Beware of Industry Experts

Our experts are failing us. In three global realms experts convinced us that things are under control. That they know better than us. They have the mathematical models, the scientific know how, the insider track, the intelligence. In all three areas they told us the outliers are not possible.  We were repeatedly told:  “We have modeled and planned for the possible outcomes and we got it under control“.  “Listen to us” , they told us,” we have studied and we have planned for the best outcomes“.

The first example is our global financial calamity. The experts, the financiers and bankers told us they hired all the mathematicians and physicists to model the possibilities. The formulas and the new liberal financial markets, will protect us from busts and keep us on a trajectory of booms.

Yet, my instincts, my experience was telling me the following:

  • American household incomes did not rise since 1978.
  • Household debt was on the rise.
  • All on the idea that property values would continue an upward trajectory.

For example, in Richmond, California a friend bought a house for $550, 000, no cash down. The story was that prices would rise and she could then have equity. I turned a few shades of green and red when she told me that she put herself into this mess. My instincts, and experience in housing told me that for each $100,000 of debt, a household will make payments in the range of $800 to $1,000 per month for debt, taxes and insurance. It’s a simple calculus that I gained from twenty plus years of designing affordable housing programs. At $550,000, she would need to pay out, just for housing, something in the range of $4,400 to $5,500 per month. Remember, these were variable rates, so you calculate for the highest possible interest.

So, my dear friend would need to be able to have a minimum of $52,800 per year to make her payments. Now, this does not include food, health insurance, car payments, repairs, entertainment, savings etc. In the old days, banks would say a family was safe if they spent in the range of 25% to 35% of their income towards housing costs.  Well that went out the window with the promise of ever rising values. Let’s be conservative and say that for a time, families can have a housing payment of 50% of their income. So, she would need an income of over $100,000 per year. The median income in Richmond is somewhere below $50,000. Meaning, at that price, hardly anyone in Richmond could afford a house at $550,000. The expectation that somehow the values would rise and there would be a market in the future, was basically a scam.  For the scam to have worked, incomes in Richmond would have to take a remarkable up turn.

At that rate, the population in Richmond would have to have a rise in incomes that was no possible under any of the economic realities of our time.  The financial experts never bothered to do this one simple calculation: Can people who live in that city where we make loans, buy these over leveraged houses in the future, or even now? Of course, the mathematical calculations told them it was a slam dunk.

Our second set of failed experts were the foreign policy experts and middle east experts.  For decades they collectively droned on and on about what happened in Egypt and Tunisia was not possible. People in those nations were passive; They told us “Arabs like the tyrants because they are stuck somewhere in the crusades, they are so far behind the rest of the world. Time has passed them by and they need to be tortured and oppressed because they will just want to take back the world and impose Islam.”

The story line was convenient and convenience is lazy. No one bothered to listen to the voices of Arabs from the various nations, they made up a story and kept telling it to each other. No one bothered to read. No one bothered to follow the demonstrations in Egypt for the last five years at least, or wonder, who is in the prisons. The same batch of recycled ex officials from Europe and the US perpetuated the narrative. When Edward Said accused the west of being Orientalist, meaning they made up a racist story and stuck to it, he was accused of being a radical and anti-Semite. It was in front of them, but first you did not think it within the capability of the Arab people to desire, demand and demonstrate for the human rights they deserve. The democracy that we purport to support with all the sub clauses that are tainted with racist and colonial overtones as to why we don’t think certain people can manage such rights.  You see, the underlying racist assumptions drowned the experts in the echo chamber of foreign policy talk.

Time after time, in nations where they convinced themselves that people were stuck in the crusades, people of all walks of life proved them wrong. All that the experts had to do is get out of their echo chambers.  All you have to do, is be curious.  Talk to some people.  Read their writings.  Go beyond the bubble of our own experts who are paid to project our self interests.

Finally, we have the nuclear experts and the offshore drilling experts. Look, they told us, these systems are safe. Your doomsday scenarios are just naive and sensationalist. In less than twelve months, the worst case scenarios happened in the Gulf of Mexico and in Japan. Two major industries are proving to us that when the worst happens–that small catastrophic possibility occurs– they are not equipped to manage the disaster. They really did not plan for the worst case.  When the catastrophe happens, they tell us to not panic, that it’s not the time to panic.

They pat, pat us on our heads and tell us not to worry our pretty heads, they are the industry scientists, the experts. They hold the wisdom and the tools for our safety. In truth, we have abdicated our welfare to a bunch of corporate, self serving interests. Sure, we close our eyes because we get a flow of electricity and energy that courses through our veins, so we nod and wink and buy the comfort that Daddy will take care of us.

Next time someone tells you ” I am an expert, let me do the worrying, I have it under control” run. Run fast. Run and engage your instincts, your critical thinking and your advantage of being outside whatever echo chamber of experts is patronizing you.   To rift on the Reagan right wing quote, if you hear ” I am an industry expert and I have come to help”, shut the doors, take cover and hide your wallet.  “We don’t understand the world as well as we think we do and tend to be fooled by false patterns, mistake luck for skills (the fooled by randomness effect), overestimate knowledge about rare events (Black Swans), as well as human understanding, something that has been getting worse with the increase in complexity”, Nassim Nicholas Taleb.


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