Old people can see that, but it requires looking with fresh eyes, as opposed to only being willing to see what was there decades ago.
Not disputing the claims of you or msla, but how is this sentence ageist -
> Old people can see that, but it requires looking with fresh eyes, as opposed to only being willing to see what was there decades ago.
while this one is not -
> Youth who think they're forging new territory usually aren't, but there are plenty who think they are and have an arrogance about it that is insufferable.
At least in science there's the Planck's principle which is essentially "Science progresses one funeral at a time" - that adoption of major new mental models is driven mostly not by people changing their minds, but by them "dying out" and being replaced with new people who have adopted the new model since the beginning.
>>Old people can see that, but it requires looking with fresh eyes, as opposed to only being willing to see what was there decades ago.
The controversy arises from the structure of the sentence. It implies that 'looking with fresh eyes' is the rare thing, and the common thing is that older people are "only being willing to see what was there decades ago."
Sure, you technically acknowledged that it was possible, but the sentence structure guides the reader to conclude that your view is that old people only see the old stuff, thereby treating them as a monolithic unit, and thus ageist.
I've often had this sort of issue myself. I've found the only thing that helps is merciless self-editing, and keeping in mind two things.
First is a passing comment from a professional writer friend who was weighing how our choice of allocating more words or fewer gave different weight to each concept we were trying to get across in a short piece we were writing, saying something like "using that many words here gives it too much weight".
The second thing I've found often useful is to put the key concept and a key word at the end of the sentence and paragraph, where it is actually most punchy and emphatic. The beginning is second best, and the middle just buries it.
I notice that you sentence buried the 'fresh eyes' concept in the middle, and used a much longer ending phrase ending in 'decades ago', so compared to your intent stated here, the emphasis was kind of backwards.
Perhaps better would have been "Old people can see that, and although everyone's tendency to see just what they already know, they'll see the new opportunities just as well as anyone else when they make the effort to see with fresh eyes.".
This doesn't make any sense.
Aging is certainly a problem that needs to be solved, but the idea that you expressed here seems to be that younger people are better at their jobs - which is very wrong.
This line of thinking is akin to "If less of the postmen had diabetes, I would get more of my mail faster!"
Don't fall for these ageist logical inconsistencies
> Aging is certainly a problem that needs to be solved
by that logic, childhood is also a problem that needs to be solved.
I have to get metaphysical to argue against the mindset, but IMO the origin of seeing aging as a problem stems from seeing death as the opposite of life.
> but the idea that you expressed here seems to be that younger people are better at their jobs - which is very wrong
That is not the idea I took from the GP's comment about government workers being younger.
Younger people have a different perspective to older people. That might lead to a better direction.
If you think about progress/improvement as a vector, there's speed and direction. Young and old people might have the same speed but different directions, and younger people might have a direction which is more beneficial long term.
It's less that I think they'd be individually better at their jobs and more that I wonder (without evidence fwiw) if a slightly younger organization would have more diversity of thought because they're coming to things with objectively fresher eyes.
"If my chess team of 45-year-olds were 10 years younger, I would win more games." Is this also an ageist logical inconsistency? At some point claims like this are testable.
On a separate note, of course 20-year-olds are better at their jobs than 100-year-olds. So the phenomenon of younger people being better at their jobs is true at an extreme. You can argue that it doesn't extend much further than this extreme, but saying it doesn't exist at all is silly.
Head to Capitol Hill and you'll see that the legislative side of that is much much younger. Though perhaps the age of the legislators skews the average.
It would go perfect if they were not bothering and spoiling citizens and making dependents. We would be far more useful ourselves and less restricted to do real contributions to the society.
That generational thing sounds a lot like IT's eternal flip-flop between thick clients and thin clients. (I'm fully expecting "web browsers are too thick, we need a thin alternative" to appear any day now). On the back-end, serverless is time-sharing.
Your attempt-fail-stigmatise curve has a lot in common with the Gartner hype cycle.
I read a while back that scientific ideas usually take about 50 years to be accepted. Which means essentially that they never are accepted, the people who disagree with them just die and the next generation embrace them. Einstein pretty much hated quantum mechanics and ended up making a bunch of discoveries while making every effort to disprove it.
So if that’s how scientists do it - who should be the most amenable profession to new information and ideas, what chance do the rest of us have?
I mean.. Einstein did prove himself wrong a bunch he just hated it. Its not like the work was flawed, or not performed. Its hard to find the sort of fault in that you seem to be implying.
“A new scientific truth does not generally triumph by persuading its opponents and getting them to admit their errors, but rather by its opponents gradually dying out and giving way to a new generation that is raised on it. […] An important scientific innovation rarely makes its way by gradually winning over and converting its opponents: it rarely happens that Saul becomes Paul. What does happen is that its opponents gradually die out, and that the growing generation is familiarized with the ideas from the beginning: another instance of the fact that the future lies with the youth.”
I don't think this is accurate. Sometimes the facts are so plain that the new truth wins (or, at least, the old truth dies) quickly without much fuss.
Perhaps the earliest example of this was the destruction of the Ptolemaic view of the solar system by Galileo's observation of the phases of Venus. This was a "killer fact" that rapidly (after 1611) led to abandonment of that venerable theory, even by its supporters (although Clavius would die soon after). Sales of the standard texts on Ptolemaic astronomy, Sacrobosco's Sphere and Peuerbach's Theoricae novae planetarum went into immediate terminal decline.
