This Christmas We Need the Gift of Humility
On election night at around 6 p.m. a Hillary Clinton political operative went on TV and smugly opined that she believed they had a 95 percent chance of winning. Wow, 95 percent. In statistics we call that a very high level of certainty. But of course five hours later the woman was in tears and the 1 in 20 long shot named Donald Trump came in.
Throughout the race the betting odds gave Hillary Clinton an 80 percent likelihood of winning. That was never the case. This race was always a toss-up with slight odds leaning toward Hillary. But several months ago my friend Jonah Goldberg, who is a very smart guy, insisted over and over on Fox News that Mr. Trump had no chance of winning the race. Stuart Spencer, who is supposed to be one of the wise men of Republican politics and gets paid a lot of money for his sage political advice said a few weeks before the election that “the election is over” and that Mr. Trump had no chance of winning. Zero.
My point is experts are surprisingly wrong surprisingly often. The large majority of political experts and polls in Britain predicted that Brexit would lose. Oops.
A few years before the housing meltdown and the more than $100 billion taxpayer bailout of Fannie Mae and Freddie Mac, Nobel prize-winner Joseph Stiglitz and the future Office of Management and Budget director Peter Orszag wrote a research paper concluding that “the risk to the government from a potential default on GSE debt is effectively zero.” So either the housing bust was a one in a million event … or they had no idea what they were talking about.
Remember Long-Term Capital Management? This company was said to have a computer model developed by Nobel prize winners and other mathematical geniuses that was a magical money making machine. And it made money year after year until it crashed and went bankrupt.
Paul Krugman writes twice a week for The New York Times as their economic sage. He was asked on TV after the Trump election and the stock market sell-off the night of the election, when would the market recover? His sourpuss answer was “never.” A few hours later the market went on a massive bull market run giving stocks one of their best months ever. Yet The New York Times still runs opinion pieces as if he has something wise to say.