Real names eliminated to protect the guilty.
In high school. my brother and I each had our own friends, but we also did a fair amount of sharing them, which worked out well for me, since he had more of them. Once, our friend "Chewy" had a broken stereo in his Fiero. Our other friend, "Shabba", who lived across the street (both nicknames are distant derivatives of the last names), was handy, relative to the rest of us, and offered to fix it.
We’ll never know if he fixed the radio or not, because, after he worked on it, the car wouldn’t start at all. At this point, my brother went inside to field a phone call. Shabba suggested we try to roll start it in front of our house, as we were on a slight incline, which might have been a valid idea had the car not been an automatic. But, in the land of two burnt-out headlights, the one-headlighted man is king, so Chewy and I went along with it, not knowing any better.
Predictably, the roll starting didn’t work and the Fiero set inert at the bottom of the hill. Shabba suggested pulling it back into my driveway using his Bronco II. Again, this might have worked had he and Chewy not insisted on pulling the Fiero by its spoiler. I objected, but Shabba said, “Don’t worry. It’s a strong spoiler.” In retrospect, my actions betrayed more trust than my words because, like a fool, I got behind the car to push it. In the end, Shabba and Chewy were right, the spoiler was strong, but whatever attached the spoiler to the car wasn’t. As I pushed, I heard a loud “Clang! Clang!” as the spoiler ripped off and dragged along the street behind the Bronco. It likely worked out for the best, because the spoiler also probably represented the limit of the its towing capacity.
Chewy rushed to get the brake on, leaving me to support the Fiero by myself, which, actually wasn’t too hard, since, well, it was a Fiero. He and Shabba ran to the spoiler and both began to fumble with it, like cavemen with a Rubik's Cube. Chewy said frantically, “Untie it! Untie it!” and Shabba said (in an excited voice that somehow uncharacteristically suddenly sounded like a cross between Yoda and Harvey Firestein), “I CAN’T! IT’S A SAILOR’S KNOT!”
At this point, my brother stepped outside into the dusky evening, about to discover that one of the side effects of talking to girls on the phone is missing out on your friends and brother doing stupid crap. We were all still out in the street and Chewy told Shabba, “Don’t tell him”. This was pointless advice because it wasn’t so dark that my brother wouldn’t either notice a) the spoiler on the pavement or b) Chewy’s attempts to stuff said spoiler into a backseat with the capacity of a mini-fridge.
Shabba said, “Ok. I won’t.” Then he proceeded to run up to my brother on our porch, murmur a few sentences and the darkness was pierced by my brother’s cackle. Chewy said to me, “I’m gonna kill him.” I still don’t know if he was talking about which of them he was talking about.
The purpose of the story isn't to bag on my friends, but that's a nice side effect. Not much point in piling on too much, though, as both of them (and my brother) have grown up to be respectable parents/citizens/professionals. But the real point about this story is about knowing when to defer to the "experts".
Now the story is a little disingenuous. Shabba really did know more about cars and car audio than the rest of us, so maybe some degree of deference was in order. But, you don't need to be a mechanic to know that you can't tow a car by its spoiler, either. And as for the attempt to roll start an automatic? I have no idea what was going on there.
We live in an age when expertise is under attack. And I can see the experts' point. It must drive doctors nuts when they see a people armed only with Google debate the merits and drawbacks of things like vaccines and diets. But, this isn't just a tale about the masses being uppity, as the experts cracked that door open by being wrong about some very key things (the 2016 election, whether fat is bad for you, the subprime crisis, etc.). And of course, generally mistrust is amplified with the related problem of governments and corporations repeatedly lying to us.
It isn't that expertise doesn't have value, but it doesn't carry the same weight across all domains. When it comes to technical skills (programming a computer, inventing new gadgets, performing sleight of hand, hand-to-hand combat, etc.), the experts keep getting better and better and the limits of human ability keep boggling the mind. When the systems become more dynamic, though (elections, investing, geopolitics), the value of expertise seems to degrade a bit. Partly because expertise in these fields often involves predictions, always a risky proposition.
It’s clear to some people why political and economic domains (in short, the social sciences) might be tougher to get a handle on. But the problem exists in the hard sciences, too, as the “Is fat bad for you?” debate proves. I don’t want to come down too hard on science. It’s not a religion, it is a method of discovery, which means it is sure to make a lot of mistakes by definition. So, I’m not implying that an actual physicist doesn’t know more than some guy who just read some Neil deGrasse Tyson books. I’m just saying that even the expertise in the hard sciences is undercut severely once scientists start exhibiting hubris about what we don’t know. The history of science is littered with ridiculous statements saying we have reached the limits of knowledge, which makes people like Thomas Edison look all the wiser when he said, “We don’t know one millionth of one percent about anything.” Though I’m still wondering if he gave us too much credit.
The problems and limits of expertise might be no clearer than in the domain of investing. The correlation between knowledge and performance in investing is sketchy at best. Someone can have the facts down cold, but constant messing with with their portfolio will likely result in worse results than someone with no knowledge whose internet is down for ten years, rendering tinkering impossible.
This isn’t to undercut my own profession by saying advisers don’t add value. It’s just that their value often takes the form of three things:
1) Identifying holes in the client’s finances in areas like insurance, taxes and estate issues, while acknowledging that financial advisers aren’t CPAs or lawyers. When push comes to shove, only lawyers should law and only accountants should account.
2) Helping the client determine their risk tolerance and crafting an investment plan appropriate for that tolerance.
3) Enforcing good behavior on the investment piece by executing the plan faithfully and being choosy as to when changes are made.
And a big part of the third point is having a solid appreciation for what we don’t know and just how hard investing is.
As to when to defer and when not to defer? An adviser might have more general knowledge than the client, but the client should know himself and his money better than the adviser. This is true in the same way that a doctor will know medicine better than the patient, but, if the patient is paying attention to themselves, they should know their own body better. A big part of knowing yourself is knowing your risk tolerance and what you can handle. If you adviser is pushing you into things that make it hard to sleep at night, maybe it’s time to push back.
As for listening to the “experts” about the economy who give either excessively rosy or gloomy predictions? All I need to do is look at the college football scores from last weekend (4 top 10 teams lost to unranked opponents) to be reminded that no one can see the future. And if you listen to people argue about economic history, you will realize that a lot of them can’t even predict the past, let along the next 5 years.