Three Important Facts
There are three important facts about bullshit: It’s everywhere, it’s influential, and it’s dangerous.
Capital Thinking • Issue #1116 • View online
The amount of publicly accessible information today would have seemed unfathomable 10 or 20 years ago. What used to be hidden is now free and abundant, from financial information to global news to insight into how millions of people live on social media.
But are we actually better informed? Are we making decisions? Less susceptible to bad ones?
Sometimes yes. But often the answer is no, or we’ve gone backwards, and part of the reason is that information turns into bullshit as easily as ice turns into water.
-Morgan Housel
Different Kinds of BS
Morgan Housel | The Collaborative Fund Blog:
Bullshit can go unnoticed because people are more concerned with lies. Lies, once spotted, are unmistakable and their damage is obvious. But bullshit stops just short of a lie, mixing the integrity of the truth with the deceit of a lie in a way that leaves both the bullshitter and his recipient feeling satisfied.
If a company tells investors it has $20 million in the bank when it actually only has $10 million, that’s a lie. But if a company tells investors that it’s profitable if you ignore half its expenses, that’s bullshit. And that kind of thing is everywhere, in every industry, every corner of society.
Jeff Bezos once said there are different kinds of smart. Distinguishing the various flavors is important because if you think smarts comes in just one form, you’ll miss dozens of other nuanced varieties.
Bullshit is the same.
It comes in countless forms, some harder to spot than others. False modesty, projecting, double standards, hypocrisy, tugging at heartstrings – these aren’t lies; they’re subtle forms of bullshit, which is why they’re so prevalent.
A few others that come to mind:
1. Predicting things that are impossible to know.
The book The Beginning of Infinity writes:
Beware the difference between prediction and prophecy. Prophecy purports to know things which cannot be known.
The most egregious of the latter is predicting stock prices within precise periods of time.
Stocks (or any investment) are valued by taking a number from today and multiplying it by a story about tomorrow. The numbers are easy to find – take revenue or earnings or dividends. You can then make a reasonable prediction of how those numbers might grow in the future. Easy enough.
But then you must multiply those figures by a story – a story about optimism, or pessimism, or how angry investors are with politicians, or how smart they feel, or how persuasive their advisor has been. That’s the multiple on how much investors are willing to pay for the numbers.
And that multiple is impossible to know, because it’s a reflection of people’s moods at a moment in time. How could anyone know what kind of mood a bunch of strangers will be in a year from now? I don’t know what kind of mood I’ll be in tonight.
That’s why a lot of people trading on insider information still lose money. Even if you know what data is about to come out, you often have no idea how other investors will react to it.
In the same sense, if I say, “The stock market is forecast to return 16% over the next 12 months,” it sounds reasonable. But if I said, “I think people will be in a 10% better mood next June,” it sounds like … bullshit. And it is. But those two lines are practically saying the same thing.
2. Presenting an upside reward with no regard to the associated cost.
And by cost I don’t necessarily mean the price tag. Everything worth pursuing in life has a cost, but most costs are paid with stress, anxiety, uncertainty, and self-doubt.
Morgan Housel
*Featured post photo by Joao Tzanno on Unsplash