A more recent example is the Big Bang's success over the Steady State model. The cosmic microwave background radiation was such an overwhelming piece of evidence in favor of the former that only cranks persisted with the latter (including unfortunately Hoyle, admittedly.)
This quote made me feel better: "Some of the biggest businesses of the last 10 years are all in industries that were the starkest examples of stupidity 20 years ago."
I'm still a little bitter from VC experiences 20 years ago.
In 1998 my friends and I built a browser-based (Java applet) collaborative word processor and spreadsheet called Office Wherever (o-w.com). We shopped it to a dozen VCs and all went ROFLMAOWTFBBQ. They all said the same - no company would want to put their files on the (scary) Internet (the term "cloud" was still years away).
In 2001 my friend and I had built a full music & movie/tv streaming service with a full-screen interface that looks just like the modern ones, built demo hardware, had access to all the rights etc. Everyone we pitched it to went ROFLMAOWTFBBQ. They said people will NEVER get rid of their DVDs! They like having things on their shelves to show off. What a stupid idea! You need to be like Netflix and rent DVDs to people! You stupid! STUPID STUPID STUPID!
I wonder what folks are pitching today to VCs who are rolling on the floor laughing when they see the "stupid" demo?
I feel you. When I was working in IBM research, I developed a web-based tool eerily close to Jupyter in 2007 but was simply unable to get traction within the company and abandoned the work by the end of the year. I still regret not pushing forward with it to this day.
There was a time that Google had good sucess by launching new products that Yahoo had launched 5 years earlier and cancelled due to lack of interest.
Nobody wants to be a patent troll, but being too early and filing patents can set you up for late revenue. Even if it's just watching for patent trolls and licensing your patents to the victims to double troll.
Experiences like this seem not to have made Musk bitter, but just even more determined.[1]
Comes down to the old “Would you rather be famous for a great thing you never did, or have done something great without anybody else realizing it?”
You experienced the same things as Elon Musk. When he pitched Zip2, the execs from Yellow Pages laughed at him, shoved the yellow pages book over the table and said, “So you think you’re gonna replace THIS?”.
What you're saying is that you have seen things and done things like Elon Musk. You didn't get the wealth and the recognition. But that you have these things "in you" - how many people can say that about themselves? You not only had really visionary ideas that were proven right within a decade. But you also built a Google Docs and a Netflix before Google and Netflix did.
You're one of the Semmelweises or Lickliders of history. They didn't get rich, and most people don't know about them. But they are the ones who actually drive our world forwards. They are the ones who go "Zero to One". The others are just resellers, even if they end up getting all the credit.
[1] I mean, the guy was bullied at school and still did not, as one might expect, end up being driven in life by “paying them back”, or by retreating from humanity. This trait of “taking a lot of crap without becoming dirty himself” is an underestimated quality that he has.
This sounds like a bunch of boring truisms when stated this way, but perhaps a little extra insight can be wrung out by binding this to some more specific claims.
There's a corner of the cognitive science literature about iterated learning in a Bayesian framing. A question it asked was roughly, "If we partition a dataset over a sequence of agents who each see only a slice, and we allow each agent to communicate something to the next agent down the line, what must be true of the communication between those agents for them to learn the same thing as a single agent who saw all of the data?" And roughly, for the sequence to converge to the same posterior as a single agent, each agent had to adopt an unbiased estimate of the previous agent's posterior as their prior. See esp work from Griffiths and colleagues.
In a somewhat looser analogy, there's a family of techniques for distributed convex optimization (like ADMM), where a group of agents are collectively trying to optimize a function over data, and each agent sees only a slice of that data. Note especially that the way the data is partitioned can be entirely arbitrary, including e.g. training an SVM classifier where some agents see only positive data points. And for the group of agents to collectively converge to the global optimum, each local agent basically adds a large term to the function which penalizes disagreement with the other agents.
In slightly hand-wavey terms, in either case, for the agents to reach a "correct" conclusion as a group, each needs to be able to give potentially an arbitrarily high weight to the information distilled from others. In the iterated learning case, the posterior distribution received from a previous agent may have more information than the likelihood distribution of the data that an individual agent sees. In the optimization case, the consensus term may contribute more to the local loss than the data that an individual agent sees.
So in contexts where one is actually trying to solve the _same problem_ as a group, placing very high weight on the honest information received from previous experts can be critical.
But in cases when you're _not_ all working on the same problem, it can be disastrous.
> So in contexts where one is actually trying to solve the _same problem_ as a group, placing very high weight on the honest information received from previous experts can be critical.
Another "loose attempt to make this argument rigorous" might be to invoke Grim Trigger [1] strategies from repeated PD games. A very large negative weight is placed on "dishonest" behavior across a communication channel (game).
Of course, this is only available in certain scenarios.
A Gen Z person at the beginning of their financial lives may want to _discount_ the advice of baby-boomers as having come from experience in a structurally different economy. But they have very little mechanism to _retaliate_ against the boomers who supported state university tuition increasing faster than inflation for decades.
Something I've noticed in the pandemic: there's a pretty big gap between what people remember "the experts" saying vs what, if you listened to one or two qualified professionals and kept them straight, actually said.
Individual experts—the good ones at least—seem to hold up pretty well even if they didn't see everything coming.
It's the widespread sampling of chyrons and faces that inevitably says everything all of the time and winds up looking incompetent.
"Experts" is synomim for politization of topics and create obedience.
Real experts have name and surname yet in my country they created groups of experts all the time for politicians to confirm their ideas.
"The experts" say we must raise taxes (in my area only personal income can be up to 54% of your earnings). I do know experts, without the quotes, who are totally against this tax abuse.
