Introduction
I’m afraid this blog has been a little quiet of late. I didn’t intend it, indeed I had this series of 3 posts almost ready 5 weeks ago, but other distractions took over and suddenly here we are, weeks later.
I thought another break from the run of mechanical analyses was in order. So what follows are three non-astrological posts, dealing with facets of prediction in general. The third post will look specifically at the validity of astrology, the second with how hype and spin blind people to the real forecasters out there. This one, however, looks at negativity in forecasts and how this is received; basically why spin falls on such receptive ears.
In my weeks off we haven’t missed much market wise. As expected the turn came on 10/11th March and things have been relatively stable/almost positive since. However I wonder if perhaps this optimism is a little misplaced. But I bet most readers will be embracing the promises of green shoots. Maybe they only want good news? Is the turn on 2Oth April more realistic- you'll have to wait for later posts for that now let's get on with looking at the optimists.
On December 29 2008John Kay wrote in the FT:
Although people endlessly ask for predictions, they rarely really want the answers. It was only late – too late – in life that I realised that when people said, “We really want you to challenge our ideas,” they mostly did not. They wanted instead to be congratulated on their wisdom. Similarly, when they ask, “What is going to happen?” they seek reaffirmation and reassurance rather than insight into the future.
I’m afraid this blog has been a little quiet of late. I didn’t intend it, indeed I had this series of 3 posts almost ready 5 weeks ago, but other distractions took over and suddenly here we are, weeks later.
I thought another break from the run of mechanical analyses was in order. So what follows are three non-astrological posts, dealing with facets of prediction in general. The third post will look specifically at the validity of astrology, the second with how hype and spin blind people to the real forecasters out there. This one, however, looks at negativity in forecasts and how this is received; basically why spin falls on such receptive ears.
In my weeks off we haven’t missed much market wise. As expected the turn came on 10/11th March and things have been relatively stable/almost positive since. However I wonder if perhaps this optimism is a little misplaced. But I bet most readers will be embracing the promises of green shoots. Maybe they only want good news? Is the turn on 2Oth April more realistic- you'll have to wait for later posts for that now let's get on with looking at the optimists.
On December 29 2008John Kay wrote in the FT:
Although people endlessly ask for predictions, they rarely really want the answers. It was only late – too late – in life that I realised that when people said, “We really want you to challenge our ideas,” they mostly did not. They wanted instead to be congratulated on their wisdom. Similarly, when they ask, “What is going to happen?” they seek reaffirmation and reassurance rather than insight into the future.
This is certainly true. People do indeed want reaffirmation. (I’ve duly just obliged). Yet I think that there is another factor at work. Mr Kay continues:
The market for clairvoyance has existed through history and is satisfied by messages based on hope and ambiguity. The market for economic prediction is similar.
The market for clairvoyance has existed through history and is satisfied by messages based on hope and ambiguity. The market for economic prediction is similar.
The essence of this statement is that Mr Kay is saying that some predictions are accepted not just because they confirm what people believe but because those predictions confirm what people want to believe.
On being Cassandra
I recently published a forecast for Argentina which was generally positive. That forecast might, of course, prove to be completely wrong. The point is not the outcome, rather that the prediction is relatively upbeat; to date, optimism has been rare in my posts. Indeed one of the first criticisms I received on this blog related to the negativity of my forecasts. If I had been quoted at all in the mainstream media, I would have been deemed an economic Cassandra.
Now, as it happens, my negative outlook has been more than realized in practice, which got me wondering………… Like the Cassandra of mythology, unfortunately, I was not wrong. Yet, even if I had a higher profile, my forecasts probably wouldn’t have been quoted in the mainstream media. Had my forecasts been rather more rose tinted, however, I hazard a guess that I would have been deemed an “expert” with the forecasts seized on and repeated ad-infinitum.
Why, then, is there such an asymmetry in the public acceptance of positive and negative data? Why is it that upbeat predictions are seized on without question yet predictions of failure lead to unpopularity, or worse, invisibility?
This asymmetry or bias is endemic, not just in market forecasting, but in business as a whole.
On being Cassandra
I recently published a forecast for Argentina which was generally positive. That forecast might, of course, prove to be completely wrong. The point is not the outcome, rather that the prediction is relatively upbeat; to date, optimism has been rare in my posts. Indeed one of the first criticisms I received on this blog related to the negativity of my forecasts. If I had been quoted at all in the mainstream media, I would have been deemed an economic Cassandra.
Now, as it happens, my negative outlook has been more than realized in practice, which got me wondering………… Like the Cassandra of mythology, unfortunately, I was not wrong. Yet, even if I had a higher profile, my forecasts probably wouldn’t have been quoted in the mainstream media. Had my forecasts been rather more rose tinted, however, I hazard a guess that I would have been deemed an “expert” with the forecasts seized on and repeated ad-infinitum.
Why, then, is there such an asymmetry in the public acceptance of positive and negative data? Why is it that upbeat predictions are seized on without question yet predictions of failure lead to unpopularity, or worse, invisibility?
This asymmetry or bias is endemic, not just in market forecasting, but in business as a whole.
