Just a story to set the tone for this discussion.
you had known me 20 years ago, I was not exactly a charming specimen of
the male gender.
I'm soft of like Ted, but not cute. A female undergrad once asked me to carry her bag for her. I told her no, "Because scarly I fall down how ?"
During my NUS days, I
struggled to get a date, then I normally screw up my chances for a second
date because I am a troll. I can't really help it - Gen X girls are so
self-contradictory about marriage, relationships and career and I had a
great time pointing this out to them - as a result my wife still laughs
at me for getting a girlfriend so late in my life. I also never
understood when I should be providing a listening ear versus giving
advice. I am engineer. If you have a problem, I'll solve it for you.
But the difference between me and other guys is that I know about my problem with girls and have no illusions about how 'attractive' I was. Note that those days, my net worth was negligible. I might also be argued that I had low esteem on relationship matters.
So when I was attending an entrepreneurial seminar, a hot chick came up to me and introduced herself.
Being a cynical asshole, I reduced this to three possibilities : she's either into insurance, MLM or wants to convert me into a Charismatic Christian.
I went with MLM and decided to troll her with a pre-emptive strike. I
said "Haha ! Hot chicks don't just talk to me just like that. You must
be into MLM and I'm not into MLM. Sorry !"
Man, the look on her face was priceless !
She nodded in agreement, looked a little embarrassed and sat back down.
back, I think that was dumb, I was pretty sure if she was hotter, I
would have pretended to be interested in MLM just to get a date, but
what I did was clearly cynical, not skeptical. I crossed the line.
The last article got some people into thinking about reading a whole new set of books which demonstrate how skepticism is ideally carried out against new ideas.
A good friend then told me on FB that this may not be enough, he wanted something actionable on a much smaller scale. And after all, developing a healthy approach to a new idea takes years ( And many opportunities to date women ) to refine.
I'm just going to share three quick suggestions on how to approach a new idea. They are not a collectively exhaustive list of what you need to go through, but generally it should be helpful at the street level.
a) What's in it for the person if you accept this idea ?
The first filter is to ask, what's in it for the person who is selling the idea to you.
Everyone who was into real estate or selling housing loans was selling the idea that real estate is a sure winner in good times and bad. Why ? Because if you buy the idea, they have the possibility of earning commissions.
Contrast that with a dividends investor.
I get asked all the time which REITs are good. I can't just answer "Sabana" for it's current high yields, there's the complicated issue of expiring master leases and that horrible manuever in Chai Chee. A contextual discussion on Sabana would take investment bloggers hours.
So instead, I very reluctantly tell people that perhaps the best approach to avoid idiosyncratic risk is to simply buy up all REITs which would yield about 6.5%.
Would I make any money if these guys succeed. Hell no ! They might just go NLB to borrow my books.
But I might get cursed here if they lose money so expect my advice to be sound but reluctantly given.
b) Is the idea falsifiable ? ( impossible to disprove, tautological )
The second filter gets rid of all that detritus that common well-meaning folks will throw at you, as these are issues of faith and not science.
Take for instance the Law of Attraction, which has generated a whole new legion of fucking idiots who believe in wishful thinking.
The Law of Attraction is not falsifiable. But morons who believe in it will asset that if what you dream about comes true, the law works. If the law does not work, you do not have enough faith to make the law work for you. The believer will not accept the idea that the Law is simply not true. It is as if I can dream my way to a training contract in a law firm or a beef steak in my pockets.
Compare that with the assertion that global stock equity can defeat inflation. There is enough data in Bloomberg to show that this might not even hold true in some market conditions. You can prove this assertion wrong, but you will find out that at a horizon of over 20 years, the odds of beating inflation goes up by quite a bit.
c) Is the evidence credible ?
The third filter is that on balance of probabilities, the idea is believable based on the evidence given. You just need to assess the credibility of the evidence.
In this case, I can be a little elitist, I would peg an assertion by The Economist more accurate than a left-winged website like The Salon ( which I do read just to experience how stupid liberals and a progressives are. )
This is important as a last filter as even I was misled by self-help books which claimed that a Harvard study confirmed that business students who had personal goals were richer than those who did not - this study was entirely bogus ! It spawned a truckload of literature based on a big lie ( SMART goals anyone ?).
And, no, Einstein did not talk about making fishes climb trees either.
This also means that you have to pidgeon-hole some of your friends because they tend to draw evidence from the sources that they like.
I have developed a strong suspicion of lawyers or law students who are making an assertion even if they have a strong body of evidence to support their views. I know they are just advocating a position, and that it's not too difficult to dig out evidence to to suggest the contrary. Lawyers are aces at evidence.
As a consequence of this, I do not trust my classmates on legal matters and reasoning but I do trust them if they bring up insights from their first degrees.
Anyway, in summary, if you do not really know how to develop your skeptic muscles, just ask yourself three questions :
a) Does the context imply that someone will benefit from you believing in this idea ?
b) Is there a way to falsify the idea by referring to research or just waiting for some results to appear ?
c) Is the evidence credible ?