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Speaker 2: Ideas to Tales at pushkin dot fm.
Speaker 1: Late one evening on the twentieth of December nineteen fifty four,
Speaker 1: a small group of people sat together in a living
Speaker 1: room in Oak Park, a suburb of Chicago, waiting for
Speaker 1: the end of the world. They were led by a
Speaker 1: woman named Dorothy Martin, who was a conduit for messages
Speaker 1: from aliens or God, or both. The messages were alarming.
Speaker 1: At midnight, the aliens would land a flying saucer in
Speaker 1: the backyard and convey the true believers to the safety
Speaker 1: of a planet named Clarion. Then at dawn, a cataclysmic
Speaker 1: flood would destroy much of the world. Now, at five
Speaker 1: minutes to midnight, the believers were waiting. Some were disheveled
Speaker 1: since the aliens had demanded they remove all metal from
Speaker 1: their clothing. Bra clips, buttons, even trousers. Zips had been
Speaker 1: hastily slashed away by fumbling hands wielding scissors or razors.
Speaker 1: Some of the group were there out of mere curiosity.
Speaker 1: Others had sacrificed almost everything for this moment. They'd quit
Speaker 1: their jobs, given away their possessions, and said farewell to
Speaker 1: their families. But what distinguishes this particular apocalyptic cult from
Speaker 1: all the others is that a small team of social scientists,
Speaker 1: led by the world renowned psychologist Leon Festinger, had managed
Speaker 1: to infiltrate it. They were there to witness what happened
Speaker 1: at midnight, and in particular, how the group reacted to
Speaker 1: the appearance or possibly the non appearance, of the aliens.
Speaker 1: Gather round, and I'll tell you another cautionary tale. I'll
Speaker 1: tell you all about what happened with Leon Festinger, Dorothy
Speaker 1: Martin and the aliens in due course, but for a moment,
Speaker 1: let's leave them there in Chicago, anxiously waiting for the
Speaker 1: end of days, because I have another story to tell you.
Speaker 1: And it's not a story about crazy cult members, but
Speaker 1: about two economists, Indeed, two of the most celebrated economists
Speaker 1: who ever lived? And what do these economists have to
Speaker 1: do with a UFO cult in nineteen fifties Chicago. It's
Speaker 1: very simple. Just like Dorothy Martin, they tried to see
Speaker 1: into the future, and trying to see into the future
Speaker 1: it's a dangerous business. One of the economists I want
Speaker 1: to tell you about is the great British polymath John
Speaker 1: Maynard Keynes. You may have heard of him. He's a
Speaker 1: colossal figure in economics, overturning the ideas that had gone
Speaker 1: before him and then reshaping the post war economic system.
Speaker 1: Many economists still call themselves Knesians, like him or hate him.
Speaker 1: In economics, you can't get much bigger than John Maynard Keynes,
Speaker 1: except that in his day you could. When Caines first
Speaker 1: strode the world stage, he did so in the shadow
Speaker 1: of another man. In nineteen twenty four, The Wall Street
Speaker 1: Journal tried to describe John Maynard Keynes, this up and
Speaker 1: coming economist. They reached for a comparison that everyone in
Speaker 1: America would have known, Caines said the Journal was England's
Speaker 1: Irving Fisher. And Irving Fisher was the most famous economist
Speaker 1: on the planet. But Irving Fisher wasn't just more famous
Speaker 1: than Kiness. He was brilliant. There's one Nobel Prize winner
Speaker 1: put it.
Speaker 3: Fisia was anywhere from a decade to two generations ahead
Speaker 3: of his time.
Speaker 1: Some would say he was the greatest economist who ever lived.
Speaker 1: But if you're thinking I don't hear much about Irving
Speaker 1: Fisher these days, you're right. He's not the household name
Speaker 1: he was one hundred years ago. If you're wondering why
Speaker 1: his reputation faded while Canes is lived on, that is
Speaker 1: what our cautionary tale is all about. Irving Fisher and
Speaker 1: John Maynard Keynes were very different men in some important ways,
Speaker 1: but they also had a great deal in common. Both
Speaker 1: were stars at their universities, Canes at Cambridge and England,
Speaker 1: Fisher at Yale. They were both physically impressive. Canes was
Speaker 1: thin and very tall, with piercing eyes. Fisher had the
Speaker 1: broad chest of a competitive rower. They were both skilled
Speaker 1: writers charismatic speakers too. After witnessing Canes giving a speech,
Speaker 1: the Canadian diplomat Douglas Lapan was moved to write.
Speaker 4: I am spellbound. This is the most beautiful creature I
Speaker 4: have ever listened to. Does he belong to our species
Speaker 4: or is he from some other order?
