Sabbath, January 22, 2012

[“Sabbath” is this blog’s Sunday feature that explores places where work and life meet.]

Following the Experts

The past week has been very bad for experts, especially those who make predictions.  Last Sunday, the Green Bay Packers lost the New York Giants.  The experts have spent most of the season calling the Packers the favorite to win the Super Bowl.  The New Orleans Saints, the team that many experts said had the best chance to beat Green Bay, also lost.

Yesterday, former Speaker of the House Newt Gingrich defied the experts by winning the Republican Presidential Primary in South Carolina.  A week ago, polls had him losing to Mitt Romney by margins of 5% to 20%.  Gingrich won the election by 13%, and now the experts will begin to tell us what will happen in Florida in 10 days.

Who will win the Oscars?  Really, who cares?  We are a society obsessed with predictions, ignoring how often “experts” are wrong (Who picked the St. Louis Cardinals to win the World Series?).  The same principle holds true in business and investing.  Look back at the “hot” stocks that end up losing money for the investors who followed conventional wisdom.  Similarly, many strong businesses have failed when they guessed wrong about market trends.  The best example of such a decision might be “new” Coke, which consumers rejected, forcing the company to return to its “classic” formula.

Why are experts wrong?  In his great book Black Swan, Nassim Taleb argues that it is impossible to predict the future.  Too often an unexpected event will happen – a Black Swan – that will change the path of history.  A Black Swan event can be good or bad – 9/11 or Steve Jobs’ Apple computer.  Rather than try to do the impossible and predict such events, Taleb recommends that we prepare for them by being “robust,” being prepared to meet the change and use it to our advantage.

Experts do contribute to our understanding of the world, but we need to take their advice with a grain of salt.  Ever since the financial collapse of 2008, economists, politicians, and pundits have all predicted that a new disaster is coming.  They preface their forecasts with words like if and could.  For example, “If another European country undergoes financial stress, the Euro could collapse as a currency, which could impact the American economy and lead it to a possible recessions.”  The secret to being an expert?  Hedge and qualify your predictions whenever possible.

I like Taleb’s solution.  Let the future happen and deal with the unpredictable when it happens.  Stay flexible and humble.  Don’t mindlessly follow the crowd.  The stories experts tell are attractive because they make us think we understand and can control the future.  It’s a nice myth, but reality and experience show again and again that the “best laid plans of mice and men”. . .  Enjoy the rest of the playoffs, the Super Bowl, as well as the political games.  However, if you are going to bet, think twice before following the experts.

Time for Kids to Work?

In a speech at Harvard, Republican presidential candidate and former Speaker of the House Newt Gingrich suggested replacing union janitors at inner city school with the children who attend the school.  He called laws that prevent children from working before the age of 14-16 “totally stupid.”  He did not say what restrictions – if any – he would put on child labor.

What Gingrich doesn’t consider is how many adults his plan would throw on the street.  He claims to be doing what is best for the children.  Looked at more clearly, his real target seems to be public union employees who have been the targets of Republican governors across the U.S. 

This proposal is foul on two levels.  First, it seeks to make children workers rather than learners.  Second, it would increase unemployment and income inequality he claims to want to lower by putting adults, many of whom are supporting children, on the streets.  This solution would make the problem worse. 

Gingrich has long been one of the most cynical politicians in the U.S.  With this “modest” proposal, he has reached a new low.

Working Less on Holiday Weeks

The Chicago Sun-Times reports that 1/3 of managers claim workers are less productive on the week before a major holiday.  This claim is based on a national survey of 1,000 senior manager conducted by Accountemps.  Five years ago, a similar poll found that 44% of managers held this view.  It would seem that people are working harder.

How productive are senior (or middle) managers in the week before a major holiday?  Generally speaking, managers get more time off and have better benefits than the people who work for them.  My guess is that front line employees are less productive because their bosses are equally distracted by holidays. 

We are becoming more and more a society that blames problems on working people.  Former House Speaker New Gingrich recently called the unemployed “lazy.”  Other conservative thinkers blame unemployment rates on high union wages (even though fewer than 10% of private sector workers are union members).  We need to start questioning these claims.  We need to call them what they are – lies.