Online Cortex Thoughts on Science and Technology

I had a strong reaction to Jon Stewart’s piece titled “CNBC gives Financial Advice“. I don’t know if I am more angry at CNBC’s “analyst” Rick Santelli’s asinined rampage against homeowners who are going to be bailed out of their bad loans or if I am more angry in general at the lack of professional oversight of the news and financial industry as a whole.
Allow me to start with the latter.

I am a physicist.  When I come up with a new theory, and I have, my theory is expected to explain everything that is known as well as make accurate predictions about phenomena that have not yet been observed.  If my theories lead to predictions that turn out to be false, my ideas about how the world works are questioned.  If I consistently get things wrong, my reputation is diminished.  This aspect of science works, and works well.

However, over the last 10 years I have become painfully aware of the numerous “analysts” and “news personalities” in politics, finance and the media who make absolutely crappy predictions and are still revered as being authorities on the topic.  These predictions have ranged from the idea that the Iraq War would be a “cake walk” to the idea that the economy is fine.  Despite the fact that these ideas were not just wrong, but were as far off as one could possibly be, worse even than if one selected one’s beliefs by mere chance, these people are still looked to as having something intelligent or useful to say.  It is mind-numbing that they still have jobs!

Contrast these individuals to Al Gore, who receives no end of constant ridicule.  This man has been trying to warn the public about climate change since the 1980’s… seriously… the 1980’s!  OVER TWENTY YEARS!!!  And only in the last two years or so has the fact that the Earth is undergoing climate change become generally accepted by the public.  Here is a man who has been right, yet is vilified.  Think about it!

Jon Stewart’s piece on CNBC points out how full of shit their “analysts”, “reporters” and TV personalities are.  They clearly don’t understand either finance or the economy, otherwise they would have made predictions that were remotely in the ballpark.  Instead we have the following list of serious and I mean SERIOUS errors:

March 11, 2008   “Bear Stearns is FINE!” – Jim Cramer
Bear Sterns went under SIX DAYS later!

June 5, 2008  “Lehman Brothers is no Bear Sterns”
Lehman Brothers went under three months later!

April 7, 2008 “Will Merrill need to raise capital? No…” – Faber Report
Five months later Merrill Lynch ran out of capital, and is now owned by Bank of America.

October 4, 2007 “Bank of America is going to $60 in a heartbeat” – Jim Cramer
As of March 4, 2009, Bank of America trades at $4

December 5, 2007 “AIG…not going bankrupt… obviously they are the biggest insurance company in the world”- Charlie Gasparino
Federal Bailout Money for AIG: $85 BILLION in Sept 2008, $37.8 BILLION in Oct 2008, $30 BILLION in March 2009…

October 31, 2007 “You should be buying overvalued stocks” – Jim Cramer
Oct 31, 2007: DOW=13,930

February 1, 2008 “Market just wont quit no matter how poorly companies are actually doing” – Jim Cramer
Feb 1, 2008: DOW=12,743

April 16, 2008 “The worst of this sub-prime business is over” – Kudlow and Co.
April 16, 2008: DOW=12,619

June 13, 2008 “it means its time to buy, buy, buy” – Jim Cramer
June 13, 2008: DOW=12,307

November 4, 2008 “people are starting to get their confidence back” – Guy Adami (The Negotiator)
Nov 4, 2008: DOW=9,625

These people clearly don’t know what they are talking about.  To get it wrong so consistently takes some kind of effort.  It demonstrates that these individuals are unable to learn from mistakes and work within a culture that suffers from the same deficits.  There is no improvement in their predictions or understanding of economics and finance.

Granted, I am not an expert on economics, but I can tell you who I will NOT go to for advice.

If the news and financial advice agencies really want to do well for themselves, they would forget the short-term gains made by employing showmen, and assess the performance of their employees by monitoring the soundness of the advice that they give the public.  Furthermore, it is up to us, the public, to pay attention to people who make accurate predictions and stay away from those who don’t.

Now for this Rick Santelli…
As an American interested in a strong America, I am more than willing to have my tax money bail out individual Americans who were suckered into buying homes they could not afford than bailing out companies who operated solely out of greed.

This is America alright!
And it is not enough for Americans to support American companies and industry!
It is high time that American companies and industry ALSO support Americans!

Blow THAT out your shorts Santelli, you CNBC astrologers, and all the self-centered Wall Street Welfare Recipients!

Last, I can tell you what will help this economy.  And that is spending!  Economies are healthy only when money is flowing.  We are fortunate to have a government that is able… even artificially… to force a flow of money into the system.