Speaker 1: And Fisher and Kanes were also both active investors. They
Speaker 1: weren't just Ivory tower economists, but men who believe that
Speaker 1: their mastery of economics would enable them to make profitable investments.
Speaker 1: That is where their interest in forecasting came in. An
Speaker 1: academic economist might be content to describe and explain the
Speaker 1: economist's past, but to make money, Fisher and Canes would
Speaker 1: have to catch a glimpse of the economy's future. Let's
Speaker 1: meet the young Irving Fisher.
Speaker 5: How much there is I want to do? I always
Speaker 5: feel that I haven't time to accomplish what I wish.
Speaker 5: I want to read much, I want to write a
Speaker 5: great deal. I want to make money.
Speaker 1: He's writing from Yale to an old school friend. Money
Speaker 1: was important to Fisher. His father had died of tuberculosis
Speaker 1: the very week that Irving had arrived at Yale. The
Speaker 1: young man needed to scramble for funds throughout his studies.
Speaker 1: He understood what it was to struggle financially while surrounded
Speaker 1: by wealth. At the age of twenty six, however, Fisher
Speaker 1: found himself with a small fortune at his disposal. He'd
Speaker 1: married a childhood playmate Margaret Hazard, who was the daughter
Speaker 1: of a wealthy industrialist. Irving and Margaret's wedding was sumptuous
Speaker 1: enough to be covered by the New York Times. With
Speaker 1: two thousand invited guests, three ministers, an extravagant lunch, and
Speaker 1: a wedding cake weighing sixty pounds, They commenced a fourteen
Speaker 1: month European honeymoon and returned to a brand new mansion
Speaker 1: in New Haven. It had been built in their absence
Speaker 1: as a wedding present from Margaret's father, and was furnished
Speaker 1: with a library, a music room, and spacious offices. If
Speaker 1: marrying your childhood sweetheart sounds a little too wholesome, I'm
Speaker 1: just getting started. There are three things you need to
Speaker 1: know about Irving Fisher. The first is that he was
Speaker 1: a health fanatic. He abstained from alcohol, tobacco, meat, tea, coffee,
Speaker 1: and chocolate. One dinner guest enjoyed his hospitality while noting
Speaker 1: his quirkiness.
Speaker 6: Well, I ate right through my succession of delicious courses.
Speaker 6: He dined on a vegetable and a raw egg.
Speaker 1: He founded the Life Extension Institute and persuaded William Taft,
Speaker 1: who had just stepped down as president to be its chairman.
Speaker 1: In nineteen fifteen, when he was nearly fifty years old,
Speaker 1: he published a book titled How to Live. How to
Speaker 1: Live Now, that's some real ambition. It was a huge bestseller,
Speaker 1: the freeconomics of its day, and from a modern perspective,
Speaker 1: it's hilarious.
Speaker 5: I advocate a sunbath, common sense must dictate its intensity
Speaker 5: and duration. It is important to practice thorough mastication, chewing
Speaker 5: to the point of natural involuntary swallowing.
Speaker 1: He even adds a discussion of the correct angle between
Speaker 1: the feet while walking.
Speaker 5: About seven or eight degrees of outtying in each foot.
Speaker 1: And there's a short section on eugenics, which really hasn't
Speaker 1: aged well. But while it's easy to laugh, How to
Speaker 1: Live is in many ways as far ahead of its
Speaker 1: time as Fisher's economic analysis, describing exercises preaching mindfulness, and
Speaker 1: at a time when the majority of doctors were smokers,
Speaker 1: correctly warning that tobacco causes cancer. The second thing you
Speaker 1: need to know about Irving was that he believed in
Speaker 1: the power of rational quantified analysis.
Speaker 5: In the modern study of scientific clothing, there is a
Speaker 5: new unit, the cloe. This is a technical unit for
Speaker 5: measuring the warming power of clothing.
Speaker 1: There's also the money. That's the third thing you need
Speaker 1: to know. Irving Fisher was rich, and not just because
Speaker 1: of his wife's inheritance. Making money was a matter of
Speaker 1: pride for Fisher. There were the book royalties from How
Speaker 1: to Live. There were his inventions, most notably a forerunner
Speaker 1: of the rolodex, a way of organizing business cards. He
Speaker 1: sold that invention to a stationary company for six hundred
Speaker 1: and sixty thousand dollars in cash, many millions of dollars
Speaker 1: in today's terms. Fisher turned his academic research into a
Speaker 1: major business operation called the Index Number Institute. It sold data,
Speaker 1: forecasts and analysis as a syndicated package to newspapers across
Speaker 1: the United States. He called it Irving Fisher's business Page.
