Imperfect experts

It’s obvious by now that the latest collapse of the U.S. stock market
and the ensuing recession was spearheaded by experts — those same people
who received fancy degrees from Ivy League institutions. They sold the
public on their complex mathematical models purporting to show huge
profits — all the while masking the risk of a total blowup.

In many respects, this is the societal effect of a miseducated
population. It is the result of an over-reliance by many people on the
advice of experts, and the reliance of those experts on theoretical
constructs that have little bearing on the real world. It is a classic
case of mistaking the map for the territory.

Popular writer and educator Nassim Taleb, when describing the cause of the market collapse, was blunter. He aptly describes it as a case of “scholarship without erudition.”

Taleb’s argument is simple yet nuanced. By concentrating for a long time on complex problems, experts tend to become experts in solving known problems — such as the probability of winning a casino game (where all of the possibilities are known). But this tunnel view prevents them from considering the broader factors that account for real-world events in which there is no complete information — be it business performance, the stock market or the riskiness of complex financial derivatives. In part, it is the level of education that deludes them into believing that they can manage the complexity of making large bets for small gains.

Armstrong Williams is on Sirius/XM Power 169, 7-8 p.m. and 4-5 a.m., Monday through Friday. Become a fan on Facebook at www.facebook.com/arightside, and follow him on Twitter at www.twitter.com/arightside.