September 13, 2015
Can You Make Better Choices For Politicians Than Stocks?
Dilbert cartoonist Scott Adams writes an excellent blog. Here is an example of the quality of his thinking: If the vast majority of smart people can't beat the stock market indexes why do they think they can do better at knowing who to elect as President?
A small number of people are better at guessing about the future. Large scale screening of the public would let us know who they are. This has already been done to rank 3000 people by their ability to make accurate predictions. But if I was running the CIA or an investment bank I'd do this on a much larger scale. The people with the best predictive skills are largely unknown.
Randall Parker, 2015 September 13 10:00 PM
Why do I think I'm better at predicting who would make a good President, than at picking stocks? Because predicting stocks demands that you be better than, not the average person, but instead people who have non-public information, and put a lot of work into exploiting it. And there's no prize for being just as good at predicting stocks as the average well-informed person. You have to be BETTER than the average well informed person, because the prices already incorporate the predictions of the merely reasonably good predictors. Predicting that Apple will make money doesn't win you anything in the stock market, the price of Apple is already predicated on that.
Predicting that this guy would be better than that guy at being President doesn't lose validity if most people happen to agree with you. You don't have to be better at it than practically everybody. You just have to be better at it than random chance.
It's a completely different sort of game, in other words.
The vast majority of smart people can't beat the stock market indexes because the vast majority of smart people can't beat the vast majority of smart people.
You can't jump over your shadow.
Also, the purpose of elections is not just to choose rational and effective policies, it's to choose values, priorities and goals.
For instance, should we go to war? It's a good idea for the potential draftees to be represented...