How to Have a Financial Debate

How to Debate Finance Without Being a Jerk
A few rules can help prevent financial discussions from becoming as overheated and useless as our political exchanges.
Bloomberg, October 29, 2018.



The arrest of a partisan extremist who mailed explosive devices to political and media critics of President Donald Trump was a reminder of what happens when rhetoric turns nasty. As political debates become emotionally charged, people tend to make irrational decisions.

It isn’t much better when it comes to discussing investing, minus the mail bombs. With real capital on the line, the internet affords all of us an opportunity to engage in financial discussions that can easily run amok. Just a decade ago it was almost impossible to imagine that anyone could have a debate about markets and economic issues with the likes of Cliff Asness and Ray Dalio and Richard Thaler and Nassim Taleb (okay, maybe not Taleb), but that is the state of FinTwit today, as financial social media is called.

The debate among bulls and bears doesn’t typically lead to violence, but it can get quite heated. It is incumbent on anyone who engages to learn the basic rules of decorum. For their trouble, those who do will find a richer online experience. Consider the following a modest guideline for keeping your exchanges both civil and useful.

Avoid cheap rhetoric:

 • Anecdotes: Data and evidence always trump personal anecdotes. Your cousin may own a pub in London, but that data set N=1 doesn’t give you statistical insight into the odds of Brexit.

 • Ad hominem: It is never OK to engage in debate by attacking your opponent personally. Their words, language, data, beliefs, claims, views and arguments are fair game, but not your opponent personally — ever. This debate Rule No. 1. Unfortunately, in the current climate this rule is observed more often in the breach.

 • Predictions: Countering a factual discussion with a forecast in which you say what might happen is nonsense. Don’t do it.

 • Off topic: If I have 750 words to discuss a topic — or 280 characters to tweet it — I will not be able to produce the comprehensive manifesto that solves all of humanity’s problems or even answer half of the questions about any given subject. Instead, I can barely scratch the surface of a single topic. Don’t let whataboutism reveal you as an unworthy debate opponent.

 • Inflation adjusted: There are instances when adjusting for inflation is meaningful. Wages, home prices, buying power and commodities are all valid data series where real prices as opposed to nominal ones provide insight. But this doesn’t mean everything needs to be inflation adjusted. No, price-earnings ratios don’t require an inflation adjustment. Nor do things as varied as rally lengths or per-capita measures.

 • Chart crimes: Whenever a chart is used in a deceptive or inappropriate way, FinTwit calls it a #ChartcrimeDoctored outcomes are the most obvious chart crimes, but subtler issues include using a misleading Y axis scale or almost any chart involving Tesla.

 • Time horizons: Different holding periods lead to differing perspectives. We sometimes see this in debates between traders and investors who may not realize that they actually are in agreement. Be aware that your time horizon may not be the same as everyone else’s.

 • Straw man: Fabricating an easily demolished example while ignoring the specific case at hand is a no-no. If anything, creating a ridiculous comparison tends to reveals the strength of the counterargument.

Use good rhetoric:

 • Data: Show the data that underlies your position. Explain what it means to the argument, and how if it does shift in the opposite direction in the future, your views will change.

 • Logic: Follow the basic rules of logic. Explain them in simple terms. Avoid making unsupported assumptions or huge leaps in your argument; do not draw unsupported conclusions.

 • Know both sides: One of the more informative exercises in law school is moot court, where you prepare arguments with a specific fact pattern and applicable law. Only you don’t know which side you will be arguing, for or against. Thus, you must understand the strengths and weaknesses of both sides. Traders and investors should learn from this approach.

Some other thoughts on making your economic and financial debates better: Stay away from the sorts of things you wouldn’t say in person. People tend to indulge their inner “id” online and in email. And avoid being passive aggressive: Take a position, and defend it honestly.

Lastly, those who put their money where their mouths are eventually learn that Mr. Market decides the outcome of these debates. But until the market issues a ruling, we should all become better at disagreeing with each other.



I originally published this at Bloomberg, October 29, 2018. All of my Bloomberg columns can be found here and here



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