Also, for some reason, I did not see any expert yet for the taxing stuff or the pandemic medical teams that were supposed to exist and we did not get even names or surnames of them. Strange to say the least...
Now extend this to all areas possible that have political intereset and this is basically what "experts" are: excueses used by politicians of all colors to convict nce people of their stuff.
From the book of Proverbs (in the Bible): "The wise man gets a lot of advice" (paraphrased).
One chapter later: "The fool listens to most of it" (also paraphrased).
If you don't have the time to sort it all out, don't listen to all the viewpoints. Society, collectively, is insane - it believes so many contradictory things that could not all possibly be true. You can't listen to society or "they say" as a guide. You'll get nonsense.
But part of this is on the news, especially television and internet news. They need a hot take for this hour to draw eyeballs. It doesn't have to make sense, it just has to be new and different. But if you're trying to follow it to learn what to do to protect yourself in the pandemic, it's a hopelessly self-contradictory jumble. People wind up saying "They lied to us! They're still lying to us!" The problem is that "they" - the "they" that the media present to us - is too big a set.
Now, individual experts still can be mistaken, give bad advice, or even lie. But no expert is as confused as the union of all the experts.
Here is a set of people. On a given subject, the median position is likely to be at least reasonable. That's the "wisdom of the crowds".
Here is a set of experts. Within the area of their expertise, the median position is probably pretty close to right. The intersection of their views are almost certainly right (though it may be the empty set).
But what you can't do is take the union of the views of a set of people, and expect anything except a bizarre jumble of self-contradiction. And that's what the media gives us. (In fact, the media gives us the union, with extra emphasis added to the outliers, because those are "more interesting" and therefore attract more eyeballs.)
Wisdom of the crowds? Maybe. Wisdom of the media coverage of the crowds? No way.
Yes it seems like a combination of magnifying and muddling information.
Say, for example, a cancer researcher makes a statement like "Red wine contains compounds that might protect from some cancers" - not very interesting as news. So it gets magnified to "Red wine CURES cancer".
Next, another expert says "excessive use of alcohol can increases the risk of certain cancers". Of course the news converts this to "Alcohol causes cancer".
Finally, combine these two messages and people quite understanderbly conclude that cancer experts have no idea if alcohol causes or cures cancer.
There is that, but it also seems to be true that a lot of scientific studies are done badly. A lesson of the pandemic seems to be that when doing a meta-analysis you need to make sure to avoid the low-quality and fraudulent studies.
This is why eyewitness testimony can be unreliable . People are sure someone said or believed something, or that there is a consensus about something, but this may not be true. Social media can make this worse, particularly by forming false consensuses about issues in which no such consensus may exist.
Some of this is a conflation of who the experts are, as well as hindsight bias on that question. If you look at say Fauci or Trevor Bedford's predictions, sure, they were pretty accurate (with some confusion in the middle of the pandemic when everything was confused). But if you take Rand Paul as your "expert" (also a medical doctor, but in a different specialty), you would've had a very different sense of what "the experts" were saying. And in the moment, you don't have the benefit of hindsight to judge the credibility of expert predictions, only their credentials.
There was an amusing example of this yesterday with The Economist saying, `The sharp increase in inflation over the past year has blindsided many economists. Almost no one saw it coming`
The social media person at the Economist is bad at their jobs. The article goes into the nuances of the claim.
The specific claims are
Higher than expected inflation
> new data showed that America’s consumer price inflation rose to 5.4% in June, well above economists’ expectations. On July 14th it was revealed that British inflation rose to 2.5% in June, which was also higher than forecast.
The specific reason high inflation was not expected was because expected long term slump, which didn't happen
> Not long ago economists tended to the view that the covid-19 pandemic would lead to a prolonged slump in the rich world. That view has not worn well
> With unexpected growth has come an unexpected spurt of inflation
"predicted 83 of the last 7 downturns" implies a false positive rate of at least 76 incorrect predictions for 7 correct ones.
Of course, if they made 83 downturn predictions but didn't correctly predict the 7 that actually occurred, thee false positive rate could also be worse than that.
Well this is not true. There has been debate about an emerging inflation threat for many years now even long before the pandemic due to the rapid rate central banks are printing money to keep the economy floating since 2008. However in the financial market there are many people whose lives depend on constant growth creating a strong sentiment to either willfully mislead the market or just lie to themselves for comfort and self-preservation.
Lol everyone saw it coming, but policymakers needed everyone to think it wouldn't come, otherwise the public appetite for Covid measures would have been far less...
For sure. The older I get, the more I try to watch out for this effect.
It's a pain, but one of the nice parts is that it drives you to look for deeper principles. E.g., when my dad started coding, machine time was really expensive as was storage space, so everybody optimized for those things. Hello, Y2K! Now the opposite is true: developer time has gotten more expensive, and computation is cheap. In one sense, that invalidates a lot of old expertise. But on the other, optimization is still usually important, we're just optimizing for different things. A little reframing of habits and you can end up with a more flexible and subtle model.
Optimization never grows old, but it’s the more general form of optimization of which you speak, rather than hyper-specific instances of optimization which can overfit to specific eras.
I was thinking about this in the context of large transformer based language models like GPT-3. Based on my years of experience in the field, I keep thinking that this is a dead-end on the path to full AI but I have to force myself to keep an open mind and to not to fall into that trap.
Incidentally, Morgan Housel, the author of this essay is a very good financial writer - worth reading his other essays too.
