FinancialGuy Writes!

Yesterday evening I sat down with two friends to watch the Presidential debate. Being in Europe it would have been shown at an ungodly hour, meaning that we had already had the chance to read reports of the debate of the century.

Well let’s be honest, it wasn’t that, was it…?

No, it took the form of two people on a stage. One had lots of answers and a fair few ideas, the other shouted a lot.

As the event closed, Trump’s name was mentioned and many members of the audience cheered. We three friends stared at each other in disbelief. What were they cheering for? He was awful. He lost. No contest.

Didn’t he…?

His policy topic that stood out the most in my mind was him mentioning and blaming Mexico relentlessly in the first fifteen minutes. That can’t be enough to elect someone President, can it?

In earlier debates, his strategy of shouting loudest and being rude over everyone else worked brilliantly. But in a one-on-one debate he needed more substance and to us three at least, he lacked it.

Let’s go back to that cheering. I realise that politics has something tribal about it, in the same way that many people support a sports team. But at what point do we need to mentally disengage from that and recognise that a situation has changed?

Trump really does not feel like a President nor a Republican candidate and judging by the number of endorsements that Mrs Clinton has been receiving, many Republicans feel the same way. His campaign was amazing entertainment, but he can’t actually get elected based on that, can he?

How Do You Know When To Change Your Mind?
Just last week I found myself, with a number of friends, engaged in a pretty fierce debate on facebook about Brexit.

What was both maddening and interesting to us, was that the lady we had locked horns with had failed to update her view of the world.

That she believed in the Brexit view of things is fair enough. I don’t, but do not begrudge her the opposite opinion. However, the reality is that since the vote on 23rd June, the situation has changed.

We now know that a Brexit might mean the end of the United Kingdom as both Scotland and Northern Ireland may choose to secede (here). We also know that six European Union member states might be willing to block any deal (here) and those are just the ones we know of. We also know that the threats of “Project Fear” about changes to the economy were justified – as the pound dropped by ten percent, the world effectively told the UK that everything in the British Isles was now worth less than the day before. The now very obvious lack of a plan and on and on…

Despite these obvious changes to reality, her opinion was the same. I’m sure that there are millions of other people in the UK that feel the same way that they did on 22nd June.

How Do You Change Someone’s Mind?
In 1933 John Maynard Keynes wrote, “There is no harm in being sometimes wrong, especially if one is promptly found out”.

In their 2014 book, Think Like A Freak, Steven D. Levitt and Stephen J. Dubner discuss this very topic. As they suggest,

The first step is to appreciate that your opponent’s opinion is likely based less on fact and logic than on ideology and herd thinking. If you were to suggest this to his face, he would of course deny it. He is operating from a set of biases he cannot even see. As the behavioral sage Daniel Kahneman has written: “[We] can be blind to the obvious, and we are also blind to our blindness.” Few of us are immune to this blind spot. That goes for you, and that goes for the two of us as well.”

Having two of the world’s largest and most important economies change course dramatically based on opinions that have not been updated to the current reality is likely to make for a very unpleasant 2017 and beyond.

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