This Republican call to stop spending is like shutting down the heart… it would kill the economy.  This idea that tax cuts are the solution is ridiculous.  First, we can see how well that has worked in the last 10 years.   Second, as the president of a company myself, I can promise you that tax cuts are not equivalent to profits!  In my opinion, companies should focus on making profits rather than cutting taxes, but then again, I am not a CNBC analyst!

Kevin Knuth
Albany NY

Posted under Entrepreneurship, Opinion, Uncategorized

Yesterday we saw an election of historic proportions! While I am elated by the results and look forward to finally moving into this new millennium with President Barack Obama, I am going to spend this blog talking about how how Barack Obama owes his success in great part to his intellectual curiosity.  And how the lack of intellectual curiosity of many Republican politicians has come back to bite them in the behind.

Intellectual Curiosity is a phrase we have seen many times in this election season. George Bush clearly doesn’t have it.  According to this Rolling Stone article, John McCain doesn’t have it. And from Sarah Palin’s disdain for higher education and affection for Joe Six Pack, we can safely infer that she doesn’t have it either.

Intellectual curiosity is about the desire to learn.

It sounds like a good thing.  Except that this desire to learn has been used as a weapon by the right wing to discredit anyone who is well-educated.  We hear all about the intellectual elite.  Rather than crediting them with the hard-work they have performed to attain a higher-degree, they vilify them.  Rather than seeing them as an American who has achieved the American dream, they are seen as an enemy to America.

As education has gone underfunded and ignored for decades by politicians on both sides, America has suffered.  It has become cool to be stupid.  Smart people are a drag.  And they have ideas that may be a threat to our way of life.  It has been better to be a politician who has no intellectual interests, who is not well travelled, who does not use big words.  Rather than electing the best Americans into leadership roles, we have been choosing Americans who are average in capability or even below average.
The result… think about it.

The Republicans have been using divisive techniques to win elections for decades.  As long as you choose candidates and issues that get your base riled up, your party will look good.  You can control dissemination of the facts by repeating the same story over and over again.  Stay on message at all costs.  Ignore contradicting facts and repeat supporting facts.  You will look like you are right.

The difficulty with this strategy is two-fold.  First, after dividing the country, you must rule a divided country.  This is extremely difficult, and has led to sub-optimal performance when it comes to administration.

The second problem is that they are most effective when they start believing the story that they are trying to sell.  It works in the short term, and for short-sighted individuals, this smacks of being an effective technique.  However, it fails in the long run.  The critical point is that there is a reason we believe things.  We believe things so that we can understand things.  This allows us to make predictions about what will happen in hypothetical situations.  If you believe a made-up story, your predictions will be worthless.

We see this all the time with the political pundits.
They are the astrologers of politics.
They make predictions every night on the news, and their jobs don’t seem to depend on how accurate they are.  Instead, their jobs depend on viewership.  The viewers, who have been taught to believe everything they hear from their favorite political personality, don’t critically evaluate the pundits.  This results in a population of pundits who have no realistic model of the political landscape and thus make ridiculous predictions.  We have seen many such predictions in this election.

Barack Obama succeeded in great part due to his intellectual curiosity.  He understood that Americans were not only tired of the Bush administration’s way of handling problems, but also were tired of negative divisive politics and were ready to be treated like smart people again.  He learned from the mistakes of his rivals and believed in his assessment of the political landscape.  He was intellectually curious.  He paid attention to what was going on, critically evaluated his beliefs, and depended on his conclusions.

Today we saw Republican candidates and pundits spouting off on how McCain’s loss was due to the economy, or because he did not attack Obama hard enough.  They are still not learning.  They are staying on message, ignoring the evidence, and not considering all the possibilities.  This is the opposite of intellectual curiosity.  It cant last.  They will wear themselves out to the point where we the people will see their spouting as uninformative.  They will fade away.

The political climate has changed significantly.
I think that much of this is due to the urbanization of America.  People in cities have to be intellectually curious to a degree.  They have to understand people who are not like them.  They live in a dynamic rapidly changing environment, and wont adapt well to city life unless they can learn.

It hard to convince people of a made-up stay-on-message story when they are paying attention and thinking for themselves.  This is where McCain failed.  It wasn’t the economy, or taxes, or Bush.  It was that McCain was not consistent in his own beliefs and it showed.

Meanwhile, Obama capitalized on the intellectual curiosity of Americans.  He gave clear well-thought-out answers to the issues during the debates.  He avoided the catch-phrases that are stereotypical of the stay-on-message belief systems.  It was clear that he understood.  The power of is methodology is not to be underestimated as it empowered him to beat all of his democratic opponents and John McCain.

The results of this election were due in great part to a triumph of intellectual curiosity: both Obama’s and Ours.  But the better news is that Barack Obama’s intellectual curiosity will serve him well as the Leader of the Free World.

Kevin Knuth
Albany NY

Posted under Intellectual Curiosity, Visionaries