Perhaps this was a cherry picked example on the part of the authors, but the network generating relevant novel images conditioned upon the text prompt “an illustration of a baby daikon radish in a tutu walking a dog” … made me take a (not entirely permanent) break from on ripping on GPT-3.
This article offers nothing of value IMO... because what it's saying is basically that experts will, at some point, fail to see that circumstances have changed and advice that was good in their own "time" is no longer good... however, that's an obvious remark: as another commenter pointed out, people almost always tend to think "this time it will be different" and choose to ignore the experts... I would say more useful advice would be that you do that at your own peril: most of the time, nearly always, the experts will be right... the occasions where things really will be different are rare and far between. Eventually, a lucky kid will do well by ignoring the experts, but only after thousands before them failed doing the same thing.
You missed about half the article. There was this part (along with lots of examples), "Some expertise is timeless. A few behaviors always repeat. They’re often the most important things to pay attention to."
I'm not sure it's so much about timelesss expertise (Although that exists as well). Rather, the advice is probably something along the lines that when experts tell you that some form of the thing you're doing has been tried half-a-dozen times in the past and has failed--it probably will fail this time too. However, sometimes the difference from what was done in the past is sufficient to make it work this time. Or the surrounding technology ecosystem is qualitatively different. So it's worth considering what it is in today's environment that would invalidate the expert opinion.
I didn't miss it, just ignored it because no one, not even the experts, konw which part of their expertise is "timeless" and which isn't (otherwise the problem wouldn't exist in the first place).
If half the experts say to buy stocks and the other half say to sell, who is right? Aat some point, you have to decide. I have observed this a lot with finance. Listening to the wrong experts would have meant missing out on the biggest bull market ever (2009) or selling during the lows of the 2020 covid crash.
Finance is a discipline where expertise is really, really difficult to judge. You mention two extraordinary events though. Perhaps even in finance, on normal circumstances, i.e. 99.9% of the time, you would be wise to follow the experts, but on extremely rare events like a pandemic or the recovery period following a once-in-a-decade crash, no one, not even the experts, can predict what's going to happen (let alone you or me)?!
And what if the opportunity cost lost retrying something that didn’t work over and over? Maybe it will eventually succeed but what else could have happened with the same effort?
This article strikes me as the height of overconfidence tbh. The experts are frequently wrong but they're also usually right, and just blindly ignoring them usually leads to easily avoidable mistakes. You weigh the opinions of experts and then discount them when they're wrong, but only when you're really sure
How come they are very often two experts with opposite opinion? Whoever is right can only be proven by time and mostly by realizing the wrong choice was made.
I enjoyed this so much. The stories about Ford were terrific.
A lot of "wisdom" is contextual and gets mistaken for universal. We learn "X works" and, having been burned by everything else we tried, jealously guard the value of X as very special and precious.
Scars obtained in the process of obtaining expertise are likely an underrecognized factor in experts becoming ossified in their opinions. They learned that everything else bites and this doesn't. They don't want to get bit again.
Then conditions change and now nothing is guaranteed to work like it did before. It likely seems unfair to find their hard won wisdom is now irrelevant baggage.
Experts have done a lot of exploration and gained much experience, but just having abilities is nothing by itself. You need to exploit your abilities as well, employ them for good gain, and that takes time from exploration. Maybe you don't want to explore anymore because it's so good where you are at. This happened to Microsoft as well.
Now my own way to look at this, at least from a software product perspective but perhaps it's applicable everywhere: "Everything always gets easy if you wait long enough." It's almost a motto at this point, because there are so many technical challenges that prevented this or that product in the past, or more likely, made them niche utilities that required deep expertise to maintain. These utilities suddenly become building blocks that are simple and commoditized, allowing larger products to be built where before it was impossible, or at least very difficult. For anyone starting a software business: You can enter a crowded market as long as most of the difficult problems have almost been solved, and if you can establish that beach head, then acquire and sustain customers quickly enough, you can win, because everything is perpetually getting easier. The downside of course is that eventually your product will be commoditized into oblivion, but that's part of the game.
> Webvan failed, but Instacart and UberEats are now thriving.
Instacart has been in business since 2013 and had its first profitable month last year during the height of the quarantine. It’s probably closer to Webvan than anywhere near Amazon.
My heuristic is to extend current trends outwards. Stock prices will keep going higher, like it or not, even though the media for over a decade has been predicting a bear market. Valuations matter, but market dominance, growth, and network effects matter more. Large tech companies are excelling on all these fronts. Microsoft has been dominant and growing for 40 years and its share price reflects that. Google and Amazon have been doing it for the past 20, and Facebook for the past 10.
TIL Overton Window: "The Overton window is the range of policies politically acceptable to the mainstream population at a given time. It is also known as the window of discourse." https://en.wikipedia.org/wiki/Overton_window
A very useful concept.
Hilarious that he had to write all of this just to be able to sneak in a justification for MMT in the last paragraph.
This is a complete fallacy. Don't listen to reason or experts, the world has changed! Don't worry about debt and deficits, we've invented fiscal policy(which has been around since forever), that old wisdom no longer applies!
Believe it if you want. We live more or less in a society with free markets where, at least for people with saved wealth, individual outcomes can be highly variable by your personal ability to understand these systems and allocate your wealth effectively. If you think MMT is great and will have no consequences, then allocate your money accordingly. I'm going to assume that's not true.
Just like everything else time will tell who was right.
> you think MMT is great and will have no consequences
Doesn't MMT just tell us that we should focus on inflation instead of The Deficit?
