At some point towards the middle of the decade, shortly before the cult of the expert smashed into the populist backlash, the shocking power of central banks came to feel normal. Nobody blinked an eye when Haruhiko Kuroda, the head of Japan’s central bank, created money at a rate that made his western counterparts seem timid. Nobody thought it strange when Britain’s government, perhaps emulating the style of the national football team, conducted a worldwide talent search for the new Bank of England chief. ... nobody missed a beat when India’s breathless journalists described Raghuram Rajan, the new head of the Reserve Bank of India, as a “rock star”, or when he was pictured as James Bond in the country’s biggest business newspaper. ... The key to the power of the central bankers – and the envy of all the other experts – lay precisely in their ability to escape political interference. ... The call to empower experts, and to keep politics to a minimum, failed to trigger a clear shift in how Washington did business. But it did crystallise the assumptions of the late 1990s and early 2000s – a time when sharp criticisms of gridlock and lobbying were broadly accepted, and technocratic work-arounds to political paralysis were frequently proposed, even if seldom adopted. ... If the clashes of abstractions – communism, socialism, capitalism and so on –were finished, all that remained were practical questions, which were less subjects of political choice and more objects of expert analysis. ... Greenspan’s genius was to combine high-calibre expert analysis with raw political methods. He had more muscle than a mere expert and more influence than a mere politician. The combination was especially potent because the first could be a cover for the second: his political influence depended on the perception that he was an expert, and therefore above the fray, and therefore not really political.
The opinions of experts concerning the future are accorded great weight ... but they’re still just opinions. Experts may be right more often than the rest of us, but they’re unlikely to be right all the time, or anything close to it. ... A lot of people's lives would be more tranquil and more productive if they accepted that what the media says about an upcoming event - and whether you watch of not - won't have any impact on the outcome. ... Today many analysts seem preoccupied with central bank behavior, government actions, trends in interest rates and currencies, and the movement of markets, as opposed to the fortunes of individual companies. … Most people don’t want to tempt fate by saying things will go well forever, and in fact they know they won’t. It’s just that they can’t decide what it is that will go wrong. The truth is that while I can enumerate them, the obvious candidates (changes in oil prices, interest rates, exchange rates, etc.) are likely to already be anticipated and largely priced in. It’s the surprises no one can anticipate that would more markets most if they were to happen. But (a) most people can’t imagine them and (b) most of the time they don’t happen. That’s why they’re called surprises. ... People began to ask me what inning we’re in during the financial crisis of 2008, and they’ve continued ever since.
The gift for talent-spotting is mysterious, highly prized and celebrated. We love to hear stories about the baseball coach who can spot the raw ability of an erratic young pitcher, the boss who sees potential in the guy in the post room, the director who picks a soloist out of the chorus line. Talent shows are a staple of the TV schedules. We like to believe that certain people – sometimes ourselves – can just sense when a person has something special. But there is another method of spotting talent which doesn’t rely on hunches. In place of intuition, it offers data and analysis. Rather than relying on the gut, it invites us to use our heads. It tends not to make for such romantic stories, but it is effective – which is why, despite our affection, the hunch is everywhere in retreat. ... The low level of the validity ceiling makes sense when you think about the web of interacting forces – individual ability, organisational culture, social and economic change, pure luck – involved in any success or failure. Weather forecasters using vast databases can say with confidence if it’s going to rain only a few days in advance. Predicting the outcome of human endeavour is even more complex – imagine if clouds had feelings – yet we desperately want to believe our hunches can tell us what will happen in a year or five years’ time.
A skyrocketing interest in Amedeo Modigliani’s work is producing Picasso-level price tags, with major museum shows stoking the flame. Buyers are wary, though: the mystery surrounding one of the world’s most-faked artists has led to death threats, lawsuits, and hoaxes. ... Perhaps appropriately for one of the world’s most faked artists, there have even been fake fakes. Experts, meanwhile, are jockeying to be recognized as the ultimate authority on what should and should not be accepted as authentic. ... The stakes are high and are only getting higher. Modigliani prices, long dormant, have been climbing dramatically. Liu Yiqian, a former taxi driver who built a fortune in the stock market and has become one of China’s leading art collectors, paid $170.4 million in 2015 at Christie’s in New York for a Modigliani painting, Nu Couché (Reclining Nude). The previous record for a Modi-gliani was $70.7 million, paid at Sotheby’s in 2014 for a carved-stone head of a woman. The acceleration in the Modigliani market is said to have begun in 2010 at a Christie’s sale in Paris, where a Modigliani sculpture, expected to sell for between $5 million and $7 million, went for $52 million. ... Modigliani died of tubercular meningitis in Paris in 1920 at the age of 35.
How do experts go wrong? There are several kinds of expert failure. The most innocent and most common are what we might think of as the ordinary failures of science. Individuals, or even entire professions, get important questions wrong because of error or because of the limitations of a field itself. They observe a phenomenon or examine a problem, come up with theories and solutions, and then test them. Sometimes they’re right, and sometimes they’re wrong. ... Science is learning by doing. Laypeople are uncomfortable with ambiguity, and they prefer answers rather than caveats. But science is a process, not a conclusion. Science subjects itself to constant testing by a set of careful rules under which theories can be displaced only by other theories. Laypeople cannot expect experts to never be wrong; if they were capable of such accuracy, they wouldn’t need to do research and run experiments in the first place. If policy experts were clairvoyant or omniscient, governments would never run deficits, and wars would break out only at the instigation of madmen. ... The most important point is that failed predictions do not mean very much in terms of judging expertise. Experts usually cover their predictions (and an important part of their anatomy) with caveats, because the world is full of unforeseeable accidents that can have major ripple effects down the line. ... The goal of expert advice and prediction is not to win a coin toss, it is to help guide decisions about possible futures.