1 00:00:15,370 --> 00:00:26,050 Speaker 1: Pushkin. As the night draws in and the fire blazes 2 00:00:26,090 --> 00:00:30,090 Speaker 1: on the hearth. We warn the children by telling them stories. 3 00:00:31,210 --> 00:00:33,530 Speaker 1: Cinderella teaches them that if you want to leave the 4 00:00:33,570 --> 00:00:36,850 Speaker 1: party early, leave your phone number rather than a piece 5 00:00:36,890 --> 00:00:41,650 Speaker 1: of design of footwear. But my stories are for the 6 00:00:41,770 --> 00:00:46,130 Speaker 1: education of the grown ups, and my stories are all true. 7 00:00:47,410 --> 00:00:53,010 Speaker 1: I'm Tim Harford. Gather close and listen to my cautionary tales. 8 00:01:12,810 --> 00:01:16,890 Speaker 1: Late one evening on the twentieth of December nineteen fifty four, 9 00:01:17,370 --> 00:01:20,330 Speaker 1: a small group of people sat together in a living 10 00:01:20,410 --> 00:01:24,650 Speaker 1: room in Oak Park, a suburb of Chicago, waiting for 11 00:01:24,770 --> 00:01:27,770 Speaker 1: the end of the world. They were led by a 12 00:01:27,810 --> 00:01:31,970 Speaker 1: woman named Dorothy Martin, who was a conduit for messages 13 00:01:32,050 --> 00:01:38,690 Speaker 1: from aliens or God, or both. The messages were alarming. 14 00:01:39,450 --> 00:01:43,410 Speaker 1: At midnight, the aliens would land a flying saucer in 15 00:01:43,450 --> 00:01:47,090 Speaker 1: the backyard and convey the true believers to the safety 16 00:01:47,130 --> 00:01:53,410 Speaker 1: of a planet named Clarion. Then at dawn, a cataclysmic 17 00:01:53,490 --> 00:01:59,490 Speaker 1: flood would destroy much of the world. Now, at five 18 00:01:59,650 --> 00:02:04,090 Speaker 1: minutes to midnight, the believers who were waiting some were disheveled, 19 00:02:04,290 --> 00:02:07,410 Speaker 1: since the aliens had demanded they remove all metal from 20 00:02:07,410 --> 00:02:12,210 Speaker 1: their clothing. Braclip buttons, even trouser zips had been hastily 21 00:02:12,210 --> 00:02:16,970 Speaker 1: slashed away by fumbling hands wielding scissors or razors. Some 22 00:02:17,090 --> 00:02:20,690 Speaker 1: of the group were there out of mere curiosity. Others 23 00:02:20,850 --> 00:02:25,410 Speaker 1: had sacrificed almost everything for this moment. They'd quit their jobs, 24 00:02:25,610 --> 00:02:28,850 Speaker 1: given away their possessions, and said farewell to their families. 25 00:02:29,930 --> 00:02:34,810 Speaker 1: But what distinguishes this particular apocalyptic cult from all the 26 00:02:34,890 --> 00:02:39,050 Speaker 1: others is that a small team of social scientists, led 27 00:02:39,090 --> 00:02:43,650 Speaker 1: by the world renowned psychologist Leon Festinger, had managed to 28 00:02:43,730 --> 00:02:50,410 Speaker 1: infiltrate it. They were there to witness what happened at midnight, 29 00:02:51,490 --> 00:02:55,370 Speaker 1: and in particular, how the group reacted to the appearance 30 00:02:56,290 --> 00:03:03,450 Speaker 1: or possibly the non appearance, of the aliens. Gather round, 31 00:03:04,010 --> 00:03:33,330 Speaker 1: and I'll tell you another cautionary tale. I'll tell you 32 00:03:33,370 --> 00:03:37,090 Speaker 1: all about what happened with Leon Festinger, Dorothy Martin and 33 00:03:37,170 --> 00:03:40,850 Speaker 1: the aliens in due course, but for a moment, let's 34 00:03:40,970 --> 00:03:44,810 Speaker 1: leave them there in Chicago anxiously waiting for the end 35 00:03:44,850 --> 00:03:48,370 Speaker 1: of days, because I have another story to tell you. 36 00:03:48,810 --> 00:03:51,890 Speaker 1: And it's not a story about crazy cult members, but 37 00:03:51,970 --> 00:03:57,890 Speaker 1: about two economists, indeed, two of the most celebrated economists 38 00:03:58,130 --> 00:04:01,570 Speaker 1: who ever lived. And what do these economists have to 39 00:04:01,650 --> 00:04:06,570 Speaker 1: do with a UFO cultin nineteen fifties Chicago. It's very simple. 40 00:04:07,130 --> 00:04:10,410 Speaker 1: Just like Dorothy Martin, they tried to see into the future, 41 00:04:10,890 --> 00:04:14,930 Speaker 1: and trying to see into the future it's a dangerous business. 42 00:04:16,450 --> 00:04:18,250 Speaker 1: One of the economists I want to tell you about 43 00:04:18,370 --> 00:04:22,010 Speaker 1: is the great British polymath John Maynard Keynes. You may 44 00:04:22,090 --> 00:04:25,130 Speaker 1: have heard of him. He's a colossal figure in economics, 45 00:04:25,170 --> 00:04:28,170 Speaker 1: overturning the ideas that had gone before him and then 46 00:04:28,330 --> 00:04:34,650 Speaker 1: reshaping the postwar economic system. Many economists still call themselves Keynesians, 47 00:04:35,370 --> 00:04:38,410 Speaker 1: like him or hate him. In economics, you can't get 48 00:04:38,530 --> 00:04:43,410 Speaker 1: much bigger than John Maynard Keynes, except that in his 49 00:04:43,530 --> 00:04:49,210 Speaker 1: day you could. When Caynes first strode the world stage, 50 00:04:49,650 --> 00:04:53,050 Speaker 1: he did so in the shadow of another man. In 51 00:04:53,170 --> 00:04:56,890 Speaker 1: nineteen twenty four, The Wall Street Journal tried to describe 52 00:04:56,970 --> 00:05:00,930 Speaker 1: John Maynard Caynes, this up and coming economist. They reached 53 00:05:00,930 --> 00:05:04,050 Speaker 1: for a comparison that everyone in America would have known. 54 00:05:04,890 --> 00:05:11,010 Speaker 1: Canes said the journal was England's Irving Fisher, and Irving 55 00:05:11,050 --> 00:05:15,810 Speaker 1: Fisher was the most famous economist on the planet. But 56 00:05:15,930 --> 00:05:19,490 Speaker 1: Irving Fisher wasn't just more famous than Kenes. He was 57 00:05:19,570 --> 00:05:23,370 Speaker 1: brilliant as one Nobel Prize winner put it, Fiesel was 58 00:05:23,450 --> 00:05:28,370 Speaker 1: anywhere fully decade to dooge. In additions ahead of his time, 59 00:05:28,770 --> 00:05:32,130 Speaker 1: some would say he was the greatest economist who ever lived. 