The current financial / credit crisis in the U.S. exposes an ongoing societal need: people who can understand complex ideas and then translate them for consumption by the quasi-informed and curious but non-expert segment of the population.
Malcolm Gladwell, for example, has made a living out of reading hard-to-understand psychology papers and writing about them to the lay audience. Michael Pollan is the Gladwell of food science. Pollan’s books on agriculture, farming, and eating have been bestsellers. He once boiled down all nutrition advice thusly: “Eat food. Not too much. Mostly plants.” Simple but right.
Who’s the Malcolm Gladwell of finance? Who is translating the macro-economic gibberish into concepts the average person can understand, without offending economists?
As anyone who reads Brad DeLong knows, the economic literacy of the average journalist is not very high. There’s a big difference between “simple but right” and “simple but wrong.” Ben Stein, in the New York Times, is often simple, often wrong. Jim Cramer, often simple, often wrong.
On the contrary, James Fallows on China and the deficit, David Leonhardt on how even experts are confused about what’s going on in the markets, or James Surowiecki on real estate and foreclosures, are all examples of solid explanations that are simple and clear. Michael Lewis is also a reliably thoughtful lay-person’s explainer on business issues.
I read lots of economics blogs, and blogs are good for in-the-moment analysis, but they rarely can afford to step back and offer a higher level overview. Also, professional economists, by virtue of being professional economists, can struggle to translate economic jargon.
In an old post of mine titled When to Think Hard, When to Outsource, I talked about how I rely heavily on certain people’s insight for certain types of issues (in effect “outsourcing” some parts of the critical thinking process to them). To wit, I’m trying to construct my “dream team” of people who are following the macro-econ scene, following the credit markets and mortgage situation, and conveying their thoughts in sound, simple prose.
Any ideas for who should be in the starting lineup?
Check out “Irvine Housing Blog.” The author, IrvineRenter, effectively alternates between examples of housing disasters and background on the principles that have driven this bubble. His postings can be pretty funny and really highlight the irrational exuberance that has led to our current economic situation.
Sorry I don’t have a name for the author – I guess like Batman he prefers to crusade against stupidity anonymously.
http://www.irvinehousingblog.com/
The incentives in publishing financial ideas are different than those of publishing other types of information.
If you publish your ideas (take for example, my blog post in 2005 discussing the likely real estate bubble and its likely causes: http://mathoda.com/archives/12) there is a small level of recognition, but many people just don’t take the time to understand it. Even if you publish in a national magazine or newspaper, you get wide coverage but many people frankly just disagree. Even if a financial author is right many people can bet they are wrong and make money in the short term (meaning even up to a few years) as people have done in real estate for the last few years or did with .coms for many years.
Usually if someone understands finance very well it’s far more rewarding to keep the insights mostly to themselves and use them in deploying their own (and others’) capital then to make their insights broadly available. The most valuable financial opinions tend to be from Warren Buffett, Charlie Munger, and the like. They make statements far and few between, but they are well worth listening to.
I’ve actually just spent almost a year studying how great investors think and act, and frankly it’s mostly available, you just need to put it together intelligently.
The 2005 real estate bubble blog post I mention in my comment above can be found here: http://mathoda.com/archives/12
Check out every single thing written by Gerald Graff, especially his book “Clueless in Academe”–it specifically addresses the problem of translating academic language into not just lay language, but language in which other branches of academia can understand as well.
Writing well is definitely a skill that even professors who write exclusively academic material should master–and I’ve seen even Harvard grad students who fail to do so. It’s a sad, sad world when they get degrees for stuff that even I can’t make sense of.
Ben:
I am inclined to agree with Ranjit Mathoda that many people just don’t take the time to understand the information available aplenty in very lucid form.
The problem of mistranslation between disciplines and between experts and non-experts itself however is widely discussed including in the blogosphere and I wrote about it some months ago. Admittedly I am inclined towards systemic solutions, not quick fixes.
http://laviequotidienne.wordpress.com/2007/11/29/lost-in-translation/
For your dream team, I would point you towards Tim Congdon one of whose recent pieces on the UK’s Norther Rock crisis can be found here:
http://www.ft.com/cms/s/0/472407fe-d017-11dc-9309-0000779fd2ac.html?nclick_check=1
Tim Harford of the FT is another one.
You’re already reading DeLong, I would read the guys at:
marginalrevolution.com
also, Barry Ritzholtz at
http://bigpicture.typepad.com/
He links to great charts that often really boil things down.
Watching the US housing market from the outside has been fascinating – Americans have some significant blind spots, probably because policy-makers don’t know that there are other ways to structure the market for much greater stability.
http://hubpages.com/hub/Foreclosures–Sub-Prime-Loans–And-The-Real-Reason-The-US-Housing-Market-Is-In-Free-Fall
A significant part of my twelve year career spent on the technology side of the Financial markets hasn’t exposed me to a single reliable source for easily digestible financial information.
The financial business thrives on information asymmetry. New York / Wall Street puts a premium on any kind of disclosure. Occasional breaks in barriers to information spread is quite likely a big source of innovation in this field.
Any “innovation” in itself is largely limited to certain sections of the industry, with the details of the innovation being held close to the player’s chests, and largely (as much as possible) prevented from exposure to outside world through layers of security measures and non-disclosure agreements.
Given the hush-hush culture, I am of the opinion that the wheel has been reinvented a few thousand times along different dimensions in the financial world.
The one person whose writing painted a much clearer picture of intricacies (or stupidities) of the Wall Street business has been Nassim Nicholas Taleb.
Fooled by Randomness provides a high level view of the operations of the Financial industry – specifically the core operation of Trading. Yet to read – and eager to start on – The Black Swan.
I wish NNT shared more of his take on the financial markets on a blog.
Ben,
Try taking a look at Robert Reich’s blog, 22nd Secretary of Labor and Professor at UC Berkeley.
He’s been pretty consistent (and accurate) in what he says. Take for instance this post written in November: http://robertreich.blogspot.com/2007/11/after-next-recession.html
Bill
Martin Wolf of the FT.
umair haque
http://www.bubblegeneration.com
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