Speaker 1: With such a platform, Fisher was able to evangelize about
Speaker 1: his approach to investment, which broadly speaking, was ti bet
Speaker 1: on American growth by buying shares in the new industrial
Speaker 1: corporations using borrowed money. Such borrowing is called leverage since
Speaker 1: it magnifies both profits and losses, but during the nineteen twenties,
Speaker 1: stock market investors had few losses to worry about. Share
Speaker 1: prices were soaring, Fisher wrote to his old childhood friend
Speaker 1: to inform him that his ambition had been fulfilled.
Speaker 5: We are all making a lot of money.
Speaker 1: In the summer of nineteen twenty nine. Irving Fisher was
Speaker 1: a best selling author, inventor, data pioneer, friend of presidents, entrepreneur,
Speaker 1: health campaigner, syndicated columnist, and the greatest academic economist of
Speaker 1: his generation, and in that summer of nineteen twenty nine,
Speaker 1: a millionaire many times over. Irving Fisher was able to
Speaker 1: boast to his son that a renovation of the family
Speaker 1: mansion had been paid for not by the hazard family money,
Speaker 1: but by Irving Fisher himself. That achievement mattered to him.
Speaker 1: Fisher's own father hadn't lived to see his seventeen year
Speaker 1: old boy grow into one of the most respected figures
Speaker 1: of the age. As Irving and his son watched a
Speaker 1: mansion reshaped before them, he could perhaps be forgiven his pride.
Speaker 1: John Maynard Keynes was the ultimate insider. As a schoolboy,
Speaker 1: he was educated at Eton College, just like Britain's first
Speaker 1: prime minister and nineteen others. Since like his father, he
Speaker 1: became a senior academic, a fellow of King's College, the
Speaker 1: most spectacular of all the Cambridge colleges. His job during
Speaker 1: the First World War was managing both debt and currency
Speaker 1: on behalf of the British Empire. He had barely turned thirty.
Speaker 1: He knew everyone. He whispered in the ear of prime ministers.
Speaker 1: He had the inside track on whatever was going on
Speaker 1: in the British economy.
Speaker 5: Maynard, Bank of England.
Speaker 4: Here, I just wanted to let you know that interest
Speaker 4: rates will be rising tomorrow.
Speaker 7: There's a good chap.
Speaker 1: But this child of the British establishment was a very
Speaker 1: different person to his American rival, Irving Fisher. He loved
Speaker 1: fine wines and rich food. He gambled at Monte Carlo.
Speaker 1: His sex life was more like a nineteen seventies pop
Speaker 1: star than a nineteen hundred's economist, bisexual, polyamorous, eventually settling
Speaker 1: down not with his childhood sweetheart but with a Russian ballerina.
Speaker 1: One of Kynes's ex boyfriends was the best man at
Speaker 1: their wedding, and Caines was adventurous in other ways too.
Speaker 1: In nineteen eighteen, for example, as the First World War
Speaker 1: was raging and the German army was camped outside Paris,
Speaker 1: Caines caught wind of the fact that in Paris, the
Speaker 1: great French Impressionist artist Edgar de Gart was about to
Speaker 1: auction his vast collection of pieces by France's greatest nineteenth
Speaker 1: century painters, and so Caines embarked on an insane adventure. First,
Speaker 1: he spoke to the Chancellor of the Exchequer, the UK's
Speaker 1: senior treasury minister, asking for a fund for purchasing art
Speaker 1: twenty thousand pounds. That's millions in today's money.
Speaker 3: Maynard, It's the first occasion that I've ever known you
Speaker 3: in favor of any expenditure whatsoever.
Speaker 1: Remember, the British Treasury was four years into fighting the
Speaker 1: most devastating war the planet had yet seen, but Caines
Speaker 1: knew to get his way.
Speaker 7: My picture coup was a whirlwind affair, carried out in
Speaker 7: a day and a half before anyone had time to
Speaker 7: reflect on what they were doing. I think the Chancellor
Speaker 7: was very much amused at my wanting to buy pictures,
Speaker 7: and eventually let me have my way as a sort.
Speaker 1: Of a joke, some joke.
Speaker 7: Escorted by destroyers and a silver airship watching overhead.
Speaker 1: Canes crossed the Channel to France with the director of
Speaker 1: London's National Gallery, who had shaved off his mustache so
Speaker 1: that nobody recognized him. And just as Dagar's auction begins,
Speaker 1: the German artillery starts up. Some people panic and hurry out.
Speaker 1: Canes pounces, buying twenty seven pieces at rock bottom prices
Speaker 1: for the National Gallery, and he buys a few for himself,
Speaker 1: including a Sizan, which these days would be regarded as
Speaker 1: a better buy than anything the National Gallery director chose.
Speaker 1: It costs Canes just three hundred and seventy. They then
Speaker 1: flee back to the English Channel and cross home with
Speaker 1: a convoy of hospital ships. Exhausted after his non stop adventure,
Speaker 1: Camees calls in on some friends.
