personal investment blog

ARE YOU CALLING ME A LIAR?

ARE YOU CALLING ME A LIAR?

10 Aug 2018

A little more than three years ago I wrote in defence of the word “scepticism”. I said that scepticism, which was once habitually paired with the word “healthy”, was having its meaning changed pejoratively to imply that a sceptic was a borderline fanatic who was in denial of the consensus agreed by all enlightened liberals. But scepticism is essential to successful investment and it might do people some good to employ it on other occasions.

Something similar but opposite has happened to the word “liar”. It seems that everyone with whom some people disagree is called a liar. It has turned into a playground taunt, an insult tossed off casually without thought as to its actual implications. I will explain at the end why this really matters.

Let me insist, if I dare, on two conditions that must be satisfied if someone is to be convicted of lying. First, what they say must be false and second, they must have a reasonable expectation that it is false. According to these criteria it is a very strong accusation to make. In the House of Commons to accuse another member of lying is considered unparliamentary language and the words must be withdrawn.

Of course, in a trivial way, most of us lie routinely every day. For this reason the phrase “white lie” was invented. The film “Liar Liar” is about the hilarious chaos that ensues when a lawyer is forced to tell the truth for twenty four hours. Saki’s story of Tobermory the talking cat, written nearly a century earlier, was based on similar comic consequences: as was  William’s Truthful Christmas by Richmal Compton (1925).

 By and large, it is considered better to be kind than truthful in personal relationships.

“What can I do, what can I do?

Much of what you say is true,

I know that you see through me,

But there’s no tenderness beneath your honesty.”

Paul Simon (Tenderness)

The very existence of white lies alerts us to the fact that darker lies are serious stuff. People go to prison for perjuring themselves in court and the reason that they tend to receive custodial sentences (up to seven years) is that the law wishes it to be known that lying under oath is an attempt to pervert the course of justice.

The word “liar” has a lot of ground to cover – from a fib to boost someone’s confidence to a false allegation of criminal activity – and it is a shame that it has been debased further to the status of a mere general term of abuse.

From memory, this trend picked up over the furore around Tony “Bliar” Blair and the 2003 Iraq war. The so-called “Dodgy Dossier” implied that Saddam Hussain could deploy “weapons of mass destruction” within forty five minutes. Blair said that 10,000 litres of anthrax “could exist” inside Iraq. He implicitly compared Saddam to Hitler and warned against making the mistakes of appeasement seen in the 1930s. In 2016, the Chilcot Report said that Blair had exaggerated the case for war. In response, Blair admitted to mistakes but explicitly not to lies.

Looking at the two conditions of lying we can say that some of what Blair said was false but can we say that he knew that it probably was false? The latter is very hard to prove and given that Blair is both a free man and, ironically, a man who seems more convinced of his own opinions than ever, we have to say that the allegation of lying is unproven. So in this case at least, Tony Blair is not a liar.

But many respond by saying that not only Blair but all politicians are liars. “They’re all the same”.

Now, regretfully, I must turn to the EU referendum vote. On the one hand you had a campaign bus saying that the UK could spend an extra £350 million a week on the NHS, on the other you had the excitable Anna Soubry MP saying that our exports to the EU would fall to “almost absolutely (sic) zero”.

Both these views are highly debatable but they are not lies. They were opinions about what happens after Brexit and Brexit has not yet happened. Even when it has happened and things don’t pan out in line with these predictions, are we really going to say that the people who voiced these opinions believed that they were false?

It is worth mentioning that the PM herself disinterred the “Brexit dividend” claim for the NHS a few weeks ago and we still don’t know and arguably can never know if it could be correct though apparently the Guradian does know: 

“The Guardian view on the NHS cash plan: the Brexit dividend claim is a lie.”

Guardian Leader, 18 June, 2018

All we can say for sure is that the Guardian editorial writer doesn’t know what the word “lie” means. One might think that’s a bit of a handicap for a journalist but never mind.

Anna Soubry still appears to be completely convinced that all UK trade is about to fall off a cliff. I can’t find anything in her CV that implies that she is an expert on international trade nor indeed on commercial transactions of any kind but she might still be right and I can see no grounds to accuse her of being a liar.

Here is a trickier one. In March 2016, there was this exchange in the House of Commons:

Labour MP Richard Burgon:

“If the British people vote to leave the European Union, will the Prime Minister resign, yes or no?”

Prime Minister David Cameron:

“No”.

On 24 June 2016, the day after the referendum, David Cameron resigned.

Here was a prima facie case of a Prime Minister appearing to have said something that was untrue. Did he know it was probably untrue when he said it? I can’t be sure, but if I wanted to investigate possible lies of the referendum campaign I might start there.

Or I might wonder whether the Chancellor Osborne was serious when, in the week of the referendum itself, he refused to rule out suspending the stock exchange in the event of a Leave vote. In the days after the vote the FTSE 100 fell by about 6%, frightened perhaps by Osborne’s threat, but of course there was no suspension and the index has subsequently risen by more than 20%.

As far as I know neither Cameron nor Osborne has ever publically explained why they changed their minds. David Cameron’s resignation speech lasted seven minutes during which time he did not find it necessary even to refer to the fact that he had recently denied that he would do what he was now doing. Well played, Eton.

The accusation of “lies” is now made loudly, loosely and frequently, often without any alleged lie being specified. “Liar” is an angry shout of disapproval and I fear that it diminishes the chances of actually holding people to account. (See here for a similar point about blame and accountability).

The shame is that real liars are getting swept away in the froth. As an investor I am getting concerned about the number of auditors who are signing off accounts that are full of optimistic opinions that are presented with the confidence of facts.

Accounting mistakes, whether wilful or not, are hard to understand for anyone not closely involved. Most financial accounting involves judgement as to the fair value of an asset or the probability that a contract will be completed in accordance with its terms. As an investor I sometimes have to dig deeply into the notes to accounts and I have to assess probabilities. Sometimes I know that the CEO of a vulnerable business has to sound confident in public in order to avoid a collapse in trust that might be justified if certain facts were known.  A fall in the confidence of funders and counterparties might finish him off. What is he supposed to do?

There is no easy answer but what he must not do is to say something that he knows to be probably false i.e. to lie. But the more that the idea of a lie is debased, the further in that direction he will be tempted to creep. If the new definition of a liar is someone who makes a debatable prediction about the future, well….bring it on!

“I am confident that our contract will be completed profitably and on time” can be conveniently ascribed to an outcome whose probability he knows to be roughly 5%. The chances are that this outrageous and irresponsible statement will be lost in the foaming current of alleged filthy lies that swills back and forth every day. 

As his ship begins to take water he will reverse rat and take his severance package off to spend more with his family. He will swim away in a school of ex-bankers, credit rating executives and busted hedge fund managers in the direction of Avoidance Island while somewhere in the background someone is shouting something about a bus.

“Liar” is not a playground taunt. It is not a difference of opinion and a shout of disagreement. It is a serious allegation that should lead to the guilty being held accountable. So, who are you calling a liar?

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