60 00:05:33,490 --> 00:05:36,410 Speaker 1: But if you're thinking I don't hear much about Irving 61 00:05:36,450 --> 00:05:41,050 Speaker 1: Fisher these days, you're right. He's not the household name 62 00:05:41,090 --> 00:05:44,330 Speaker 1: he was a hundred years ago. If you're wondering why 63 00:05:44,610 --> 00:05:49,450 Speaker 1: his reputation faded while Canes is lived on, that is 64 00:05:49,450 --> 00:05:56,250 Speaker 1: what our cautionary tale is all about. Irving Fisher and 65 00:05:56,370 --> 00:06:00,210 Speaker 1: John Maynard Keynes were very different men in some important ways, 66 00:06:00,730 --> 00:06:03,330 Speaker 1: but they also had a great deal in common. Both 67 00:06:03,370 --> 00:06:06,970 Speaker 1: were stars at their universities, Canes at Cambridge in England, 68 00:06:07,170 --> 00:06:11,330 Speaker 1: Fisher at Yale. They were both physically impressive. Canes was 69 00:06:11,410 --> 00:06:15,090 Speaker 1: thin and very tall, with piercing eyes. Fisher had the 70 00:06:15,130 --> 00:06:18,730 Speaker 1: broad chest of a competitive rower. They were both skilled 71 00:06:18,730 --> 00:06:23,690 Speaker 1: writers charismatic speakers too. After witnessing Canes giving a speech, 72 00:06:24,010 --> 00:06:27,930 Speaker 1: the Canadian diplomat Douglas Lapan was moved to write, I 73 00:06:27,970 --> 00:06:31,570 Speaker 1: am spellbound. This is the most beautiful creature I have 74 00:06:31,690 --> 00:06:35,650 Speaker 1: ever listened to. Does he belong to our species? Or 75 00:06:35,770 --> 00:06:39,690 Speaker 1: is he from some other order? And Fisher and Canes 76 00:06:40,130 --> 00:06:45,570 Speaker 1: also both active investors. They weren't just Ivory Tower economists, 77 00:06:45,770 --> 00:06:48,970 Speaker 1: but men who believed that their mastery of economics would 78 00:06:49,050 --> 00:06:52,930 Speaker 1: enable them to make profitable investments. That is where their 79 00:06:52,970 --> 00:06:57,810 Speaker 1: interest in forecasting came in. An academic economist might be 80 00:06:57,890 --> 00:07:01,970 Speaker 1: content to describe and explain the economy's past, but to 81 00:07:02,050 --> 00:07:04,810 Speaker 1: make money, Fisher and Canes would have to catch a 82 00:07:04,850 --> 00:07:09,690 Speaker 1: glimpse of the economy's future. Let's meet the young being Fisher, 83 00:07:10,610 --> 00:07:13,890 Speaker 1: how much there is I want to do? I always 84 00:07:13,930 --> 00:07:16,570 Speaker 1: feel that I haven't time to accomplish what I wish. 85 00:07:16,690 --> 00:07:19,570 Speaker 1: I want to read much. I want to write a 86 00:07:19,570 --> 00:07:24,730 Speaker 1: great deal. I want to make money. He's writing from 87 00:07:24,850 --> 00:07:29,170 Speaker 1: Yale to an old school friend. Money was important to Fisher. 88 00:07:29,610 --> 00:07:34,090 Speaker 1: His father had died of tuberculosis the very week that 89 00:07:34,210 --> 00:07:37,530 Speaker 1: Irving had arrived at Yale. The young man needed to 90 00:07:37,570 --> 00:07:41,610 Speaker 1: scramble for funds Throughout his studies. He understood what it 91 00:07:41,850 --> 00:07:46,290 Speaker 1: was to struggle financially while surrounded by wealth. At the 92 00:07:46,290 --> 00:07:49,210 Speaker 1: age of twenty six, however, Fisher found himself with a 93 00:07:49,290 --> 00:07:53,770 Speaker 1: small fortune at his disposal. He had married a childhood playmate, 94 00:07:54,050 --> 00:07:57,410 Speaker 1: Margaret Hazard, who was the daughter of a wealthy industrialist 95 00:07:57,810 --> 00:08:01,130 Speaker 1: Irving and Margaret's wedding was sumptuous enough to be covered 96 00:08:01,130 --> 00:08:05,090 Speaker 1: by the New York Times. With two thousand invited guests, 97 00:08:05,490 --> 00:08:09,890 Speaker 1: three ministers, an extravagant lunch, and a wedding care weighing 98 00:08:10,010 --> 00:08:15,010 Speaker 1: sixty pounds, they commenced a fourteen month European honeymoon and 99 00:08:15,130 --> 00:08:19,290 Speaker 1: returned to a brand new mansion in New Haven. It 100 00:08:19,370 --> 00:08:22,530 Speaker 1: had been built in their absence as a wedding present 101 00:08:22,570 --> 00:08:25,970 Speaker 1: from Margaret's father, had was furnished with a library, a 102 00:08:26,090 --> 00:08:31,610 Speaker 1: music room, and spacious offices. If marrying your childhood's sweetheart 103 00:08:31,690 --> 00:08:37,250 Speaker 1: sounds a little too wholesome, I'm just getting started. There 104 00:08:37,290 --> 00:08:40,370 Speaker 1: are three things you need to know about Irving Fisher. 105 00:08:40,770 --> 00:08:43,370 Speaker 1: The first is that he was a health fanatic. He 106 00:08:43,490 --> 00:08:48,890 Speaker 1: abstained from alcohol, tobacco, meat, tea, coffee, and chocolate. One 107 00:08:49,010 --> 00:08:53,690 Speaker 1: dinner guest enjoyed his hospitality while noting his quirkiness. Well, 108 00:08:53,770 --> 00:08:58,250 Speaker 1: I ate right through my succession of delicious courses. He 109 00:08:58,410 --> 00:09:03,810 Speaker 1: dined on a vegetable and a raw egg. He founded 110 00:09:03,850 --> 00:09:08,050 Speaker 1: the Life Extension Institute and persuaded William Taft, who had 111 00:09:08,210 --> 00:09:11,570 Speaker 1: just stepped down as president, to be its chairman in 112 00:09:11,730 --> 00:09:14,890 Speaker 1: nineteen fifteen, when he was nearly fifty years old, he 113 00:09:14,970 --> 00:09:19,850 Speaker 1: published a book titled How to Live. How to Live Now, 114 00:09:19,850 --> 00:09:23,450 Speaker 1: that's some real ambition. It was a huge bestseller, the 115 00:09:23,490 --> 00:09:27,370 Speaker 1: free economics of its day, and from a modern perspective, 116 00:09:27,930 --> 00:09:32,290 Speaker 1: it's hilarious. I advocate a sunbath, common sense must dictate 117 00:09:32,330 --> 00:09:37,330 Speaker 1: its intensity and duration. It is important to practice thorough mastication, 118 00:09:38,050 --> 00:09:41,850 Speaker 1: chewing to the point of natural involuntary swallowing. He even 119 00:09:41,890 --> 00:09:45,090 Speaker 1: adds a discussion of the correct angle between the feet 120 00:09:45,090 --> 00:09:48,690 Speaker 1: while walking, about seven or eight degrees of out tying 121 00:09:48,810 --> 00:09:52,490 Speaker 