“Give me solutions not problems” is the response of the ostrich like manager across the globe when confronted with anything other than positive news. Superficially that even sounds rational; but when the problem presented and denied represents a fundamental market change and indicates a need to review strategy from the top. Denying it dooms the business.
The denial of potential bad news is entrenched in day-to-day life too, though the fact is often obscured by actual real time news which is unfortunately impossible to deny so easily.
Interestingly the level of denial is so overarching that even the literal experience of Cassandra herself is denied by writers and psychologists. At best the archetype is described as “someone whose prophetic insight is obscured by insanity, turning their revelations into riddles or disjointed statements that are not fully comprehended until after the fact”.(wikipedia) At worst Cassandra’s visions are ignored and instead her experience used as a metaphor for the disbelieved victim of abuse or the oppression of women’s ideas.
This denial in modern references of the fact that Cassandra is simply supposed to have been able to forsee disasters is both facinating and unnerving. The need to deny, to such an extent, that the path that is being followed could be anything other than the yellow brick road leading to the great wizard suggests that there is some fundamental human characteristic at work.
What’s left in Pandora’s box?
The denial of potential bad news is entrenched in day-to-day life too, though the fact is often obscured by actual real time news which is unfortunately impossible to deny so easily.
Interestingly the level of denial is so overarching that even the literal experience of Cassandra herself is denied by writers and psychologists. At best the archetype is described as “someone whose prophetic insight is obscured by insanity, turning their revelations into riddles or disjointed statements that are not fully comprehended until after the fact”.(wikipedia) At worst Cassandra’s visions are ignored and instead her experience used as a metaphor for the disbelieved victim of abuse or the oppression of women’s ideas.
This denial in modern references of the fact that Cassandra is simply supposed to have been able to forsee disasters is both facinating and unnerving. The need to deny, to such an extent, that the path that is being followed could be anything other than the yellow brick road leading to the great wizard suggests that there is some fundamental human characteristic at work.
What’s left in Pandora’s box?
I think the answer lies in the quote from John Kay, the little word hope. Not Cassandra’s domain but Pandora’s.Arguably hope is a brilliant genetic mutation, which evolved giving early man the will/hormonal stimulus for long enough to keep going against all odds. A lack of hope in a primitive environment would mean capitulation too early and almost certain death. Imagine one is lost in the desert, hope keeps one going that few extra steps. And even in the last throes of death, hope is perhaps anaesthetic in its effects, a protection. Hope can therefore be a good thing and still is in many tragic circumstances. Without it most of us would be registering with Dignitas at age 22. And yet…
…..Remember that when Pandora released all the evils from the box, only hope remained? Anything that is at home with a box full of evil isn’t likely to be a cuddly toy itself. So let’s look a bit closer.
Hope triggers (is?) hormones, chemicals: a drug. Like anaesthesia, it numbs us to the reality of the increasing pain, it encourages us to stagger on, oblivious to the impending doom that bears down on us. But in the modern economic world hope bestows disadvantages as well as advantages. We have to hope because it helps soldier on by denying the agony of our limited prospects. But we do not have the possibility of overcoming the threat; but the threat is unending, we cannot walk away from the system that enslaves us even when it is killing us, so we become hope addicts instead.
Hope also encourages us to believe, against all evidence to the contrary, that we can win the lottery, back the winning horse, beat the market, or attain wealth and glory as a result of the latest get-rich-quick gimmick. Unfortunately, on a national scale, it also allows us to refuse to accept the fact that we can’t grow our GDP infinitely, that our booms can’t go on forever.
The problem of economic cycles must thus be unavoidable. Not because of some invisible market force, but because we are almost all programmed to hope for the best until the moment of annihilation.
Hope is the last evil in the box, because in the modern financial environment, the motivation to keep going actually propels us onward down a path of destruction instead of encouraging us to acknowledge defeat and branch out elsewhere.
Furthermore, when presented with information to make decisions, we chose to ignore the negative options and embrace the more attractive possibilities, no matter how infinitely less likely they are.
Well, when I say we, I mean the majority. I don’t mean the typical Cassandra. The gift and curse of Cassandra is not the ability to foresee the future, but the ability to see today as it really is without the benefits of those dregs at the bottom of Pandora’s box. And, thus, to be denied by the hope addicts.
So where does that leave a financial astrologer such as myself? Off the hook for peddling doom maybe; the Cassandra label is misapplied if all the forecaster does is see today’s reality more clearly than the rest. But if all the forecaster sees is today’s reality where, if at all, does astrology have a place? I shall leave consideration of that question for the final of my three posts. With the knowledge that people are programmed to be susceptible to positive messages we turn next to the question of spin.
I have referred solely to hope in this post. Arguably in this context hope and faith could be interchangeable types of belief. However my view is that, although the two appear to overlap, faith is a fundamentally intellectual perspective, whereas hope is a biological compulsion.
Note:
Hope is much on people minds given Obama's election campaign. This post is not in any way reflecting on that campaign or administration. It seeks only to discuss behaviour in general
Reference
Financial Times :Kudos for the contrarian by John Kay Published: December 29 2008 18:48
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