“They’re in the business of flattering the prejudices of their base audience and they’re in the business of entertaining their base audience and accuracy is a side constraint.”

-Philip Tetlock

 

While researching this week’s Washington Post column (Everybody loves a good story), I came across Professor Tetlock’s quote above (we have previously referenced Tetlock here, here and here).

The quote explains quite perfectly why most forecasters appear to stink at their jobs. The answer is that, all appearances to the contrary, they are not actually trying to predict the future.

Instead, they are appealing to their audience — not the broad public, but a  much narrower group — generating a specific response that is belied by the apparent question.

When making forecast about where markets might be one year from now, the goal is not to accurately foretell the future. Rather, it is to create interest in trying to forecast the future, to market time, to pick stocks or funds. Specifically, to generate commission driven business. Whether the pundits are right or wrong is irrelevant — what matters is the activity their blatherings produce.

The political pundits generate campaign donations; the sports pundits create ratings excitement for a given playoff series. Even the Oscar pools / forecasters are an attempt to generate an audience.

All of this translates into a thinly veiled form of marketing. In other words, its all about Sales & Revenue, not accuracy.

It is all very meta.

Thus, it is helpful to understand that Pundits suck at what you think is their job, But its really not. The accuracy portion of what you see is irrelevant.The buzz, the marketing, the ratings, and of course, the commissions — THAT is what the true job of the Pundit is.

Suckitude: Its a feature, not a bug.

 

 

Previously:
Apprenticed Investor: The Folly of Forecasting  (June 2005)

The Dangers of Non-Modeled Narrative Story Tellers (December 3rd, 2012)

Are You an Investor or a Story Teller?  (April 25th, 2013)

Category: Investing, UnGuru

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “Pundit Suckitude: Its a feature, not a bug.”

  1. ComradeAnon says:

    Funny how some can entertain and stir interest while telling no lies.

  2. denim says:

    Some among us have a mind that can arrange problem or forecast variables in an orthogonal array. It is well written how to do this mathematically for physical products (Taguchi). But each ideological group of people can be a separate set variable in an orthogonal array. Solving the array produces the prediction odds. How ones mind solves complex operations internally without a computer, is an ongoing mystery. But the consistent accuracy of some pundits should not be ignored or written off as some esoteric talent bestowed by the “gods”.
    http://krugman.blogs.nytimes.com/2013/07/30/triumph-of-the-doves/?_r=0
    http://www.public.iastate.edu/~vardeman/IE361/f01mini/olberding.pdf

  3. Any medium that exists to sell advertising does not need to be helpful, useful or accurate. It only needs to attract readers for the purpose of attracting advertisers.

    “A vast sector of modern advertising… does not appeal to reason but to emotion; like any other kind of hypnoid suggestion, it tries to impress its objects emotionally and then make them submit intellectually.” ~ Erich Fromm

  4. Dhanush says:

    “In other words, its all about Sales & Revenue, not accuracy.”

    Love that! The markets seem to have this philosophy instilled in them as well. The question that arises in mind is, what does rationality really mean? Is it the quest for $$ or accuracy? If its the former, then the age old assumption that markets are rational holds. If not…

  5. faulkner says:

    They used to be called courtiers, but that title betrays their suck-upitude too obviously. These days better the cloak of court intellectual with the imprimatur of a self styled think tank. Still, their primary role is entertainer. They simply curtsy before (slightly) different powers.

  6. DeDude says:

    It is such a good feeling when someone fameous, smart and knowledgable feeds your narrative. Just feels so much better than if they challenge it.

  7. formerlawyer says:

    I would go further in that we want “bad pundits” to fail, these fuel our need for narrative to explain away uncomfortable assertions.
    http://www.salon.com/2013/07/28/bad_things_should_happen_to_bad_people/

  8. VennData says:

    If this egg-headed, academic mumbo jumbo is true, then how do you explain the fabulous track records of Rick Santelli, Zero Hedge, Peter Schiff, and Don Luskin? Ha! Got you there.

  9. Frilton Miedman says:

    Mark Hulbert’s approach comes to mind, automatically assume that a given pundit is either, 1 – Correct, 2 – incorrect, 3- Lying.

    Take a consensus, then bet against it.

  10. DuchessGateau says:

    Well said by Tetlock! Pundits are careful not to rock the boat, no matter how ludicrous they sound in the video clip shown later on Jon Stewart. A person with a track record of accuracy who actually offers worthwhile information and observations is not a pundit, he’s an Expert. We don’t hold pundits and experts to the same standard, because the pundit’s job is mostly to raise issues (even by offering unworkable solutions), and the Expert’s job is to enlighten.

    Stan Druckenmiller thinks Expertise may be irrelevant now, in the absence of free markets. In March, in an interview on CNBC, he offered the broad prediction that QE and rigged low interest rates will END BADLY, with either a malinvestment bust, or inflation. Will anyone be surprised if we get both? These may be obvious possibilities, but coming from him, it almost passes for wisdom, compared to the thoughtless chatter we’re used to hearing from TV pundits. Druckenmiller interview: http://video.cnbc.com/gallery/?video=3000152123&play=1