Epigraph: He who knows does not speak. He who speaks does not know (Lao Tzu)
At one time, Benjamin Graham said that almost everyone who is interested in stocks wants to hear from someone else what will happen to the market. I can’t vouch for literalness, but the meaning is clear. Well, if there is demand, there will be supply.
The reasons for this demand for external advice lie in the field of biochemistry. The human brain consumes 20% of all energy that goes into the body. Therefore, the body uses every opportunity to save this energy, and nothing contributes to the rapid saving of energy as slowing down the brain.
There are studies based on MRIs of the brain that show that listening to financial experts temporarily turns off some of its cognitive functions. To put it simply, when you listen to the conventionally "Jim Cramer" on CNBC, you stop thinking. This is good in terms of saving energy, which would be spent on brain activity, but bad for the wallet.
In fact, it’s frustrating to know that you’re risking your money based on someone else’s stories, which in turn obey the laws of the genre (such as financial TV or paid podcasts). In his book "Antifragility", Nassim Taleb wrote that our ability to predict rare but rather important events in the field of politics and economics is not just "close to zero", but "equal to zero." This is a very important observation, as the author of the book "Value Investing" James Montier estimates that 80 to 90% of professional managers base their decisions on forecasts.
There is only one problem with forecasts – they do not come true. Rather, they come true, but much less frequently than could be used to gain an advantage in making investment decisions. To make matters worse, the forecasts made by the most confident experts end up being the worst.
Personal experience is that people really enjoy listening to those experts who constantly predict a crisis, a bear market, etc. This is probably because there are fewer of them, and they look "smarter" against the background of more optimistic colleagues. They look especially smart at moments when the market really falls heavily, and then everyone forgets that the same experts predicted the crisis for several years, during which the market grew…
It's like a non-working clock, which shows absolutely accurate time twice a day, but is otherwise useless.
On the one hand, it would be overly optimistic to believe that there is someone, regardless of education and experience, who can predict the future with sufficient accuracy. But on the other hand, it can be considered incorrect and complete denial of the fact that there are time-tested approaches to investment management that can provide a statistical advantage. Only these approaches should be more "engineering" and based on facts, rather than "emotional" and based on stories.