I don't think any of its adherents believe that printing money is consequence-free; rather, MMT states that over-printing money will eventually result in inflation, and we can choose to respond to that inflation by either reigning in government spending (which enables us to dial back the money printing), or by raising taxes (thereby decreasing the money supply).
Its prescriptions are largely the same as the current mode of economic thought. If you spend too much, you'll have to pay for it somehow. Arguably, it just offers a better model of the trade-offs between taxation/spending/printing/inflation, and suggests a different feedback mechanism to drive policymaking decisions (inflation instead of deficit levels.)
> Doesn't MMT just tell us that we should focus on inflation instead of The Deficit?
While this is roughly aligned with some of MMTs talking points, I don't think you can reduce MMT to just this. At a minimum these talking points have some other implications like:
1) Our current congress is capable of reigning in spending
- I strongly disagree that there is any political will power to do this regardless of inflation. The last time we ran a budget surplus was 2001. Interest payments + treasury spending + social security / medicare pay as you gos are currently 111% of all tax receipts. So even if we want to reduce spending it's not really clear how you do that without putting SS/ medicare payments on hold because the Federal government is running a deficit EVEN IF YOU ELIMINATE 100% OF DISCRETIONARY SPENDING FROM THE BUDGET. And that still implies that if you wanted to have just a decrease in the deficit you would have to spend less on defense which is never going to happen. Yeah you could cut veterans spending, transportation or education (probably not in reality) but it wouldn't matter, they are a margin of error of the deficit.
2) That the timeframes of tax policy decisions exist on the same time scale as would be necessary to use tax policy decisions to regulate inflation.
- This is the core fallacy of MMT, even much more so than point 1. Maybe congress can figure out how to reduce spending, maybe if for no other reason than spite by a congress controlled by a different party then the president.
But the idea that there is any feasible way to fine tune taxation to manage inflation on a fast enough timescale to be useful is beyond the pale. We get maybe one meaningful tax plan per president and even that is a battle every single time. so we are talking about maybe on average a meaningful change to tax policy every 6 years.
Yet how fast did inflation just jump? We went from a CPI of nothing to 5+ in a few months. Who is this magical bureaucrat who just jumps in and fine tunes the taxes to account for this? It simply does not exist and will not exist any time soon without a major political revolution in America.
But the problem is the policy is justified based on the idea that micromanaging velocity and money supply is possible but any time I've heard an MMTer questioned on this point, they openly admit that this part would need to be worked out when the times comes.
Anyway, no obligation to agree with me. But as I said, be sure you know what you're talking about if it's your own money on the line.
In response to your first point, I'd counter that Gen X through Gen Z are generally in favor of both decreasing defense spending and taxing the snot out of the ultra-wealthy - the only reason we haven't done it yet is because the silent generation has only just passed the baton to the baby boomers, who are now running the show.
Your second point is a very good one, and has given me something to think about. Appreciate the detailed response.
Seriously think about that point with discretionary spending though. Even if Gen Zers took 100% control tomorrow and eliminated every penny of US spending that law makers are allowed to eliminate, we would still run a deficit. That's a game changer in my mind.
And because the entitlement pay as you gos are inflation adjusted you can't just inflate that problem away.
When someone today complains that solar power is still too expensive, or that cell phones and flat screen TVs in the hands of poor people proves they aren't really poor, they immediately flip my Bozo bit. To be fair people who hate nuclear power have always flipped my Bozo bit although they might have done the job delaying its adoption long enough for solar power to become cheaper by now.
I can't read a Collaborative Fund post without remembering the email to a former board member the founder of CircleUp wrote to the partner there who was on his board:
The thing with believing that this time is different is that your worst case is you fail but your best case is you succeed. The thing with believing that every time is the same is that you guarantee mediocrity.
When looking to the probability cone of future outcomes, some of us accept wider cones that encompass positive and negative outcomes. Others accept narrow cones where they constrain outcomes.
I personally fall into the former category and also believe that societies that enable both kinds of people (well, all along the spectrum of cones) will succeed.
I also believe that the biggest factor constraining your cone parameter is how much you have. The more you have, the less willing you are to expand your cone. This is because human beings are highly loss averse. I have seen this in my own life.
The people most able to succeed are those who (intentionally or unintentionally) have a cone with the Markov property. No matter how far along the cone they are, the remainder of the cone looks the same.
But Western society is prosperous and so the natural loss aversion leads to risk aversion. And so the balance shifts towards preservation. This article, then, is a message to that aspect of ours that is listening for the possibility that, perhaps, this time really is different.
Experts tend to be specialists, focused on silos and deep dives into specific domains.
The world is instead getting radically interconnected as "everything" is represented - more or less faithfully - by fungible bits. We are going through an "anti-specialization" phase, where everything is in principle connected to everything.
This amorphous digital ocean phase will probably not last, but it might be decades before a new landscape has settled.
In the future, every individual must be an expert on a single subject to a currently unimaginable depth. However, expertise must be simultaneously robbed of prestige and its value relegated to only its utility.
Timing is king. If you know when the current experts will become the old fools, and bet on it, you can be the richest man ever. It’s akin to knowing when the stock will rise or fall. Close to impossible unless you know more than others (and therefore become an expert ).
I did enjoy the article. I forwarded it to some colleagues. I wasn't aware of Ford's rule. But I will say that the rule perhaps only applied in that place and time. I've worked in the nuclear industry, in defense, in aerospace. Not documenting failures in those industries would be a recipe for disaster. Technology is way too complicated today. The man who "either did not know or paid no attention to the previous figures" isn't very likely to help in advanced engineering disciplines. In basic research, I think this man or woman can still make an important contribution.