1: in each foot. And there's a short section on eugenics, 122 00:09:52,690 --> 00:09:57,170 Speaker 1: which really hasn't aged well. But while it's easy to laugh, 123 00:09:57,650 --> 00:10:00,130 Speaker 1: How to Live is in many ways as far ahead 124 00:10:00,170 --> 00:10:05,850 Speaker 1: of its time as Fisher's economic analysis, describing exercises preaching mindfulness, 125 00:10:06,050 --> 00:10:09,530 Speaker 1: and at a time when the majority of doctors were smokers, 126 00:10:09,570 --> 00:10:14,570 Speaker 1: correctly warning that tobacco causes cancer. The second thing you 127 00:10:14,610 --> 00:10:16,850 Speaker 1: need to know about Irving was that he believed in 128 00:10:16,890 --> 00:10:21,290 Speaker 1: the power of rational quantified analysis. In the modern study 129 00:10:21,330 --> 00:10:25,650 Speaker 1: of scientific clothing, there is a new unit, the cloe. 130 00:10:26,170 --> 00:10:29,250 Speaker 1: This is a technical unit for measuring the warming power 131 00:10:29,490 --> 00:10:33,450 Speaker 1: of clothing. There's also the money that's the third thing 132 00:10:33,490 --> 00:10:37,290 Speaker 1: you need to know. Irving Fisher was rich, and not 133 00:10:37,370 --> 00:10:40,810 Speaker 1: just because of his wife's inheritance. Making money was a 134 00:10:40,850 --> 00:10:43,890 Speaker 1: matter of pride for Fisher. There were the book royalties 135 00:10:43,930 --> 00:10:47,730 Speaker 1: from How to Live. There were his inventions, most notably 136 00:10:47,770 --> 00:10:51,490 Speaker 1: a forerunner of the rolodex, a way of organizing business cards. 137 00:10:51,690 --> 00:10:55,050 Speaker 1: He sold that invention to a stationary company for six 138 00:10:55,290 --> 00:10:59,330 Speaker 1: hundred and sixty thousand dollars in cash, many millions of 139 00:10:59,330 --> 00:11:03,290 Speaker 1: dollars in today's terms. Fisher turned his academic research into 140 00:11:03,290 --> 00:11:07,170 Speaker 1: a major business operation called the Index Number Institute. It 141 00:11:07,290 --> 00:11:11,890 Speaker 1: sold data, forecasts and analysis as a syndicated package to 142 00:11:11,970 --> 00:11:16,770 Speaker 1: newspapers across the United States. He called it Irving Fisher's 143 00:11:16,850 --> 00:11:20,610 Speaker 1: business Page. With such a platform, Fisher was able to 144 00:11:20,650 --> 00:11:25,050 Speaker 1: evangelize about his approach to investment, which broadly speaking, was 145 00:11:25,090 --> 00:11:28,130 Speaker 1: to bet on American growth by buying shares in the 146 00:11:28,210 --> 00:11:33,730 Speaker 1: new industrial corporations using borrowed money. Such borrowing is called 147 00:11:33,970 --> 00:11:38,890 Speaker 1: leverage since it magnifies both profits and losses, but during 148 00:11:38,890 --> 00:11:42,490 Speaker 1: the nineteen twenties, stock market investors had few losses to 149 00:11:42,530 --> 00:11:48,530 Speaker 1: worry about. Share prices were soaring. Fisher wrote to his 150 00:11:48,610 --> 00:11:52,730 Speaker 1: old childhood friend to inform him that his ambition had 151 00:11:52,770 --> 00:11:56,850 Speaker 1: been fulfilled. We are all making a lot of money. 152 00:11:57,650 --> 00:12:01,050 Speaker 1: In the summer of nineteen twenty nine. Irving Fisher was 153 00:12:01,090 --> 00:12:06,490 Speaker 1: a best selling author, inventor, data pioneer, friend of presidents, entrepreneur, 154 00:12:06,650 --> 00:12:11,450 Speaker 1: health campaigner, syndicated columnist, and the greatest academic economist of 155 00:12:11,610 --> 00:12:15,210 Speaker 1: his generation, and in that summer of nineteen twenty nine, 156 00:12:15,530 --> 00:12:19,890 Speaker 1: a millionaire many times over, Irving Fisher was able to 157 00:12:19,930 --> 00:12:23,210 Speaker 1: boast to his son that a renovation of the family 158 00:12:23,250 --> 00:12:27,130 Speaker 1: mansion had been paid for not by the hazard family money, 159 00:12:27,210 --> 00:12:33,250 Speaker 1: but by Irving Fisher himself. That achievement mattered to him. 160 00:12:33,810 --> 00:12:37,450 Speaker 1: Fisher's own father hadn't lived to see his seventeen year 161 00:12:37,490 --> 00:12:41,330 Speaker 1: old boy grow into one of the most respected figures 162 00:12:41,410 --> 00:12:44,930 Speaker 1: of the age. As Irving and his son watched a 163 00:12:45,010 --> 00:12:50,490 Speaker 1: mansion reshaped before them, he could perhaps be forgiven his pride. 164 00:13:02,690 --> 00:13:07,490 Speaker 1: John Maynard Keynes was the ultimate insider. As a schoolboy, 165 00:13:07,650 --> 00:13:11,210 Speaker 1: he was educated at Eton and College, just like Britain's 166 00:13:11,250 --> 00:13:15,290 Speaker 1: first Prime minister and nineteen others. Since like his father, 167 00:13:15,490 --> 00:13:19,290 Speaker 1: he became a senior academic, a fellow of King's College, 168 00:13:19,450 --> 00:13:24,170 Speaker 1: the most spectacular of all the Cambridge colleges. His job 169 00:13:24,290 --> 00:13:27,650 Speaker 1: during the First World War was managing both debt and 170 00:13:27,810 --> 00:13:31,530 Speaker 1: currency on behalf of the British Empire. He had barely 171 00:13:31,530 --> 00:13:36,050 Speaker 1: turned thirty. He knew everyone. He whispered in the ear 172 00:13:36,130 --> 00:13:39,730 Speaker 1: of prime ministers. He had the inside track on whatever 173 00:13:39,890 --> 00:13:44,370 Speaker 1: was going on in the British economy. Maynard Bank of England. Here, 174 00:13:44,690 --> 00:13:46,730 Speaker 1: I just wanted to let you know that interest rates 175 00:13:46,730 --> 00:13:52,210 Speaker 1: will be rising tomorrow. There's a good chab. But this 176 00:13:52,370 --> 00:13:55,850 Speaker 1: child of the British establishment was a very different person 177 00:13:55,930 --> 00:13:59,890 Speaker 1: to his American rival, Irving Fisher. He loved fine wines 178 00:13:59,930 --> 00:14:03,570 Speaker 1: and rich food. He gambled at Monte Carlo. His sex 179 00:14:03,610 --> 00:14:06,490 Speaker 1: life was more like a nineteen seventies pop star than 180 00:14:06,530 --> 00:14:12,330 Speaker 1: a nineteen hundreds