The S&P 500 posted a positive quarter rising 4.7%. Over the last twelve months, the S&P is up a bit over 17%. For full coverage see
http://markets.on.nytimes.com/research/markets/usmarkets/usmarkets.asp
As we continue to benefit from a market that climbs the proverbial “Wall of Worry”, there is another showdown / negotiation / stalemate in our federal government.
Sounds of Hedgehogs
Where can we turn for a reasonable forecast of…
The economy?
Jobs and unemployment?
Presidential, senate and congressional elections?
Global climate conditions?
The release date for the next Apple Ipad?
The hopes for the 2013 Detroit Tigers?
This is a question of future prediction. There is so much information available in today’s digital world, available instantly. A Google search predicts what you want even before you finish typing the query. Great leaps in the power of computers make it seem imminent that tomorrow, next year and beyond will be predicted with increasing precision.
The brilliant Nate Silver writes about the world of future forecasting in “The Signal and the Noise: Why So Many Predictions Fail – but Some Don’t”. The book is filled with useful and well written insight into just how difficult it is to predict anything about what is going to happen next in our world.
Our current political environment is filled with uncertainty and confrontation. In Nate’s book there is a chapter entitled “Are you smarter than a television pundit? This is a very insightful discussion about the dynamics of political prediction. These issues are particularly poignant today with the shutdown of the US Federal government due to ideological battles of our political parties.
There is no doubt that this environment of political brinksmanship is troubling for investors. It seems to be a daily occurrence that our conversations are filled with people expressing strong opinions on the complex issues of today. Where do many of us go to get the information that informs these strong opinions? I suspect that television and internet media outlets are driving a significant portion of how people see the world today.
In The Signal and the Noise, we learn a little about that actual accuracy of televised political commentary. The accuracy of television pundits is shown to be poor. Nate Silver talks in the book about a very important book from 2005 titled “Expert Political Judgment” by California Berkley political scientist Philip Tetlock. This discussion introduces the concept of “Foxes” and “Hedgehogs” in television media.
It is striking to ponder the concept of these two types of forces in our political debate. Hedgehogs are personalities that seek to make big proclamations that can often garner attention and notoriety for the speaker. Foxes tend to look at nuance and complexity. Foxes tend to be more from academia and Hedgehogs are more creatures of the media sphere.
There is little doubt that Hedgehogs are having a great impact on our current national dialog. The drive for attention and notoriety has existed throughout American political history. It is worth noting that the current media landscape is highly refined and sophisticated in the methods of targeting and provoking it’s chosen audience. The words of Hedgehogs should be taken with more than a grain of salt. Sadly the skepticism that needs to exist in the public is largely absent when it comes to the media echo chamber of a given group. The dynamic of Republicans and Democrats being able to even speak the same language seems to be largely absent. Our media streams are segmented so that instead of analysis of the nuance and complexity of our problems and challenges, we are being marketed media products made of slogans and hyperbole of a particular group.
It may prove to be a great challenge to truth and rational debate that cable television and internet media have segmented us in very complex ways. These infotainment products are very sophisticated and manipulative of the average viewer.
As citizens it is our duty to work towards real understanding of what the issues are of our time. Sadly, most people do not have the time or inclination to delve deeply into the issues of our time and seek informed positions. The end result is tribalism in American politics. The media industrial complex plays to this because it is profitable to broadcast streams of programming that play to the simplistic and exciting notions of good and evil rather than the mundane study of complexity.
This is the same concept that I have written about in Beware the Financial-Industrial Complex. It is junk media. The cable news media in particular is by and large very similar to junk food. It tastes great, but hurts your intellect badly. The television infotainment landscape is very crowded; each channel needs to scream for attention louder than the competition. When more excitement can be manufactured in the media “product”, a greater chance is created to attract a larger audience.
The important takeaway here is that dire predictions for the US Government, US economy, markets and other rarely turn out to be accurate. Many people are drawn in to extreme and often negative world views without awareness of what the media stream is really doing. The infotainment complex has a primary mission to attract attention and sell advertising. That is the model of the media business that has existed for a very long time. The notion of noble journalistic endeavor seems to be dramatically reduced by digitization. This has created a hyper-competition of a media market that has a very difficult time generating revenue as technology destroyed traditional publishing models.
You can witness this dynamic in other areas such as books and music. The local bookstore is a thing of the past. To sit with a coffee at quietly examine books and magazines is much less common as tablet rendered books are available on demand. The concept of the “record store” is something my children do not understand at all. You do not go out and buy music any more; you simply subscribe or buy and download. These changes are dramatic to authors and musicians as much as the shift is occurring in journalism.
Our modern world is an incredible place of opportunity and innovation. There are huge challenges now as there have always been. For most of us, the daily reality looks nothing like what we might see portrayed on television or the internet. It seems quite plausible that this shift in our media reality is causing people to see the world in a much more anxious and negative way than is warranted.
A great example of past fears washing away is exemplified by the current growth of US domestic energy production that has created massive supplies that were never foreseen. The common belief for many years was that long term decline was a reality and the world would be driven to wars and other disasters by shortages of fossil fuels. That does not seem to be the case. One might argue that the Iraq war was driven in part by the notion of future oil shortages. A great piece recently appeared at Bloomberg on this issue
Another obvious dynamic to how things will improve is in the incredible arena of technology and innovation. Pocket supercomputers paced by the new Iphone 5s are now more powerful than mainframes of not that long ago. All of this information processing will likely have a massive effect on productivity in education, healthcare, manufacturing and much of the rest of our daily lives. These incredible technological advances, such as the EyeSight auto braking system from Subaru will truly have massive impact on many industries.