Experts Don’t Always Have Expertise

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We hear a lot of questions lately along the lines of, “How do I know who to believe?” It’s a good question, and relevant not just in personal finance, but in other areas, especially politics, economics and health, where we’re confronted with all manner of allegedly sage opinion and advice: The more confusing or anxious-making the times, the more likely we are to seek guidance, directions and counsel from experts, whether they’re TV pundits, hired professionals or knowledgeable friends.

Problem is, there are many people positioning themselves as experts who are anything but, not to mention legitimate experts who are nonetheless compromised by their own biases (a problem we’re only beginning to understand). Even worse? We tend to follow the most sure-minded among us, regardless of how reliable we know their views to be.

This tendency to be seduced by confidence was demonstrated a few years back by psychologist Don Moore, who gave volunteers in a study real cash for correctly guessing people’s weight after looking at pictures of them. But the study had a twist: Another group of volunteers served as “experts,” and the guessers could buy advice from these pros as the study progressed. The experts, it’s important to know, could spread their estimates along a wide or narrow range depending on how confident they were about them. So an unconfident expert might have said that there was a 25% chance a person’s weight was 170-179 pounds, a 25% chance it was 180-189, a 25% chance it was 190-199 and 25% that it was 200-209.

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A highly confident expert, on the other hand, might reckon the pictured person’s weight as 100% likely to be between 180 and 189 pounds. Not surprisingly, experts who proved poor judges of weight were generally avoided as the experiment moved from round to round. What didn’t make sense was this: When inept experts stayed confident — that is, when they kept their estimates limited to a narrow range of weights even as they were consistently wrong — volunteer guessers kept buying their advice.

One lesson here, as we’ve written, is that in a gray world, we like black and white answers, even when we have good reason to doubt their accuracy or relevance. Another lesson is that it’s tough to ignore drumbeats. That is, the more often an opinion or viewpoint is voiced the more we assume it to be prevailing and, likely, reliable. Indeed, in a series of experiments a few years ago, marketing professor Kimberlee Weaver and colleagues showed that this tendency remains in force even when we know the “widespread opinion” is simply being repeated by the same person. Keep this in mind when you here someone confidently and repeatedly explaining why gold is the ultimate inflation hedge (doubtful) or why immigrants are taking millions of jobs from Americans (highly doubtful).

As to the question at the top of this post, we regret to tell you that you can’t always know for sure who to believe, but we usually favor those experts who recognize that most serious issues in life today are complex and not easily solved and therefore require more of an open mind than a closed chorus. Beyond that, we’ll suggest a simple rule for sorting through opinion when making a crucial decisions: Ask three good questions before deciding. We don’t know which three, since we don’t know the choice, but we’ve found that most usually begin with “Why?”

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This idea, adapted from the “Five Whys” approach in corporate quality-control philosophies like TQM or Six Sigma, will get you in the habit of probing a little further than you might otherwise when making big (and often emotional) decisions, forcing yourself to recognize at the very least that you may not have the basic understanding you should to evaluate options — and the experts presenting them. So if you’re thinking about investing, ask yourself, “Why this particular investment?” And if the answer is because you have a hunch, ask yourself, “What is the basis of that good feeling?” And if that answer, when you’re being honest, is that some expert says so, ask yourself, “Why specifically does that person think this investment makes sense?” And if the answer is that the “expert” has a good track record or is otherwise believable, ask yourself, “How do I really know?” (Simply agreeing with your viewpoint shouldn’t be a good enough answer.)

These questions are generic, obviously, but all we’re really trying to do is help you stop “paying” (with money, time, effort or emotion) for advice from people who may not have anything wiser to say than you but are simply more willing to say it again and again and again.