economist, bisexual, polyamorous, eventually settling down not 181 00:14:12,490 --> 00:14:16,530 Speaker 1: with his childhood sweetheart but with a Russian ballerina. One 182 00:14:16,570 --> 00:14:19,730 Speaker 1: of Keynes's ex boyfriends was the best man at their wedding, 183 00:14:21,370 --> 00:14:25,730 Speaker 1: and Canes was adventurous in other ways too. In nineteen eighteen, 184 00:14:25,770 --> 00:14:28,810 Speaker 1: for example, as the First World War was raging and 185 00:14:28,930 --> 00:14:33,170 Speaker 1: the German army was camped outside Paris, Canes caught wind 186 00:14:33,170 --> 00:14:37,090 Speaker 1: of the fact that in Paris, the Great French Impressionist 187 00:14:37,210 --> 00:14:40,890 Speaker 1: artist Edgar de Gas was about to auction his vast 188 00:14:40,970 --> 00:14:45,890 Speaker 1: collection of pieces by France's greatest nineteenth century painters, and 189 00:14:46,050 --> 00:14:50,730 Speaker 1: so Canes embarked on an insane adventure. First, he spoke 190 00:14:50,770 --> 00:14:54,970 Speaker 1: to the Chancellor of the Exchequer, the UK's senior treasury minister, 191 00:14:55,290 --> 00:15:00,050 Speaker 1: asking for a fund for purchasing art twenty thousand pounds. 192 00:15:00,090 --> 00:15:04,490 Speaker 1: That's millions in today's money. Maynard, it's the first occasion 193 00:15:04,570 --> 00:15:08,530 Speaker 1: that I've ever known you in favor of any expenditure whatsoever. 194 00:15:09,690 --> 00:15:13,010 Speaker 1: The British Treasury was four years into fighting the most 195 00:15:13,210 --> 00:15:17,170 Speaker 1: devastating war the planet had yet seen, but Canes knew 196 00:15:17,170 --> 00:15:19,690 Speaker 1: how to get his way. My picture coup was a 197 00:15:19,730 --> 00:15:22,050 Speaker 1: whirlwind affair, carried out in a day and a half 198 00:15:22,130 --> 00:15:25,170 Speaker 1: before anyone had time to reflect on what they were doing. 199 00:15:25,650 --> 00:15:28,170 Speaker 1: I think the Chancellor was very much amused at my 200 00:15:28,250 --> 00:15:31,210 Speaker 1: wanting to buy pictures, and eventually let me have my 201 00:15:31,290 --> 00:15:35,810 Speaker 1: way as a sort of a joke, some joke. Escorted 202 00:15:35,810 --> 00:15:41,090 Speaker 1: by destroyers and a silver airship watching overhead, Canes crossed 203 00:15:41,090 --> 00:15:45,170 Speaker 1: the Channel to France with the director of London's National Gallery, 204 00:15:45,290 --> 00:15:48,730 Speaker 1: who shaved off his mustache so that nobody recognized him, 205 00:15:48,890 --> 00:15:54,210 Speaker 1: and just as Deagar's auction begins, the German artillery starts up. 206 00:15:54,770 --> 00:15:59,490 Speaker 1: Some people panic and hurry out. Canes pounces, buying twenty 207 00:15:59,570 --> 00:16:03,250 Speaker 1: seven pieces at rock bottom prices for the National Gallery, 208 00:16:04,290 --> 00:16:07,530 Speaker 1: and he buys a few for himself, including a Cesanne, 209 00:16:07,930 --> 00:16:10,490 Speaker 1: which these days would be regarded as a better buy 210 00:16:10,610 --> 00:16:14,690 Speaker 1: than anything the National Gallery director chose. It costs Canes 211 00:16:15,050 --> 00:16:19,970 Speaker 1: just three hundred and seventy pounds. He then flee back 212 00:16:20,050 --> 00:16:23,090 Speaker 1: to the English Channel and cross home with a convoy 213 00:16:23,130 --> 00:16:28,810 Speaker 1: of hospital ships. Exhausted after his NonStop adventure, Canes calls 214 00:16:28,810 --> 00:16:31,770 Speaker 1: in on some friends. I've got a Czanne in my suitcase. 215 00:16:32,170 --> 00:16:34,210 Speaker 1: It was too heavy for me to carry, so I've 216 00:16:34,290 --> 00:16:37,450 Speaker 1: left it in the ditch behind the gate. What Irving 217 00:16:37,490 --> 00:16:39,650 Speaker 1: Fisher would have made of it all, I do not 218 00:16:39,770 --> 00:16:44,850 Speaker 1: know yet. Like Fisher, Canes was also pursuing an investment career. 219 00:16:45,410 --> 00:16:47,770 Speaker 1: It wasn't just in art. He set up what some 220 00:16:47,890 --> 00:16:51,450 Speaker 1: historians describe as the first hedge fund to speculate on 221 00:16:51,490 --> 00:16:55,130 Speaker 1: currency movements. He raised money from rich friends and from 222 00:16:55,130 --> 00:16:58,530 Speaker 1: his own father, to whom he made the not entirely 223 00:16:58,570 --> 00:17:04,250 Speaker 1: reassuring comment, when or lose this high stakes. Gambling amuses me. Initially, 224 00:17:04,370 --> 00:17:08,490 Speaker 1: Canes made money fast, but then a brief spasm in 225 00:17:08,530 --> 00:17:13,570 Speaker 1: the currency markets wiped out his fund in nineteen twenty awkward, 226 00:17:13,930 --> 00:17:17,090 Speaker 1: but he went back to his investors, including his own father, 227 00:17:17,530 --> 00:17:20,290 Speaker 1: and asked them to trust him with more of their money. 228 00:17:20,650 --> 00:17:24,130 Speaker 1: I am not in a position to risk any capital myself, 229 00:17:24,890 --> 00:17:30,370 Speaker 1: having quite exhausted my resources. Remember this is John Maynard Keynes, 230 00:17:31,010 --> 00:17:34,170 Speaker 1: the man who persuaded a wartime government to speculate in 231 00:17:34,210 --> 00:17:38,410 Speaker 1: a Parisian art auction. The man a Canadian diplomat mistook 232 00:17:38,490 --> 00:17:42,610 Speaker 1: for an angel. I anticipate very substantial profits with very 233 00:17:42,650 --> 00:17:45,530 Speaker 1: good probability if you are prepared to stand the racket 234 00:17:45,570 --> 00:17:48,010 Speaker 1: for a couple of months. Of course, they gave him 235 00:17:48,010 --> 00:17:51,770 Speaker 1: the money he wanted. Canes was back in profit by 236 00:17:51,890 --> 00:17:58,210 Speaker 1: nineteen twenty two. So, having made a small fortune, lost 237 00:17:58,210 --> 00:18:01,450 Speaker 1: it and made it again. Canes turned to the vast 238 00:18:01,570 --> 00:18:07,010 Speaker 1: investments of his own college, King's Cambridge. Canes persuaded his 239 00:18:07,090 --> 00:18:11,170 Speaker 1: fellow academics to let him adopt a radical money making strategy. 