From the inestimable Barry Ritholtz at The Big Picture:"Imagine you discover you have a termite problem in your home. The main beams show serious signs of infestation, to the point that their load bearing capabilities have been compromised.You call in an expert, a professional exterminator. He reviews the homes structure, and gives you the following 3 step advice:
- Paint the outside of the house white with black shutters
- Curtains. Pretty ones.
- Fresh flowers in the entrance way
As ridiculous as this sounds, it is essentially what many economists are prescribing as a cure for the financial crisis. It is ridiculous in so many ways, we can barely begin to count them. Even worse, it points out that the field of economics can be dangerously into absurdity at time. If you want to understand how 95% of economists missed the warning signs about the recession, housing crisis, derivatives threat, and credit crunch, look no further than the misguided obsession with confidence, and the misunderstanding it reveals of human nature.
Read the rest here.
Who is the author of...'confidence is a four letter word?' DO you know? I once saw a Dick Cavett interview on PBS back in the '70's. I believe he was interviewing George Graves and that it was his quote. I have never forgotten it and use this belief everyday.
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