Monday, June 29, 2009

Why People Still Listen To Cramer & Kudlow


Yes, its true unfortunately. The article by New Scientist confirms my suspicions.

Humans prefer cockiness to expertise:
Ever wondered why the pundits who failed to predict the current economic crisis are still being paid for their opinions? It's a consequence of the way human psychology works in a free market, according to a study of how people's self-confidence affects the way others respond to their advice.

The research, by Don Moore of Carnegie Mellon University in Pittsburgh, Pennsylvania, shows that we prefer advice from a confident source, even to the point that we are willing to forgive a poor track record. Moore argues that in competitive situations, this can drive those offering advice to increasingly exaggerate how sure they are. And it spells bad news for scientists who try to be honest about gaps in their knowledge.

In Moore's experiment, volunteers were given cash for correctly guessing the weight of people from their photographs. In each of the eight rounds of the study, the guessers bought advice from one of four other volunteers. The guessers could see in advance how confident each of these advisers was (see table), but not which weights they had opted for.

From the start, the more confident advisers found more buyers for their advice, and this caused the advisers to give answers that were more and more precise as the game progressed. This escalation in precision disappeared when guessers simply had to choose whether or not to buy the advice of a single adviser. In the later rounds, guessers tended to avoid advisers who had been wrong previously, but this effect was more than outweighed by the bias towards confidence.

The findings add weight to the idea that if offering expert opinion is your stock-in-trade, it pays to appear confident. Describing his work at an Association for Psychological Science meeting in San Francisco last month, Moore said that following the advice of the most confident person often makes sense, as there is evidence that precision and expertise do tend to go hand in hand. For example, people give a narrower range of answers when asked about subjects with which they are more familiar (Organizational Behavior and Human Decision Processes, vol 107, p179).

There are times, however, when this link breaks down. With complex but politicised subjects such as global warming, for example, scientific experts who stress uncertainties lose out to activists or lobbyists with a more emphatic message.

So if honest advice risks being ignored, what is a responsible scientific adviser to do? "It's an excellent question, and I'm not sure that I have a great answer," says Moore.


p/s photos: Kou Shibasaki

3 comments:

SmokingGun said...

it pays to be a dickhead..

dont need a carnegie mellon study to confirm that.. just watch the loudmouths at the local baccarat tables..even when they play like crap.. the stupid public still follow.. lol

DanielXX said...

I dunno about believing in confident advisers, but I sure would spend 24 hours listening to your model Kou Shibusaki give financial advice.

METALRAGE said...

It reminds me of something I read,

"True experts don't know everything, but on the contrary, know exactly how much they don't know."

Often I feel happy when I finally button down and grasp and define the unknowns in something big and complex >_<