240 00:18:11,330 --> 00:18:14,690 Speaker 1: He would forecast booms and recessions and move in and 241 00:18:14,890 --> 00:18:19,290 Speaker 1: out of different economic sectors. Accordingly, such an approach makes 242 00:18:19,330 --> 00:18:24,930 Speaker 1: sense only if you actually can forecast recessions. But Canes 243 00:18:25,050 --> 00:18:27,170 Speaker 1: was the leading economist in the country and a man 244 00:18:27,250 --> 00:18:30,370 Speaker 1: who remember would get friendly phone calls from the Bank 245 00:18:30,410 --> 00:18:34,330 Speaker 1: of England. If anyone could see into the future of 246 00:18:34,370 --> 00:18:39,770 Speaker 1: the British economy, it was John Maynard Keynes. By late 247 00:18:40,050 --> 00:18:44,650 Speaker 1: nineteen twenty nine, both Irving Fisher and John Maynard Keynes 248 00:18:45,010 --> 00:18:50,570 Speaker 1: were rich, famous, respected, and standing on the brink of 249 00:18:50,570 --> 00:18:55,730 Speaker 1: a financial precipice. The cataclysmic Wall Street Crash followed by 250 00:18:55,730 --> 00:18:59,850 Speaker 1: the Great Depression, the worst peacetime economic calamity to befall 251 00:18:59,890 --> 00:19:04,010 Speaker 1: the Western world, and the two greatest economists of the age, 252 00:19:04,530 --> 00:19:09,370 Speaker 1: Fisher and Canes. Both of them failed to see it coming. 253 00:19:17,810 --> 00:19:22,530 Speaker 1: Experts don't have a stellar reputation for forecasting. In nineteen 254 00:19:22,530 --> 00:19:27,170 Speaker 1: eighty seven, a young Canadian born psychologist named Philip Tetlock 255 00:19:27,490 --> 00:19:32,690 Speaker 1: became curious about the entire prognostication racket. Tetlock had been 256 00:19:32,730 --> 00:19:37,090 Speaker 1: interviewing Cold War experts, and he soon found himself frustrated 257 00:19:37,250 --> 00:19:40,770 Speaker 1: by their wildly different predictions, their refusal to change their 258 00:19:40,770 --> 00:19:43,970 Speaker 1: minds when they were wrong, and the endless excuses for 259 00:19:44,010 --> 00:19:51,370 Speaker 1: their forecasting failures. Tetlock's response was patient painstaking and quietly brilliant. 260 00:19:51,730 --> 00:19:56,330 Speaker 1: He began to collect forecasts from almost three hundred experts, 261 00:19:56,330 --> 00:20:01,770 Speaker 1: eventually accumulating twenty seven thousand, five hundred predictions. He focused 262 00:20:01,770 --> 00:20:05,850 Speaker 1: on politics and geopolitics, throwing in a few questions from 263 00:20:05,890 --> 00:20:11,530 Speaker 1: areas such as economics. Tetlock sought clearly defined questions, enabling him, 264 00:20:11,570 --> 00:20:15,130 Speaker 1: with the benefit of hindsight, to pronounce each forecast right 265 00:20:15,730 --> 00:20:20,650 Speaker 1: or wrong. Then Tetlock simply waited while the results rolled 266 00:20:20,650 --> 00:20:25,930 Speaker 1: in for eighteen years. Tetlock published his conclusions in two 267 00:20:26,010 --> 00:20:30,250 Speaker 1: thousand and five in a subtle and scholarly book, Expert 268 00:20:30,330 --> 00:20:35,330 Speaker 1: Political Judgment. He found that his experts were terrible forecasters, 269 00:20:35,330 --> 00:20:38,090 Speaker 1: both in the simple sense that what they predicted often 270 00:20:38,170 --> 00:20:41,170 Speaker 1: didn't happen, and in the deeper sense that the experts 271 00:20:41,170 --> 00:20:44,290 Speaker 1: had little idea of when they should be confident and 272 00:20:44,330 --> 00:20:46,450 Speaker 1: when they should admit that they didn't have a clue. 273 00:20:47,330 --> 00:20:52,290 Speaker 1: Expert forecasts were barely more accurate than chimpanzees throwing darts. 274 00:20:53,930 --> 00:20:58,610 Speaker 1: Most people hearing about Tetlock's research simply conclude that either 275 00:20:58,650 --> 00:21:02,410 Speaker 1: the world is too complex to forecast, or that experts 276 00:21:02,410 --> 00:21:08,210 Speaker 1: are too stupid to forecast it, or both. On April 277 00:21:08,290 --> 00:21:12,210 Speaker 1: Fool's Day twenty thirteen, of all days, I received an 278 00:21:12,210 --> 00:21:16,050 Speaker 1: email from Philip Tetlock inviting me to join what he 279 00:21:16,130 --> 00:21:20,810 Speaker 1: described as a major new research program. It was funded 280 00:21:20,810 --> 00:21:25,210 Speaker 1: by the US Intelligence Services. This program continued and expanded 281 00:21:25,290 --> 00:21:28,970 Speaker 1: Tetlock's long running study in the form of a forecasting tournament. 282 00:21:29,490 --> 00:21:31,970 Speaker 1: You would simply log onto a website, give you a 283 00:21:32,010 --> 00:21:34,770 Speaker 1: best judgment about matter as you may be following anyway, 284 00:21:35,010 --> 00:21:37,570 Speaker 1: and update that judgment if and when you feel it 285 00:21:37,610 --> 00:21:41,770 Speaker 1: should be. When time passes and forecasts are judged, you 286 00:21:41,810 --> 00:21:44,610 Speaker 1: could compare your results with those of others. More than 287 00:21:44,730 --> 00:21:49,410 Speaker 1: twenty thousand people signed up, some professionals and some amateurs. 288 00:21:49,730 --> 00:21:53,730 Speaker 1: Tetlock and his colleagues ran experiments on this army of volunteers, 289 00:21:54,010 --> 00:21:57,050 Speaker 1: giving them different kinds of training or assembling them into 290 00:21:57,050 --> 00:22:00,170 Speaker 1: teams to see if that helped. I didn't join in. 291 00:22:00,530 --> 00:22:03,170 Speaker 1: I told myself I was too busy. I suppose I 292 00:22:03,250 --> 00:22:06,330 Speaker 1: was chickening out too. But the fundamental reason that I 293 00:22:06,330 --> 00:22:10,570 Speaker 1: didn't participate was because Tetlock's work had already persuaded me 294 00:22:10,650 --> 00:22:16,250 Speaker 1: that the forecasting task was impossible. But it wasn't. This 295 00:22:16,530 --> 00:22:21,290 Speaker 1: vast new tournament identified a select group of people whose forecasts, 296 00:22:21,690 --> 00:22:24,970 Speaker 1: while by no means perfect, were vastly better than the 297 00:22:25,050 --> 00:22:30,850 Speaker 1: dart throwing chimp standard. Tetlock, with an uncharacteristic touch of hyperbole, 298 00:22:31,330 --> 00:22:36,330 Speaker 1: called them super forecasters. So what makes a super forecaster? 