In the past three weeks I’ve read two books — The Best and the Brightest and The Big Short. Despite being written 40 years apart and dealing with utterly different topics (foreign policy in the 60′s and Wall Street in the 00′s, respectively), the books are fundamentally about the same thing: ostensibly smart people making enormously consequential errors because they refuse to accept reality, substituting either outdated or fantastical views of the world for plainly available facts.
In TBATB, the most painful errors (in retrospect) are those of basic geography and demography. As a lonely dissenter points out before the Bay of Pigs invasion, Cuba is not some tiny rock the size of Long Island; laid over the United States it would stretch from New York City to Chicago. Later, another dissenting realist lectures everyone that Vietnam is not a tiny nation; in fact, it’s the 12th most populous nation on Earth. No one listens, and certainly no one thinks about the consequences of digesting these facts. Geopolitical strategy in the 60′s, instead, hinged early on the belief that Cuba would be trivial to conquer and, later, on the belief that Vietnam was a tiny nation.
In The Big Short, the errors are perhaps even more acutely cringe-worthy, because they involve numbers, which once boiled down become the equivalent of proving 2+2=4 when everyone is saying it’s five. No matter how many crappy home mortgage loans you push together, you can’t reduce the risk of the resulting bond if the default risk of all the underlying loans is highly correlated. And no matter how certain you are that something is worth $95, you better re-evaluate if no one will offer you more than $70 and you won’t buy another one for $75 when they turn the offer. Markets aren’t perfect, but in this case they are relaying perfect information: your position is not worth $95. Again, no one listened.
The most interesting thing, however, is not that people did not listen. That’s almost standard. And it’s not particularly unusual for people to marshal together all sorts of delusional evidence that somehow confirms their beliefs. In fact, people often have motives, based on their economic and/or political interests, to spin evidence they know is false or irrelevant in order to promote a set of beliefs that have certain consequences. That’s a dime a dozen. Just turn on any cable news program or open the editorial page.
The truly incredible moment in both books is when people begin consciously trying to avoid having to confront the facts, by shutting off the means of transmission. In TBATB, this is seen by people refusing meetings with people who will offer dissenting opinions; in The Big Short, it is done by shielding investments from the market when a market price would instantly reveal a problem. In either case, the logic seems to necessarily operate subconsciously: if I allow myself to know fact X, then everything crumbles because our assumptions were fantasy. But everything crumbling is unthinkable; therefore I cannot learn that X is true. And therefore our assumptions are valid.
I bring this up largely because it is interesting to ponder. But also because it’s a condition less rare than I initially assumed and, more importantly, a sure sign that one’s thinking is flawed. In the past week, I’ve tried to consciously notice when I was shielding myself from information. I’d say I caught myself doing it two or three times: once when I didn’t want to make a phone call, and twice when I decided against reading something on the Internet. In each case, I concluded that my flippant decision to not encounter the information was quite possibly a more elaborate subconscious mechanism for maintaining a belief structure that was perhaps seriously flawed.
Strangely, once I really started looking into this, it got me thinking not about political or economic beliefs, but about memories. Particularly childhood memories. I’ve been telling people for years that I got my driver’s license on June 9th, 1994 — the day of the OJ car chase, and also the day the Rangers were supposed to win the Stanley Cup (game 5, home; it ended up taking 7 games). I only tuned into the car chase late because I had been out cruisin’ in my mom’s Camry all afternoon. I walked in through the garage door and was greeted by my dad. “You’re never going to believe this.”
Then last Thursday, a colleague of mine casually mentioned that it was the 16th anniversary of the car chase. June 17th. I dissented mildly — relating the driver’s licencse story — but my friend persisted. I knew for a hard fact that the Rangers had won the cup on June 14th and also that I had driven to a friend’s house for game 6, which meant that I had to have gotten my license prior to June 17th. Which means if I were to get on Wikipedia and look up the car chase, I’d have a definite answer to whether I’ve been delusional about this for 16 years. But I consciously avoided looking it up for a day for two. Then I forced myself to. June 17th. Which leaves me wondering what the hell I’m actually remembering?
And then I’m forced to recall a similar event, last month, in which my mom informs me I’ve been to Disney World three times, when I honestly would have bet the house that I’ve only been there twice. I protested that I had only been there twice, until I realized that putting my memories of grade school against my mom’s memories of me in grade school was ridiculous.
And so, yes, I’m feeling somewhat old and perhaps a bit senile. But I’m feeling less and less shocked by TBATB and The Big Short the more I think about them. If I’ve been able to consciously construct a completely wrong history of what I was doing the day of the OJ chase and how many times I’ve been to Disney World, and then feel myself consciously trying to shut out non-conforming information streams, it seems rather ordinary that it would happen with billions of dollars or the fate of the free world at stake. Which is, I suppose, a long way of saying that smart might not equal ideal in politics and that there are still fortunes to be made in discovering market inefficiencies.