Ben Carlson is one of my favorite authors; he likes to point out some of the absurdities that occur within finance and investing, especially with talking heads. In his latest article, he playfully extrapolates some of the ways the finance industry operates into other areas. I pulled some good ones below.
What if the waitstaff at restaurants gave out menu advice like pundits on financial television? The best thing on the menu is the filet mignon. I predict the chef will cook tonight’s filet to perfection as he has been data dependent with his cooking techniques. [the steak is served overcooked] Did I say steak? Scratch that. I obviously meant the chicken parm. Why would you ever get the steak? The reason you should be a buyer of chicken parm here is…
What if your kids’ grades at school worked like quarterly analyst estimates for company performance? Yes mom I know I got D+ on my English paper but I only estimated that I would get a D. I outperformed expectations! My grades should be rising as a result.
What if professional athletes acted like hedge fund managers when they underperform? LeBron, can you tell us why you lost the game tonight? First of all, there’s no way we could have predicted the other team would make more baskets than us. And the refs obviously manipulated the game. Plus, on a risk-adjusted basis, we actually scored more points than they did so it’s just like we won even if the scoreboard doesn’t show it. This game was our Battle of the Little Bighorn.
What do you guys think? Would you say that this is a fair criticism of finance and pundits?
No, obviously not
I don't know enough about any of the industries mentioned to give a meaningful insight, so I'd genuinely appreciate if you could tell me why they aren't fair criticisms
To start off, you are comparing waiters to TV personalities and elementary school students to Equity Research Analysts... I would challenge you to think a little bit harder if you can't see why these aren't "fair criticisms" (they're not really criticisms, the article is satire).
Point is, Wall Street is great at finding ways to rationalize why them being wrong doesn't mean they were actually wrong.
No...
I like Ben's blog but he always seems to have a bone to pick with active managers and seems pretty butthurt that they are getting rich off fees.
I've noticed this too. Probably a by-product of working in institutional AM or Ritholtz ("against the grain" fits their brand).
People doing punditry on tv aren't generally speaking true financiers, as Woody Allen said "Those who can't do teach. And those who can't teach, teach gym."
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