299 00:22:36,970 --> 00:22:42,810 Speaker 1: The super forecasters are what psychologists call actively open minded thinkers, 300 00:22:43,370 --> 00:22:46,450 Speaker 1: people who didn't cling too tightly to a single approach, 301 00:22:46,930 --> 00:22:49,490 Speaker 1: who were comfortable abandoning an old view in the light 302 00:22:49,530 --> 00:22:54,370 Speaker 1: of fresh evidence or new arguments, and who embraced disagreements 303 00:22:54,410 --> 00:22:58,090 Speaker 1: with others as an opportunity to learn the secret of 304 00:22:58,130 --> 00:23:11,850 Speaker 1: super forecasting. It's a willingness to change your mind. Philip 305 00:23:11,890 --> 00:23:16,010 Speaker 1: Tetlock's work on super forecasting has rightly attracted a huge 306 00:23:16,010 --> 00:23:19,090 Speaker 1: amount of attention. But I think there's a message in 307 00:23:19,130 --> 00:23:23,290 Speaker 1: that work that's often overlooked. A willingness to change your 308 00:23:23,290 --> 00:23:27,170 Speaker 1: mind doesn't just help you make better forecasts, it helps 309 00:23:27,170 --> 00:23:32,570 Speaker 1: you cope with failed predictions too. Let's return to John 310 00:23:32,570 --> 00:23:36,810 Speaker 1: Maynard Keynes and Irving Fisher. Both of them, remember, had 311 00:23:36,850 --> 00:23:41,090 Speaker 1: persuaded themselves that their expertise in economics should lead to 312 00:23:41,130 --> 00:23:45,810 Speaker 1: investment success. Both of them were wrong. The stock market 313 00:23:45,850 --> 00:23:49,250 Speaker 1: crash of nineteen twenty nine caught each of them by surprise, 314 00:23:49,570 --> 00:23:54,050 Speaker 1: both lost a lot of money. Yet here's a curious fact. 315 00:23:54,570 --> 00:24:00,530 Speaker 1: Despite his failure, Canes died a millionaire and perhaps the 316 00:24:00,570 --> 00:24:05,650 Speaker 1: most celebrated economist in the world. Fisher made basically the 317 00:24:05,730 --> 00:24:10,570 Speaker 1: same mistake, yet it ruined both his finances and his reputation. 318 00:24:11,850 --> 00:24:15,490 Speaker 1: Why the difference in their fortunes. In a way, the 319 00:24:15,570 --> 00:24:21,490 Speaker 1: answer is ridiculously simple. Canes changed his mind and changed 320 00:24:21,570 --> 00:24:27,610 Speaker 1: his investment strategy. Fisher changed neither. But that only raises 321 00:24:27,650 --> 00:24:31,970 Speaker 1: a deeper question. Why did Caines change while Fisher didn't. 322 00:24:36,370 --> 00:24:40,170 Speaker 1: Canes had lost one fortune in nineteen twenty and survived 323 00:24:40,210 --> 00:24:44,410 Speaker 1: the experience By nineteen twenty nine, before the crash, he 324 00:24:44,530 --> 00:24:49,090 Speaker 1: was again pondering his shortcomings. His investment strategy, based on 325 00:24:49,130 --> 00:24:51,810 Speaker 1: the assumption that he could predict the ups and downs 326 00:24:51,810 --> 00:24:55,890 Speaker 1: of the business cycle, wasn't working out. He started thinking 327 00:24:55,970 --> 00:24:59,970 Speaker 1: about how to change his approach. Canes lost more than 328 00:25:00,090 --> 00:25:03,290 Speaker 1: eighty percent of his net worth in nineteen twenty nine, 329 00:25:03,450 --> 00:25:06,690 Speaker 1: but even afterwards, he was still rich. In short, he 330 00:25:06,810 --> 00:25:09,730 Speaker 1: had plenty of evidence that had made him as he 331 00:25:09,810 --> 00:25:13,050 Speaker 1: had experience of making mistakes in the past and bouncing back, 332 00:25:13,450 --> 00:25:18,170 Speaker 1: and he was still comfortably off. Why not change. By 333 00:25:18,210 --> 00:25:23,490 Speaker 1: the early nineteen thirties, Cans had abandoned business cycle forecasting entirely. 334 00:25:23,530 --> 00:25:27,250 Speaker 1: The greatest economist in the world had decided he just 335 00:25:27,370 --> 00:25:30,290 Speaker 1: couldn't do it well enough to make money. As time 336 00:25:30,330 --> 00:25:33,370 Speaker 1: goes on, I get more and more convinced that the 337 00:25:33,490 --> 00:25:36,650 Speaker 1: right method in investment is to put fairly large sums 338 00:25:36,650 --> 00:25:40,410 Speaker 1: into enterprises which one thinks one knows something about and 339 00:25:40,530 --> 00:25:44,730 Speaker 1: in the management of which one thoroughly believes. Forget what 340 00:25:44,770 --> 00:25:48,490 Speaker 1: the economy is doing. Just find great companies and invest 341 00:25:48,530 --> 00:25:51,450 Speaker 1: for the long term. And if that approach sounds familiar, 342 00:25:51,850 --> 00:25:56,530 Speaker 1: it's most famously associated with Warren Buffett, the world's richest 343 00:25:56,570 --> 00:26:00,770 Speaker 1: investor and a man who loves to quote. John Maynard Keynes. 344 00:26:01,770 --> 00:26:05,170 Speaker 1: Kens is rightly viewed today as a successful investor at 345 00:26:05,250 --> 00:26:08,330 Speaker 1: King's College. He recovered from the poor performance of the 346 00:26:08,370 --> 00:26:13,490 Speaker 1: early year. He secured high returns with modest risks, outperforming 347 00:26:13,490 --> 00:26:17,210 Speaker 1: the stock market as a whole many times over. It's 348 00:26:17,250 --> 00:26:20,930 Speaker 1: an impressive reward for being able to change your mind. 349 00:26:26,450 --> 00:26:30,490 Speaker 1: Irving Fisher was in a very different situation. Irving Fisher's 350 00:26:30,530 --> 00:26:34,730 Speaker 1: business page had graced newspapers across the country. When things 351 00:26:34,770 --> 00:26:37,490 Speaker 1: turned sour, Fisher was a scapegoat in front of the 352 00:26:37,810 --> 00:26:41,810 Speaker 1: entire United States. The New York Times reported that the 353 00:26:41,810 --> 00:26:46,130 Speaker 1: bubble had been blamed on US Treasury Secretary Melon, former 354 00:26:46,170 --> 00:26:51,290 Speaker 1: President Coolidge, and Professor Irving Fisher of Yale. And Professor 355 00:26:51,330 --> 00:26:55,730 Speaker 1: Irving Fisher of Yale was in deep financial trouble. The 356 00:26:55,810 --> 00:26:59,050 Speaker 