Oh, well. The early 1900s. Henry Ford not heeding safety precautions. Carl Jung having affairs with his therapy clients. Gotta break some eggs to make an industry, don’t you?
Experts are overfitting to the territory. It is the territory which changes (or expands), not their knowledge of it. There is a necessary reason to the decay in pheromone trails: adaptivity.
Compare an army scout on a Starcraft map. First they make visible the entire map. Then they start tracking details. They detect patterns: if it rained last week, this area will be flooded, and other routes are faster.
The army scout operationalized their expertise, made it valuable to others, and hence has something of value to exchange. Anything which attacks their operationalized expertise thus attacks their livelihood. They invested all this energy into materialization, and are prone to sunk-cost fallacy and economically motivated thinking. Don't patch their exploit!
If the hive has enough energy for another scout, then too much communication and history of failure of the current expert may negatively effect their own diverse map constructions. There are multiple ways to victory and it is better to know all of these in case one way is flooded. But it is very risky for one agent to explore all these roads.
Imagine any time the new scout wants to veer of the map, or when it has rained, the expert loudly exclaims: I already checked that road last year, you can not veer of the map there. Also, take these roads, they are always shorter when it rains. Now last month, the roads stopped flooding after rain, but the expert did not waste a failed exploration on that, and the new scout never gets to try (they also do not want to waste energy on failures, but now contribute to enforcing the wasted/stale energy materialization of the outdated expert.
For the expert to admit their ideas are outdated, is to admit their own loss of value. Retiring a fighter who practiced a defense against a kick people stopped using in the 90s. Hardly, if ever, they themselves step down. They want to keep "continuous learning" and adding even more detail to their expert map. When the hive veers off the map, the expert knows they are at a disadvantage, their value no more than a newby scout. Ossification is in their best interest (but not in the interest of the hive).
The size of scientific fields may impede the rise of new ideas. Examining 1.8 billion citations among 90 million papers across 241 subjects, we find a deluge of papers does not lead to turnover of central ideas in a field, but rather to ossification of canon. Scholars in fields where many papers are published annually face difficulty getting published, read, and cited unless their work references already widely cited articles. New papers containing potentially important contributions cannot garner field-wide attention through gradual processes of diffusion. These findings suggest fundamental progress may be stymied if quantitative growth of scientific endeavors—in number of scientists, institutes, and papers—is not balanced by structures fostering disruptive scholarship and focusing attention on novel ideas.
A crafts teacher divvied up his class in two parts. One part he taught his expertise at vase making, down to the level of detail, in context of art history. They were to be graded on a single vase, so failure was frustrating and a frightening loss of energy/hurt ego. The other part of the class was to be graded on the number of vases they made. The crafts teacher focused on teaching them to learn from mistakes, cut losses and start over, how to get better at the mechanics instead of the art. In the end, the part of the class graded for most vases made, also created the highest-graded single vases. Failure was a necessary part of the initial exploration phase, allowing them to exploit unclaimed ground, instead of trial-error-mimicking already-existing expertise. There is a lesson there, I think. Deep Learning comes to mind, before and after its hype. Where the statisticians correctly calculated flooded roads of overparametrization, engineers still charged ahead, and some actually came out alive on the other side, establishing a shortcut/conquered obstacle. Some statisticians still don't want to get their feet wet. And this ok too! There may be more elegant ways, which keeps dry boots with similar outcomes. Let them find these.
buying stocks at all seemed like nothing but speculation in the 1920s because corporate disclosures were so opaque. By the 1970s that had changed, and you could begin to make rational, calculated long-term decisions that put the odds in your favor.
Thriving growth follows sunshine.
Meanwhile, Govs/Corps compulsively fight transparency. Their only greater priority is revenge on people who drag them into the light.
This line is what I think of whenever the cryptocurrency vitriol comes out here:
"""
Pets.com was mocked, but Chewy is now a $30 billion business. Webvan failed, but Instacart and UberEats are now thriving. eToys was a joke, but now look at Amazon. Some of the biggest businesses of the last 10 years are all in industries that were the starkest examples of stupidity 20 years ago.
Chewy isn't profitable yet, is it? All of the new and successful example businesses (save Amazon) only exist because of money being thrown around, and can't sustain that forever.
The idea of pets.com vs chewy is a function of bias due to failed events is a bit stretched. The real reason is consumers trust and access to online payments. In 2000 very few were online shopping because the experience was clunky and unsafe. Mobile and fraud protection changed the game.
The segue from Henry Ford's chain casting into buying stocks with a high P/E ratio seems sort of intentionally irrational; it would have made as much sense to tout perpetual motion machines. They laughed at continental drift! They laughed at Fulton!
The underlying value of a stock is the net present value of its future paid-out earnings. This is just a fact of the financial system, as fundamental to it as the conservation of energy is to the physical universe. It should have been mentioned in the article.
The reason P/E ratios vary is that companies' earnings change over time and companies go bankrupt. If you buy a stock with a P/E ratio of 20 years and then the company's earnings stay the same forever, eventually those earnings will find their way into dividends or buybacks, and your return on investment will be 5% per year, forever. If the P/E ratio is 10 years, 10%. If the P/E ratio is 50 years, 2%.
