I still don't feel like writing stories so I'm going to write about something less important:

Why we shouldn't be worried about how little we understand

We shouldn't be worried about how little we understand because really all there is to understand is that nobody else has a clue either.

There are a few good example of this. Let's look at economics, the area that's supposed to be king, that dominates the decisions of our society and it happens to be something that interests me.

In the past week or two there have been the following articles: The Wall Street Journal has explained how Chinese manufacturers don't expect higher oil prices to dint their productive abilities and how we shouldn't expect a slowdown in China any time soon. Reuters has explained how the Chinese economy may continue to grow at 10% in 2005 even with the government trying to put on the brakes. An article in the Economist points to both JP Morgan and to Lehman research that suggests that the Chinese economy is actually slowing down rapidly, perhaps only growing at 2-3%. Meanwhile, the data coming out of China suggests that they are engineering the perfect, textbook slowdown with inflation stabilizing and industrial production softening just enough.

The bottom line? Nobody really knows what's going on with one of the most important economies in the world. The journalists don't. The analysts don't. The economists don't. Its the engine of growth and probably the single biggest reason that our western economies aren't deflating, and nobody knows what the hell is really going on over there.

Another example. Oil. About the only thing that anybody can agree on with regard to China is that China is using a lot of oil. There's numbers on that, so its pretty hard to miss.

But while everybody agrees on this, nobody seems to have been able to correlate what this means to oil prices. Most think that oil prices are too high. The wall street analysts, the economists, all these experts nod their heads in unison and agree that oil is coming down. There's lots of talk about this 'terrorism' premium which is keeping oil prices up. Eventually they might be right. But here's the rub: the analysts, economists and experts have been consistently wrong on oil prices for the last 30 months, so you have to take their opinion with a bit of skepticism.

This particular example is quite remarkable. I mean when you think about it, you're supposed to have the best and brightest minds out there on wall street and in these research think tanks, and these best and brightest minds are spending all their day, probably at least 8 hours 5 days a week, scouring over loads of data to come up with a number, a prediction on what the price of oil is going to be in say 3 to 6 months. And they've been wrong for over two years in a row. 2 years! For 2 years they've consistently been predicting the downfall of oil, predicting lower forward prices, and just as consistently they have been wrong, wrong wrong!

Its elegant really. To be that wrong.

And it goes to show that nobody really knows anything. Experts are just people that have access to lots of data. It doesn't mean they can make sense of that data. It doesn't even mean they have common sense.

So anyways, I could list other examples, but it would get redundant. The point is clear. Nobody really understands very much about the world, even the people who are paid to understand it. So we shouldn't worry too much that it baffles us too.

- posted by Sigurd8/27/2004 06:54:00 PM