1: fact that his investments were made using leverage meant that 357 00:26:59,130 --> 00:27:03,730 Speaker 1: both gains and losses were magnified. What had seemed like 358 00:27:03,850 --> 00:27:09,450 Speaker 1: brilliance before the crash was catastrophic afterwards. Fisher was staring 359 00:27:09,490 --> 00:27:11,930 Speaker 1: in the face of bankruptcy, the loss of his house, 360 00:27:12,090 --> 00:27:17,210 Speaker 1: his businesses, everything. For example, one of Fisher's major investments 361 00:27:17,290 --> 00:27:20,810 Speaker 1: was in the stationary company Remington Rand. It was fifty 362 00:27:20,850 --> 00:27:23,930 Speaker 1: eight dollars a share before the crash, dropping to twenty 363 00:27:23,930 --> 00:27:27,570 Speaker 1: eight dollars within a few months. At that point, Fisher 364 00:27:27,730 --> 00:27:31,690 Speaker 1: borrowed more money to invest, but the share price kept 365 00:27:31,810 --> 00:27:36,370 Speaker 1: falling all the way to one dollar. You could imagine 366 00:27:36,410 --> 00:27:40,850 Speaker 1: his desperation. But surely being in such a tight spot 367 00:27:40,890 --> 00:27:44,450 Speaker 1: would have made Fisher more likely to adapt his strategy. 368 00:27:45,330 --> 00:27:55,810 Speaker 1: Not necessarily, I've received another message. Everyone, get your overcoats 369 00:27:56,050 --> 00:28:01,410 Speaker 1: and stand. Life has moved. Okay, okay, kids, Okay, everyone 370 00:28:01,730 --> 00:28:04,570 Speaker 1: sit quietly in the living room. We shall act as 371 00:28:04,570 --> 00:28:08,610 Speaker 1: if this were just an ordinary gathering of friends. Remember 372 00:28:08,770 --> 00:28:13,010 Speaker 1: Dora T. Martin and her UFO cult. They've persuaded themselves 373 00:28:13,010 --> 00:28:15,170 Speaker 1: that the world is about to be flooded and that 374 00:28:15,210 --> 00:28:18,890 Speaker 1: they will be saved at midnight by aliens delivering them 375 00:28:18,930 --> 00:28:23,570 Speaker 1: safely to planet Clarion. And remember too, that the psychologist 376 00:28:23,690 --> 00:28:27,850 Speaker 1: Leon Festinger has infiltrated the cult. His researchers were there 377 00:28:27,890 --> 00:28:32,570 Speaker 1: that night to observe what happened. Festinger had a striking 378 00:28:32,650 --> 00:28:37,330 Speaker 1: prediction that when the aliens didn't appear, many cultists wouldn't 379 00:28:37,370 --> 00:28:41,090 Speaker 1: be discouraged by the clear failure of missus Martin's prophecy 380 00:28:41,370 --> 00:28:45,770 Speaker 1: or feel angry and betrayed. Instead, they would redouble their 381 00:28:45,810 --> 00:28:51,490 Speaker 1: efforts to believe another reporter, in no doubt, just hang up. 382 00:28:52,050 --> 00:28:56,850 Speaker 1: Our preparations cannot be interrupted. We'll call them later if 383 00:28:56,850 --> 00:28:59,970 Speaker 1: we have anything for them. Hasn't the clock has midnight 384 00:29:00,130 --> 00:29:06,050 Speaker 1: or so that clock is love, Look at the other clock. 385 00:29:07,610 --> 00:29:10,090 Speaker 1: I said it myself this afternoon, and it's not midnight 386 00:29:10,170 --> 00:29:14,810 Speaker 1: yet one minute at midnight, and not a player this chalistry. 387 00:29:17,370 --> 00:29:23,770 Speaker 1: At midnight, the aliens did not appear nobody said a word. 388 00:29:24,850 --> 00:29:28,090 Speaker 1: One of the more casual cult members, who had expressed 389 00:29:28,130 --> 00:29:36,650 Speaker 1: skepticism before, picked up his coat and hat and walked out. No, Carmen, 390 00:29:36,890 --> 00:29:39,970 Speaker 1: we have nothing to tell you. People tried to make 391 00:29:40,050 --> 00:29:43,730 Speaker 1: sense of what was happening, or rather not happening. The 392 00:29:43,730 --> 00:29:48,570 Speaker 1: theories grew ever, wilder. People were confused, exhausted. Leon Festinger's 393 00:29:48,610 --> 00:29:52,290 Speaker 1: observers tried to ask why the sorcer hadn't come. The 394 00:29:52,370 --> 00:29:57,530 Speaker 1: group didn't want to talk about it, and then at 395 00:29:57,570 --> 00:30:02,730 Speaker 1: four o'clock in the morning, Dorothy Martin put her face 396 00:30:03,010 --> 00:30:08,290 Speaker 1: in her hands and began to weep. One of Festinger's 397 00:30:08,290 --> 00:30:12,090 Speaker 1: researchers stepped outside for some air and discussed the situation 398 00:30:12,170 --> 00:30:15,810 Speaker 1: with a leading cult member. I've had a long way 399 00:30:15,850 --> 00:30:18,930 Speaker 1: to go. I've given up just about everything. I've cut 400 00:30:18,930 --> 00:30:22,050 Speaker 1: every tie, I burned every bridge. I've turned my back 401 00:30:22,090 --> 00:30:25,570 Speaker 1: on the world. I can afford to doubt. I have 402 00:30:25,690 --> 00:30:32,770 Speaker 1: to believe. They went back inside, But at four forty 403 00:30:32,850 --> 00:30:38,290 Speaker 1: five am, Dorothy Martin, with hand shaking, picked up a 404 00:30:38,330 --> 00:30:43,570 Speaker 1: pencil and began to write. It was, she said, a 405 00:30:43,730 --> 00:30:48,090 Speaker 1: new message. Because of the faith shown by that small 406 00:30:48,210 --> 00:30:53,130 Speaker 1: group of people, the earth had been spared destruction, a 407 00:30:53,290 --> 00:30:56,810 Speaker 1: higher power would save not only the small cult but 408 00:30:56,970 --> 00:31:03,810 Speaker 1: the entire human race. At this the cultists acquired new fervor, 409 00:31:04,130 --> 00:31:06,490 Speaker 1: going out to greet the dawn and tell people the 410 00:31:06,570 --> 00:31:11,090 Speaker 1: good news. They suddenly became evangelists, issuing statements to the 411 00:31:11,130 --> 00:31:14,690 Speaker 1: press rather than batting them away. Dorothy, is this the 412 00:31:14,730 --> 00:31:19,330 Speaker 1: first time you've called the newspaper yourself? Oh? Yes, this 413 00:31:19,410 --> 00:31:22,170 Speaker 1: is the first time I've ever called them. I've never 414 00:31:22,250 --> 00:31:26,170 Speaker 1: had anything to tell them before, but now I feel 415 00:31:26,250 --> 00:31:29,450 Speaker 1: it's urgent. We should call the Associated Press and the 416 00:31:29,450 --> 00:31:33,170 