(If the company invests the earnings in assets, it doesn't pay them out in dividends or buybacks that year. But then the depreciation of those assets is deducted from its earnings in following years, so to maintain the same earnings, it would need to have higher earnings-plus-depreciation. So ultimately it all balances out.)
So when people rationally buy a stock with a P/E ratio of over 20 years, either:
1. They're expecting the company's earnings to go up by enough to put it back below 20; or:
2. They're expecting less than 5% per year return on investment, which probably means they're treating the company as a very-low-risk investment like commercial paper rather than like an ordinary stock; or:
3. They're hoping to find a bigger fool to unload the stock on before its price returns to what its earnings can rationally justify.
If you buy and hold a stock whose P/E ratio is 350 years, like Tesla today, and those earnings never change, you're getting an 0.3% annual return, forever.
Which, and forgive me because I'm not an expert here, sucks.
(Apologies for including the correct units on P/E ratios. I'm not the kind of person who thinks "vega" is a letter of the Greek alphabet.)
Tl;dr - Old experts cannot distinguish between historical/economic cycles vs. Paradigm shifts that break those cycles.
Nice theory, but adjust your scale over a thousand years and innovation has yet to usurp megacycles of boom/bust, war/peace or the rise/fall of "empires".
We may be better informed than we were in the 1700's, but we are no less partisan in our views, speculative in our ventures, nor vulnerable to geopolitical storms.
Using one of Housel's examples - high PE equity ratios are indicative of excess liquidity in the system chasing speculative yield; a subset of which excess liquidity is capital fleeing China for the West (or) A federal reserve & US Treasury committed to ensuring Boomer retirement assets are not wiped out in a market reversion to a historical mean. High PE equity ratios are not indicative of any underlying fundamentals that justify the majority of these prices.
Yes, Tesla _may_ be an exception _if_ Musk's innovation convergence strategy is monetized as its investors hope. But for every Tesla there is a Nikola, and for every Moderna a Theranos.
What do old experts (old farts like me) know that Housel may not? We've lived through about 8 recessions, three economic crisis, one bout of epic inflation, and we've watched change, ignorance and greed greatly disrupt or destroy corporate behemoths like Lucent, Enron, GM, GE, etc.
We know what is coming. We just can't tell you precisely when.
Housel's temporal sense appears to be stunted. And, yes, he does (as he stated) sound arrogant.
Tesla is not the exception, matter of fact it's the poster child of a world where the stock market going up becomes the goal pf both the elected and non-elected branches of the government and not an agnostic measurement tool to check how American public companies are faring.
Not just experts, visionaries too. One that strikes me as odd is Electric cars. Why just make a 'faster horse'? We can have battery transport options in all kinds of shapes and forms, why sell sedans and SUVs and underutilize the road networks?
Whether it's finance, geo politics, economics or even Covid, I have found that experts tend to have terrible track records. The same people today who are predicting Bitcoin will go to 250k in four years, made that very prediction four years ago. These people are being paid large sums of money to produce worse insights and worse performance that even random bloggers or random posters on r/wallstreetbets. It's hard to take these people seriously no matter how many degrees they have or how rich they are. It's obvious that prestige does not select for competence anymore.
To me that kind of observation seems subject to all kinds of biases.
You seem to be equating "prestige" in a topic with being an expert in a topic - the two are not necessarily related.
eg the more outrageous or unusual the claim from an "expert" (hence the less likely to be right), the more memorable that claim will be, or the more likely it will get attention. And the more someone is a "nobody", the more likely that their numerous eventually wrong claims will be dismissed or forgotten about compared to the memorable times some random was correct by accident.
Likewise I find the more certain someone is of something that is still uncertain, the more likely they will be to be wrong. The alternative of wishy washy consensus full of qualifications doesn't report well if at all, and tends to have minor errors picked apart and amplified even while broadly correct overall.
>n. And the more someone is a "nobody", the more likely that their numerous eventually wrong claims will be dismissed or forgotten about compared to the memorable times some random was correct by accident.
I think this applies more to some subjects than others. I think math and physics experts have a much greater claim to epistemological certainty than political or finance experts. The vast majority of political experts were wrong both about trump getting nomination, wrong about him winning ,and then were wrong about the economy doing well under Trump. I think nobodies in finance and politics can do as well, if not better ,than experts.
this author is revealing something embarassing about themselves, namely that they think of expertise in almost exclusively financial terms. knowing how to get rich is not really the same thing as expertise to me.
It's weird reading this as someone who identifies strongly as Gen X, witnessing how we can't seem to address existential threats like global climate change until the Boomers retire. Or a thousand other problems.
I've spent the last 20+ years under a near-constant form of gaslighting where everybody told me my ideas would never work. Having to watch time and again as a different version of me wins the internet lottery.
Dunno about all of you, but I'm kinda over it.
My dad (a Boomer and self-proclaimed radical in the 1960/70s environmental spirit) reminded my just yesterday though that not all Boomers are alike, and that stereotypes hurt. I wish we had a different term for people who self-ossify, glorify ignorance, and take it upon themselves to dictate to others why they're wrong. I'm thinking of guys like Mitch McConnell and Milton Friedman, so sure in their certitude that it's inconceivable to them that their theology could actively harm the modern world. How do we resist such glacial forms of resignation?
Milton Friedman was a supporter of taxes on pollutants. He recognized that negative externalities are a case where government intervention is needed, and thought Pigovian taxes were the best way for government to do that. Were he alive today he'd be advocating carbon taxes.
Interesting, I didn't know that. Most of the clips I see of him online show him berating young people who aren't wrong IMHO.
