Bullshit Detector! A Guide to Being Less Wrong
The year was 1719. Isaac Newton was already Britain’s most celebrated scientist.
That year, Newton spent £7000 (over $1M today) on shares of the South Sea Company. They were the tech stocks of Newton’s day.
In exchange for shouldering England’s war debt, the company was granted monopoly rights to trade in the South Seas. Everyone thought — no, they knew — it was the “next big thing”. Valuations flew upward. A few months later, Newton cashed out with double his money.
That wasn’t the end, though.
Share prices kept going up — they tripled, quadrupled, quintupled… Newton was puzzled. Was it ever going to stop? It was then that the Newton made one of the oldest mistakes in the book.
He was afraid of missing out.
Newton put all his profits — £20,000 ($4M in today) — back into the South Sea Company. Shortly after, the bubble burst. Prices, which had inflated ten times over from greed and herd purchasing, crashed to their starting price.
In just a few weeks, Newton lost his entire life savings.
A dumbfounded Newton commented,
“I can calculate the motion of the heavenly bodies, but not the madness of people.”
Terribly Flawed, Terribly Mad
If you have a huge ego like me, your natural reaction to Newton’s story probably went something like this.
Wow, that’s a lot of money. That was dumb of Newton. He was good at math and numbers and stuff, but it looks like he had no common sense. I would never make that mistake. I’m clever-er and taller and better loo-
It’s easier to believe that Newton was the problem. But that’s just not true. The real problem is us.
Humans are terribly flawed. When a wooly mammoth charges at us, we do a great job. But when the enemy is complexity — big data, globalization, and predicting the future — we don’t do so well.
The wiser humans in history knew this:
“The first principle is that you must not fool yourself, and you are the easiest person to fool.” -Richard Feynman
“Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.” -Albert Einstein
Newton lost his life savings. He got out with a slap on the wrist. Our own irrationality can hurt us much, much more. A single misstep could cost us our loved ones, or — even worse — the planet that we live on.
Is there anything we can do?
Luckily, our irrationality isn’t random. Here’s Duke professor Dan Ariely in Predictably Irrational:
“Our irrational behaviors are neither random nor senseless — they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.”
We are terribly flawed, but there’s still hope for us yet.
The Six Filters for Truth
Our brains aren’t perfect, but humans can adapt. We can study our flaws and designing systems to combat them.
In his latest book, Dilbert author and serial entrepreneur Scott Adams shares his technique for detecting bullshit.
It starts with humility:
Consider the people who routinely disagree with you. See how confident they look while being dead wrong? That’s exactly how you look to them. When it comes to any big or complicated question, humility is the only sensible point of view.
Scott lists six sources of information we use to determine truth. None of them are perfect:
- Personal experience. We see what we want to see and remember things in a way that makes sense. Our memories are unreliable and change with time.
- Experience of people you know. Ever play the telephone game? Miscommunications are common. People remember selectively and never tell the whole truth.
- Experts. Experts — whether they know it or not — don’t work for truth. They work for profit and agendas. Now add man-with-a-hammer syndrome. To an expert with a hammer, every problem is a nail.
- Scientific studies. Correlation is not causation. No science is truly objective. Guess who gathers, processes and interprets data?
- Common sense. “The Earth is flat, just look at it!”
- Pattern recognition. “Oh my god, we have the same birthday. It must be fate!” Patterns, coincidence, and personal bias often look the same.
Since each of these six filters is flawed, we should never rely on one:
“Consistency is the best marker of truth that we have, imperfect though it may be. When seeking truth, your best bet is to look for confirmation on at least two of the dimensions I listed.”
Scott’s six filters give us the basic building blocks of a bullshit detector.
Train Your Detector
Scott’s “six filters for truth” are good, but to make full use of them, we need to understand why they work.
Below are three steps to get better at detecting the flaws in your own thinking.
I. Understand Your Flaws
I think if there’s one thing all students should be made to learn, it’s psychology.
In his book, Scott agrees:
It’s a good idea to make psychology your lifelong study. […] On a scale of one to ten, the importance of understanding psychology is a solid ten.
You don’t need to get a degree or make psychology your full time job. You can learn the core principles in a few days.
My best guess is that there are a few hundred rules in psychology that you should have a passing familiarity with.
You can find all the info at a low cost on the internet or in books. Investing in a psychology education will pay dividends for the rest of your life — it’s a no-brainer decision.
II. Build Experience
The next step is to take the concepts and make them a part of you. This only happens through application — you want to start seeing these flaws in yourself and the people around you.
History is invaluable here. Personally, I love to read financial history—people do crazy stuff when there’s big money on the line. (Note: Some good, classic reads to start with are Kindleberger and MacKay.)
The more experience you have, the easier it is to see the patterns of flawed thinking around you. Nowadays, I can detect the main biases — sunken cost, confirmation, hindsight, etc. — almost automatically.
III. Embrace Criticism
Even with study and experience, I don’t trust myself to make perfect judgments. We’re too good at fooling ourselves.
As an extra layer of “bullshit detection”, I try to open myself to criticism. I want to make my thoughts public. I want friends who are brutally honest. That’s why I love to write — it lets people challenge my ideas.
Being criticized hurts, but it’s worth it.
To borrow the words of the great Richard Feynman:
“We are trying to prove ourselves wrong as quickly as possible, because only in that way can we find progress.”
Find the bullshit and stamp it out. That’s what got us here.