Fascinating chapter in the book "How People Learn" about How Experts Differ from Novices; It has significant repurscussions for Investors and where they get their information from.
Consider:
1. Experts notice features and meaningful patterns of information that are not noticed by novices.
2. Experts have acquired a great deal of content knowledge that is organized in ways that reflect a deep understanding of their subject matter.3. Experts’ knowledge cannot be reduced to sets of isolated facts or propositions but, instead, reflects contexts of applicability: that is, the knowledge is "conditionalized" on a set of circumstances.
4. Experts are able to flexibly retrieve important aspects of their knowledge with little attentional effort.
5. Though experts know their disciplines thoroughly, this does not guarantee that they are able to teach others.
6. Experts have varying levels of flexibility in their approach to new situations.
Bottom line: Experts first seek to develop an understanding of problems, and this often involves thinking in terms of core concepts or big ideas. Novices’ knowledge is much less likely to be organized around big ideas; they are more likely to approach problems by searching for correct formulas and pat answers that fit their everyday intuitions.
So, are all of the Wall Street types who are telling us to hop into commodities here experts? Or lemmings? Pigs possessed by Satan himself about to run off of the cliff in a final act of suicide? After runs that are greater in many instances than the runs on the Nikkei and Nasdaq into their blow off peaks. There are little sneaky things that people just aren’t looking at.
The clueless believe the future can be divined through historical pricing action rather than looking at what is happening around them and what will likely happen in the future. The cracks appear to be showing up as we speak. And not just in the US. I have little doubt copper will return to 70c a pound at some point. Oil at $20? Maybe not. But oil sustained at $75? May go to $100 first in a total act of lunacy but pshaw to this entire commodity supercycle bull sh*t. Gold maybe different. Here kitty kitty kitty. If one more missing link falls into place, we are going to see an exact repeat of what caused the Japanese deflationary cycle repeat itself in China. Doesn’t mean the outcome will be the same. It just means the circumstances will have been repeated. And it’s looking mighty damn close to happening yet this year.
Them thar Wall Street experts telling anyone that now? Nikkei itself is looking mighty toppy. Looks like the Nikkei better hurry up and rally. Ain’t no growth in Japan. Never was. Never mind you that consumer sentiment in Japan is at sixteen year highs. The same industries that have fueled the asset cycle in the US are the same ones that are driving the Nikkei higher. Consumer spending and consumer stocks in Japan haven’t moved this whole cycle on the Japanese GICS indices. The Japanese domestic recovery is all bullsh*t. It always is.
Of course, I take an ass whipping for blowing all of this smoke for the last six months from everyone I know. Tops are a bitch to pick but I’m smelling blood in the water. Are the sharks circling for a rout? Who knows. I might be wrong. Market internals aren’t so bad….yet. That is, unless you look deeper than most have the ability to look.
Any correction in commodities will be considered a buying opportunity as the Pavlovian retards who were rewarded for buying dips during the bull rush in as greedy bastards always do. Opportunity! I missed it three times but now I get a fourth chance! Except there comes a time when the behavior won’t be rewarded. Is that time close?
Oh, I’m sorry. It’s now financials that are going to lead us higher because the yield curve is no longer inverted. Well, most of the nonbanks have already been to the moon. And the banks were up 7-10% last week. Dividend of 3-4% tacked on. I guess they had their yearly run….in a week. Can anyone tell me why JPM is a buy with a dividend yield of 3% and a messy integration which isn’t generating profits that were expected? Maybe it should go up another 10% so the dividend yield is only 2+%. Time to belly up to the bar for another round of those new fangled cocktails. What’s it called? Kamikaze?
BANZAI! BANZAI! BANZAI!
B must be a novice…
Novice or expert?
Experience, relevant educational experience is the big difference, no? The novice may be clever, bright, even whip-smart but he lacks the experience that the expert by definition has. The novice has never failed while the expert has and, as we say, learned from this experience.
It is tempting to cast this experience in terms of real market exposure and illustrate the novice’s innocence and his vulnerabilities to the savvy expert. But the conditions change, the vaunted experience that informs the expert can also become dated, irrelevant or even counter productive. We need the experience to be tempered with the intelligence and curiosity that the novice brings to bear on the decision.
The conceptual superiority of the expert who has the deeper understanding, the bigger ideas, etc is a tad over-rated by the novices who think that the ability to juggle competing ideas and let current real experience reshape those rather rigid big ideas, is a tad under-rated.
What about us idiot savants?
I generally agree. But always keep in mind what an engineering PhD once half-seriously said: “A PhD is someone who can prove anything. And then immediately disprove it.”
Domain expertise is the starting point for good planning and decision making. But even experts can get cocky.
Doesn’t the word “experience” sums up all that description?
Alaskan Pete-
Let’s keep taking those miner profits to the bank and letting our accountants decide whether we were smart or not. We’ve been told three times now there’s not going to be a currency intervention to prop up a declining $USD so even us hicks have gotten the message. Besides, we can always buy a degree from the back of a magazine if we need something to cover up a hole in one of our walls.
A very interesting topic. The development of “judgment” is really the whole ballgame.
Calmo, I would like to understand your post better. I understand and agree with your first two paragraphs. You reach a conclusion in the third paragraph, but the grammar is a bit tortured so I can’t pick out your point.
Then there’s also this condition known as ‘expert idiocy’, which is an aspect of the hypertrophy of the division of labor and associated credentialism(s). Too often, experts assume a broader knowldege which they simply don’t have yet believe they do. This seems particularly the case in the ‘hard sciences’.
That is, experts are also novices yet tend to have little awareness of such. This is on the same line as the teacher who fails to understand that s/he must also be a student.