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...