Mark Twain did not say it so I will. “There are three kinds of fools: fools, damned fools, and fools with statistics.”
Being a fool is not shameful by any measure. We are all fools now and then. Being a fool means that you express an opinion coming from ignorance or deep bias. There are only two types of good music. The first is everything from the 1960s and 1970s. Start with the Beatles and Elvis and move through to Queen and Pink Floyd. I also listen to all things Reggae, including ska and dub.
To the best of my knowledge, Taylor Swift is a clothier in London that has been in business since the days of Charles Dickens. I am a fool.
The term “damned fool,” while probably accurate, is also probably rude. I prefer to use the term “expert.” This category of fool is the most disappointing because we expect more from them, especially concerning “money.”
Experts are supposed to be well trained in their field. They are mentored and gain real-world experience to put their education to good use. Of course, a surgeon does not go out and start doing heart transplants on day one. But, over time, knowledge combined with experience creates wisdom and these are people that I should listen to. After all, I am only a “fool,” far beneath being a damned fool.
As I wrote before, John Kenneth Galbraith said, “In economics, the majority is always wrong.” That is depressing and a little scary. What if there are “damned fools” in other professions like epidemiology and public health? Imagine if there was a global pandemic and some of the information we received from the experts was contradictory or just plain incorrect?
Galbraith was apparently correct. The Second Quarter 2020 GDP forecasts came from the top economics people in the Philippines. The majority was wrong big time. The median forecast was for an 11.2 percent contraction. One foreign bank expected the economy would shrink by 4.2 percent. Our top university expert said a 20 percent decline was going to happen.
The actual decline was 16.5 percent. The only authentic expert who was near accurate—as usual—was Jonathan Ravelas at BDO bank. If I did not know that Mr. Ravelas is a genuine God-fearing man, I would swear he has a mystical book with secret symbols on the cover that he uses for his analysis.
“In the field of psychology, the Dunning-Kruger effect is a cognitive bias in which people with low ability at a task overestimate their ability and comes from the inability of people to recognize their lack of ability.” That is the 1999 textbook definition of “fools with statistics.” In 1599 William Shakespeare wrote in As You Like It, “A fool thinks himself to be wise, but a wise man knows himself to be a fool.”
Any side of any political, social, or economic issue can be supported, even proven, by a fool with statistics.
The United States has the highest civilian ownership of firearms with 120 guns per 100 citizens. The US murder rate is ranked 94th in the world, the same as Cuba. Jamaica has the third highest murder rate and yet has only 8 firearms per 100 people, ranking number 92. “The statistics prove that more civilian gun ownership means less murders or intentional homicides.”
Statistics are just numbers that supposedly reflect fact/facts. Sometimes they are incorrect or manipulated. But we must be most cautious about how “the fools” use statistics to fool us.
E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.