personal investment blog

On Scepticism – can we have our word back?

On Scepticism – can we have our word back?

9 Jun 2015

Scepticism is essential to successful investment. At its simplest, it implies recognising the possibility that anything the market prices as certain or very likely, might turn out to be false. This practical application of scepticism should feature in all investment decisions.

Given the priceless value of scepticism, it seems wrong and somewhat suspicious that the word has acquired pejorative connotations. In Britain, “eurosceptics” are taken to be anti-Europe and specifically against the UK’s membership of the European Union. There are plenty of such people, but they seem to me to have made up their minds. If you are decided on a matter you are not sceptical.

It may be that people against Europe like being called sceptics because it makes them seem more open minded. But this use of the word has started to turn it into a term of abuse, specifically in relation to the belief in climate change. Climate change deniers are referred to in language that implies them to be corrupt criminals or merely idiots and they are rarely if ever distinguished from those who choose to treat all arguments about climate change with scepticism.

Here is Kofi Annan talking to the Guardian last month.

“We seriously have to question the motivation of those people referred to as climate change sceptics, who are denying the evidence of human-caused climate change and preventing us from moving forward by spreading disinformation and supporting unchecked carbon pollution.”

Climate change believers frequently state that 97% of all climate scientists agree that the consensus view – that global warming is caused by human activity – is true. As an investor, this assertion discomforts me. It makes me think of packages of securitised junk mortgage loans being given AAA+ scores by ratings agencies. If everyone thought or more precisely said that they thought they were OK, what could possibly go wrong?

Ratings agencies were, it would seem, paid to award high ratings to rubbish. Whether climate scientists have a financial incentive to swim with the dolphins in the warm waters of the consensus I don’t know. But it is clear that on numerical grounds alone, publicly expressing scepticism will make you stand out a bit.  

It would be impractical and exhausting to be sceptical about everything. It is a relief to be satisfied with an answer. It means that you can stop thinking. Belief in your god, your country, your company or your sports team is an appealing and comforting form of crowd behaviour. But don’t assume that someone who questions the authenticity of a religious tract or his nation’s territorial claims or the working practices of his employer or the right of football supporters to sing that their team is “by far the greatest that the world has ever seen” is an enemy. Scepticism is priceless and its proponents should be respected.

As an investor I try to maintain scepticism as my default position. I frequently slip up and over-rate and under-scrutinise news that confirms my existing bias. It is tough to be ceaselessly vigilant and correspondingly irritating to be accused of negativity and cynicism. Sceptics are dedicated to the mission of keeping us real. At the very least we should let them have their word back.   


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