A bit serendipitous, but his name popped up just now when I was searching for an article about regulation to make companies responsible for their own externalities:
Big investors really do think of themselves as universal investors
The typical attitude is: “If we’re a big investor, we’re universal investors. We can’t say we’re going to divest fossil fuels companies; we have to stay invested.” Other companies in the portfolio will continue to use carbon. At the same time, a universal investor needs to look after the wellbeing of its clients. That means making sure they have a healthy climate to breathe when they retire, and not just that they have an adequate cash flow.
Put differently, the report says they believe that they “own” the negative externalities caused by the companies in their portfolio “due to the sheer depth and breadth of their holdings in all asset classes and regions.” As far as they are concerned: “Such ‘paper’ holdings do not negate their fiduciary responsibility to wider society.” This is a long way from the “shareholder value” philosophy associated with Milton Friedman that held sway for decades.
Right now I put the responsibility for environmental collapse squarely on the shoulders of corporations, their shareholders and fundamentally consumers who (due to tragedy of the commons) frankly don't know how to begin to be sustainable when it takes everything they got to make it in today's world.
To say that another way, I don't think that Friedman's views are fundamentally incorrect, I just think that they put attention in the wrong places. For example, capitalism is just economic evolution. It doesn't need to be defended as some alternative to social democracy. Capitalism isn't going anywhere, but it can be constrained by human will so that it doesn't make us slaves to it, toiling in the workaday world every day until we die as the earth burns around us.
Corporations (and consumers, and politicians) react according to their perceived costs and benefits. If the cost of pollution is not properly incurred, it will be overproduced. It's not a corporation problem (or a consumer problem), it's a market failure problem.
Friedman preferred taxes to solve this because that approach has the least room for rent seeking behavior, unlike approaches like subsidizing or mandating specific solutions.
Unfortunately , as a fellow Gen X, "Boomer" is turning into a term for "older than me and a little more successful/further along in life". Hate that some younger people are calling me a Boomer, when we didn't have pensions _or_ 401ks, our families were gutted with parents divorcing, etc.
> My dad (a Boomer and self-proclaimed radical in the 1960/70s environmental spirit) reminded my just yesterday though that not all Boomers are alike, and that stereotypes hurt.
> I wish we had a different term for people who self-ossify, glorify ignorance, and take it upon themselves to dictate to others why they're wrong.
Your Dad is correct about your stereotyping.
Mitch McConnell is too old to be a Boomer but is part of the Post War generation. Milton Friedman was part of the Pre War generation.
I disagree with Ford's principle of "not logging failures". The key is to log _in_detail_ ... the setup, the materials used, the failure, and most importantly, how and why it failed.
If someone else wants to try, they can see that if they try the _exact_ same way they will end up with failure. But they can -- and should be encouraged to -- try with changes to the variables.
This reminds me of the linotype machine's [0] invention. Many had tried to invent a similar machine and failed, the inventor went into it without knowing about the other failed attempts and used a completely different and novel technique than other attempts and managed to make it work.
At first I was a little wary of this, because it had the sort of smooth, business-school-y tone that makes you worry someone’s trying to sell you something.
But I after reading I thought this was genuinely insightful. Particularly politically.
I think it helps give me some perspective to know that different smart, well-intentioned people have believed wholeheartedly in entirely contradictory positions in their lifetimes.
I am sometimes called an expert. I strongly focus on things that I or others already tried and did not work. And then hypothesise if the circumstances are the same or similar this time around. Looking for arguments that they haven’t changed (enough).
I've done various forensic-oriented gigs for court cases. I was always given an titles like "Technical Expert" and sometimes really specific "Expert" terminology.
In one case I was brought in only to give a high level synopsis about how deleted files can often be carved out either in full or in part, may appear in multiple places at once, sometimes clearly showing edits, and also come with useful metadata stored within the directory entries both past and present.
They referred to me as the "Computer Filesystem Expert" which I thought was a bit strange, because I'm not what I'd consider an expert in file systems. Hell, I only barely know how journaling works without breaking down. I just know a lot about a very specific set of details that are useful in a forensic investigation.
So there is yet another use of the word "expert" that doesn't necessarily mean the same thing to everyone. It's not a useless title in this case, but it's really ambiguous to a person who understands more than the role requires.
> So it will always be the case that those with the most experience – and the good, smart, accurate wisdom that comes from it – will be the least willing to adapt their views as the world evolves.
This is where I stopped reading, although I will finish the article.
He’s writing about the stereotype.
Humility often comes with this experience and wisdom. Some people are capable of seeing that everything is changing, all the time, regardless of their personal experience.
That recognition frees you to embrace new, different, the things that used to be unthinkable.
The funny thing is that exactly this kind of talk was all the rage leading up to both the 2000 and 2008 crashes. The boom makes it impossible to imagine what the bust will look like, and vice versa. Most people are utterly incapable of seeing 180 degrees through the business cycle. They simply can't do it and rather extrapolate current conditions to infinity.
This is a big part of boom/bust cycles. They are spaced out by just enough to entice a new group of greenhorns who ever more loudly beat the new paradigm drum. Then this new class learns that the business cycle is in fact immortal. But for many, it's a short-lived lesson.
And that part about making "rational, calculated long-term decisions" is amusing. Because it's during the boom that companies start to engage in accounting shenanigans. The book-cooking will all come out in the next bust, just like it always has. 100x + price-to-earnings multiples will cover a multitude of sins.
As Warren Buffet allegedly said, it's only when the tide goes out that you find out who's been swimming naked.