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The Skeptic

skeptic200Oh, well, I should have known. The Sunday Telegraph reported on January 18 that folks working in the City are visiting psychics in dramatically increased numbers in order to gain some insight into the financial future. If it’s true – and of course this is the kind of “trend” story you can write from a couple of phone calls – it just goes to show how little they believed in the stuff they were selling in the first place.

A Google search shows that there’s a rash of stories in the US about people visiting psychics with financial worries on their minds, but these seem to be all ordinary individuals. Interesting, though, that there are all these stories on local TV and newspaper sites, each quoting a different local psychic saying more or less the same thing. The media cue the media.

The Telegraph story got its information from the British Astrological and Psychic Society as well as a couple of Web sites. All said the same thing: they’re getting a lot of wealthy guys – yes, guys – coming in to consult them about their careers. Should they quit the finance industry altogether? Or could the psychic just glance over this job offer or contract for them? You can’t help feeling that this says everything you need to know about the inner workings of the financial industry. They say it’s all about the numbers and the analysis, but how can you tell?

I guess there are no skeptics in a foxhole.

In booms and busts it’s fascinating to watch CNBC, which relies on a steady stream of CEOs, venture capitalists, analysts, and pundits to fill its many daily hours of coverage, pretty much like a sports broadcast, only with money. They spend a lot of time just calling the score (currency rates, the various key market averages, and the state of shares lucky or unlucky enough to be in the news). But at some point they need to fill up time with people explaining the Meaning of It All.

Some of these (mostly) guys are hilarious. My favourites are the ones who explain very seriously what the charts mean. I mean, the patterns made by the graphs on the charts. As in talking about the share price “finding a bottom”. Or the graph forming a “head and shoulders” or a “double top”, which is supposed to tell us something about where the share price is going to go. The first time I saw someone read a chart like this – they call it “technical analysis” – I stared, giggled, and wondered why they didn’t just read tea leaves on the air.

I said as much to a friend, with whom I share a second friend who has spent much of his career in financial journalism. “Oh, no,” he said. “If you go into his office he’s got a big graph on his wall covering all the ups and downs in the market for the last 40 years, and he can explain to you what each one means.”

There’s a word for that: hindsight.

What technical analysts don’t look at is the stuff you’d think would be most helpful: what the company does, how well it does it, what its operating margins and prospects are. All they’re interested in is the pretty pictures. People who will believe this will believe anything. They’ll find meaningful patterns in clouds, reinterpret their dreams to predict the events that happen the day afterwards, and believe in the financial “opportunities” they’re selling.

You’re right. I’m not being fair. There’s no reason why all these things should necessarily go together. But the underlying phenomenon is the same: humans are just really good at seeing patterns, even where none exist.

What’s interesting is how plausible the research analysts make it all sound. In 2000, I spent six months doing financial news (as a freelance) for a Web site and magazine with delusions of IPO grandeur; incredibly, it still exists, but it never got the share of the dot-com boom its initial investors and full-time staff hoped. As part of the job of producing a couple of stories every day, I had to phone research analysts.

Much to my astonishment, whatever you asked them about the companies they covered, they all always sounded terribly knowledgeable and logical, and the case they made for whatever their opinion was on a particular company always sounded compelling. They were also always terribly busy, which meant you were lucky to get their attention for five minutes. Note: it’s very hard to mount a logical argument against someone’s belief if you only have five minutes to talk to them and you need them to produce usable quotes in that time. Journalists are therefore pretty much forced to report their words at face value; there isn’t time for serious questioning.

All of which kind of makes me wish I could pretend to be a psychic so I could quiz the City folk a little more intensely. Though if these financial types had any common sense, they’d be asking the psychics this: how come they didn’t predict the economic meltdown. Huh? Huh?

Wendy Grossman is founder and former editor (twice) of The Skeptic magazine.


3 comments for “The Skeptic”

  1. Wendy,
    A couple of things occurred to me reading your essay that might be of interest to you:
    1. People in all walks of life, not only in finance, though they unfortunately have a greater effect on so many, represent themselves as experts when in reality they’re little more than con artists who have learned the language necessary to get their spiel across.
    2. A few months ago I read where fundamentalist religions are getting a great many new converts since the beginning of the financial downturn. It would appear, judging from this and what you say about the increase in the psychic business, recessions and depressions are good for voodooism.

    Posted by R Sabella | May 29, 2009, 4:25 am
  2. I predict that Wendy will have a great financially successful career and find the meaning of life and win many awards and even do the Holy Grail and be on Oprah. Now that you have heard what you wanted to hear you may mail the check for $50 to my account in the Bahamas.

    Posted by artist | May 29, 2009, 4:52 pm
  3. I think that visiting psychics can be very good for the City types. At least the Psychics can’t be worst than their charts and computer models.
    Many moons ago I joined the staff of a merchant bank. My boss at the time told me never to trust an economist essentially because they were terrible mathematicians and very bad at evaluating risk. Through my long career I discovered that my boss was certainly Right.
    And yes I’m a mathematician.

    Posted by Luis Santos | September 30, 2009, 1:44 pm