Speaker 1: Oneida Press. This thing is pretty important. It's a very 417 00:31:33,250 --> 00:31:37,370 Speaker 1: big thing, bigger than just one newspaper. I don't think 418 00:31:37,370 --> 00:31:40,330 Speaker 1: the creator would want this to be an exclusive story 419 00:31:40,530 --> 00:31:43,810 Speaker 1: any Definitely not. Oh no, all right, correct, it's got 420 00:31:43,810 --> 00:31:48,170 Speaker 1: to be for everybody. It's for everybody. Correct. Yes, Festinger 421 00:31:48,330 --> 00:31:51,610 Speaker 1: had been right. His view that the cultists would redouble 422 00:31:51,690 --> 00:31:54,450 Speaker 1: their efforts to believe in the face of failure was 423 00:31:54,450 --> 00:31:59,370 Speaker 1: based on a theory he called cognitive dissonance. Cognitive dissonance 424 00:31:59,650 --> 00:32:02,890 Speaker 1: predicts that people will start to squirm when they hold 425 00:32:03,010 --> 00:32:07,770 Speaker 1: contradictory thoughts, such as it's worth quitting my job in 426 00:32:07,890 --> 00:32:12,090 Speaker 1: order to be collected by aliens, and the aliens did 427 00:32:12,090 --> 00:32:16,450 Speaker 1: not show up. People often deny the obvious in order 428 00:32:16,490 --> 00:32:19,890 Speaker 1: to reduce the discomfort, and the more suffering people have 429 00:32:19,970 --> 00:32:23,090 Speaker 1: put themselves through on behalf of a belief, the more 430 00:32:23,130 --> 00:32:27,130 Speaker 1: likely they are to cling onto it. Otherwise, all that 431 00:32:27,330 --> 00:32:36,010 Speaker 1: suffering would seem ridiculous, would it not. Festinger's theory applies 432 00:32:36,130 --> 00:32:40,650 Speaker 1: perfectly to poor Irving Fisher in the nineteen thirties. He 433 00:32:40,690 --> 00:32:43,610 Speaker 1: believed himself to be a man of logic and reason, 434 00:32:44,650 --> 00:32:48,730 Speaker 1: and yet he was deeply in debt, the most famous 435 00:32:48,810 --> 00:32:53,970 Speaker 1: financial basket case in the country. In fact, if people 436 00:32:54,010 --> 00:32:58,010 Speaker 1: today know just one thing about Irving Fisher, it's this. 437 00:32:59,130 --> 00:33:02,450 Speaker 1: Two weeks before the Wall Street crash began, he was 438 00:33:02,570 --> 00:33:06,090 Speaker 1: quoted by The New York Times, starks have reached what 439 00:33:06,210 --> 00:33:10,490 Speaker 1: looks like a permanently high plateau. How do you back 440 00:33:10,530 --> 00:33:15,770 Speaker 1: away from that? Fisher went deeper and deeper in debt 441 00:33:15,970 --> 00:33:19,930 Speaker 1: to the taxman and to his brokers. Towards the end 442 00:33:19,970 --> 00:33:23,530 Speaker 1: of his life. He was a marginalized figure, a widower, 443 00:33:24,050 --> 00:33:27,210 Speaker 1: an easy target for scam artists and their get rich 444 00:33:27,290 --> 00:33:31,170 Speaker 1: quick schemes because he was always on the lookout for 445 00:33:31,250 --> 00:33:37,450 Speaker 1: a way to revive his fortune. He never did. Although 446 00:33:37,530 --> 00:33:40,210 Speaker 1: Canes had much in common with Fisher, he was a 447 00:33:40,210 --> 00:33:44,250 Speaker 1: different kind of character. Recall came to his comment to 448 00:33:44,330 --> 00:33:48,770 Speaker 1: his father, this high stakes gambling amuses me. The Monte 449 00:33:48,850 --> 00:33:52,730 Speaker 1: Carlo gambler knew all along that while investing was a 450 00:33:52,770 --> 00:33:57,130 Speaker 1: fascinating game, it was a game nonetheless, and one shouldn't 451 00:33:57,130 --> 00:34:00,130 Speaker 1: take an unlucky throw of the dice too much to heart. 452 00:34:00,970 --> 00:34:07,850 Speaker 1: When his investments flopped, he tried something else. Fisher and 453 00:34:07,970 --> 00:34:10,330 Speaker 1: Canes died with in a few months of each other. 454 00:34:10,610 --> 00:34:13,090 Speaker 1: Not long after the end of the Second World War. 455 00:34:13,890 --> 00:34:19,530 Speaker 1: Fisher had become irrelevant. Canes was the most influential economist 456 00:34:19,650 --> 00:34:23,450 Speaker 1: on the planet, fresh from shaping the World Bank, the IMF, 457 00:34:23,730 --> 00:34:29,730 Speaker 1: and the entire global financial system. Looking back, Canes reflected, 458 00:34:30,330 --> 00:34:33,690 Speaker 1: my only regret is that I have not drunk more 459 00:34:33,810 --> 00:34:36,970 Speaker 1: champagne in my life. But he's remembered far more for 460 00:34:37,050 --> 00:34:43,090 Speaker 1: words that he probably never said. Nevertheless, he lived by them. 461 00:34:43,130 --> 00:34:48,610 Speaker 1: When my information changes, I alter my conclusions. What do 462 00:34:48,690 --> 00:34:52,650 Speaker 1: you do, sir? If only he had taught that lesson 463 00:34:53,330 --> 00:35:03,410 Speaker 1: to Irving Fisher. You've been listening to cautionary tales. If 464 00:35:03,410 --> 00:35:05,490 Speaker 1: you'd like to find out more about the ideas in 465 00:35:05,490 --> 00:35:09,050 Speaker 1: this episode, including links to our sources. The show notes 466 00:35:09,130 --> 00:35:13,730 Speaker 1: are on my website, Tim Harford dot com. Cautionary Tales 467 00:35:13,850 --> 00:35:17,570 Speaker 1: is written and presented by me, Tim Harford. Our producers 468 00:35:17,610 --> 00:35:21,250 Speaker 1: are Ryan Dilley and Marilyn Rust. The sound designer and 469 00:35:21,330 --> 00:35:25,690 Speaker 1: mixer was Pascal Wise, who also composed the amazing music. 470 00:35:27,010 --> 00:35:31,770 Speaker 1: Starring in this season are Alan Cumming, Archie Panjabi, Toby 471 00:35:31,810 --> 00:35:37,930 Speaker 1: Stevens and Russell Tovey, alongside Enzocellente, Ed Gochen, Melanie Gutteridge, 472 00:35:38,130 --> 00:35:43,210 Speaker 1: Mass Siam and Rowe and rufus Wright and introducing Malcolm Gladwell. 473 00:35:44,410 --> 00:35:48,650 Speaker 1: Thanks to the team at Pushkin Industries, Julia Barton, Heather Faine, 474 00:35:49,010 --> 00:35:53,370 Speaker 1: Mia LaBelle, Carlie Migliori, Jacob Weisberg and of course the 475 00:35:53,570 --> 00:35:56,890 Speaker 1: mighty Malcolm Gladwell. And thanks to my colleagues at The 476 00:35:56,930 --> 00:36:09,810 Speaker 1: Financial Times.