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11th June 2019 | Michał Karol Ejdys | Portfolio Quantitative Analyst

Dare to Doubt - Think Critically About the Wisdom of Experts

Experts of various kinds accompany us throughout our lives. Parents, teachers, university professors, scientists – at some point in our lives we take their word as given. Everybody knows germs cause disease, but not many of us have ever seen one. We don’t need to – we have the word of the experts. Other people delve into a subject, so we don’t have to, contributing to our development as a species.

Assessing expertise

On the other hand, every day we hear about a diet being ridiculed as outdated, or, to give another extreme example, experts of opposing political parties providing contradictory expertise. Some people then just go with what they feel is ‘most’ credible, what comes from people we think are the most competent and sincere. It might be the innate human behaviour: we use statistics to gauge the expert’s credibility (how often were they right?) and tailor it with emotional intelligence (are they telling the truth?). Well, I say that this is not enough.

Carmen Reinhart, and Kenneth Rogoff claim that high level of debt causes sudden drop in the economic growth, a finding that was later implemented in European governments’ austerity policies. Then a graduate student discovered their research was skewed by an error made in an Excel sheet. 

Second one wins?

This is just one instance of a larger problem – the replication crisis. In empirical research, a result found by one author should be then replicated by other members of academic community, providing independent verification. This proves to be more complicated lately, mainly because of two reasons. One is that sometimes the articles are too vague, possibly because they contain findings that can be monetised, and the author does not want to share the profit-making knowledge. The other is that, well, nobody wants to be the ‘second’ to make a discovery, and we just lack enough volunteers to provide enough replication studies.

DIY academic reviews

But much of this you can do by yourself, to a limited extent at least. Doubt and think critically. Instead of focusing on credibility and honesty, focus on replicability and availability of data. It is a well-known technique of conspiracy theorists to present unverifiable claims that fit together perfectly, making them seem like a plausible theory. Look for the same in research, books, articles, interviews. If somebody is making a claim that is unverifiable, this research should be taken with a pinch of salt.

Empirical research with a lot of assumptions, variables (think dieting) and without rigorous, usually large scale, statistical testing is another door for manipulation. Usually the correct way of thinking about providing empirical evidence is: the more variables the problem has, the larger the sample should be. If, for example, a diet was tested on 10 people, it is probably not enough to account for variability in all the traits in which humans can differ.

True, false, not given?

While the two methods above won’t help you distinguish the true from the false, they will enrich your confidence (or lack of thereof) in certain claims. Especially in the financial markets, confidence in views is key, and you can see the examples of what’s above almost in any expert interview. Speaking with confidence about the future events or providing explanations for market moves based on unverifiable theories and without statistically significant data happens daily. This is why thinking critically is important and will help you distinguish could-be-true-or-false from we-definitely-don’t-know-about-it. Which is a major and informative factor, if you ask me.

Golden Sand Bank ("Bank") exercised due diligence to ensure that the information contained in this publication was not incorrect or untrue as at the date of publication.

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