Speaker 7: I've got a Sazan in my suitcase. It was too
Speaker 7: heavy for me to carry, so I've left it in
Speaker 7: the ditch behind the gate.
Speaker 1: What Irving Fisher would have made of it all, I
Speaker 1: do not know yet. Like Fisher, Caines was also pursuing
Speaker 1: an investment career. It wasn't just in art. He set
Speaker 1: up what some historians describe as the first hedge fund
Speaker 1: to speculate on currency movements. He raised money from rich
Speaker 1: friends and from his own father, to whom he made
Speaker 1: the not entirely reassuring comment.
Speaker 7: Win or lose. This high stakes gambling amuses me.
Speaker 1: Initiallykines made money fast, but then a brief spasm in
Speaker 1: the currency markets wiped out his fund in nineteen twenty awkward.
Speaker 1: But he went back to his investors, including his own father,
Speaker 1: and asked them to trust him with more of their money.
Speaker 7: I am not in a position to risk any capital myself,
Speaker 7: having quite exhausted my resources.
Speaker 1: Remember this is John Maynard Kaynes, the man who persuaded
Speaker 1: a wartime government to speculate in a Parisian art auction.
Speaker 1: The man, a Canadian diplomat, mistook for an angel.
Speaker 7: I anticipate very substantial profits with very good probability if
Speaker 7: you are prepared to stand the racket for a couple
Speaker 7: of months.
Speaker 1: Of course, they gave him the money he wanted. Caines
Speaker 1: was back in profit by nineteen twenty two. So, having
Speaker 1: made a small fortune, lost it and made it again.
Speaker 1: Caines turned to the vast investments of his own college,
Speaker 1: King's Cambridge. Caines persuaded his fellow academics to let him
Speaker 1: adopt a radical money making strategy. He would forecast booms
Speaker 1: and recessions and move in and out of different economic sectors.
Speaker 1: A call such an approach makes sense only if you
Speaker 1: actually can forecast recessions. But Kines was the leading economist
Speaker 1: in the country and a man who remember would get
Speaker 1: friendly phone calls from the Bank of England. If anyone
Speaker 1: could see into the future of the British economy, it
Speaker 1: was John Maynard Keynes. By late nineteen twenty nine, both
Speaker 1: Irving Fisher and John Maynard Keynes were rich, famous, respected,
Speaker 1: and standing on the brink of a financial precipice. The
Speaker 1: cataclysmic Wall Street Crash followed by the Great Depression, the
Speaker 1: worst peacetime economic calamity to befall the Western world, and
Speaker 1: the two greatest economists of the age, Fisher and Canes,
Speaker 1: both of them failed to see it coming. Experts don't
Speaker 1: have a stellar reputation for forecasting. In nineteen eighty seven,
Speaker 1: a young Canadian born psychologist named Philip Tetlock became curious
Speaker 1: about the entire prognostication racket. Tetlock had been interviewing Cold
Speaker 1: War experts, and he soon found himself frustrated by their
Speaker 1: wildly different predictions, their refusal to change their minds when
Speaker 1: they were wrong and the endless excuses for their forecasting failures.
Speaker 1: Tetlock's response was patient, painstaking, and quietly brilliant. He began
Speaker 1: to collect forecasts from almost three hundred experts, eventually accumulating
Speaker 1: twenty seven thousand, five hundred predictions. He focused on politics
Speaker 1: and geopolitics, throwing in a few questions from areas such
Speaker 1: as economics. Tetlock sought clearly defined questions, enabling him, with
Speaker 1: the benefit of hindsight, to pronounce each forecast right or wrong.
Speaker 1: Then Tetlock simply waited while the results rolled in for
Speaker 1: eighteen years. Tetlock published his conclusions in two thousand and
Speaker 1: five in a subtle and scholarly book, Expert Political Judgment.
Speaker 1: He found that his experts were terrible forecasters, both in
Speaker 1: the simple sense that what they predicted often didn't happen,
Speaker 1: and in the deeper sense that the experts had little
Speaker 1: idea of when they should be confident and when they
Speaker 1: should admit that they didn't have a clue. Expert forecasts
Speaker 1: were barely more accurate than chimpanzees throwing darts. Most people
Speaker 1: hearing about Tetlock's research simply conclude that either the world
Speaker 1: is too complex to forecast, or that experts are too
Speaker 1: stupid to forecast it, or both. On April Fool's Day
Speaker 1: in twenty thirteen, of all days, I received an email
Speaker 1: from Philip Tetlock inviting me to join what he described as.
Speaker 4: A major new research program.
Speaker 1: It was funded by the US Intelligence Services. This program
Speaker 1: continued and expanded Tetlock's long running study in the form
Speaker 1: of a forecasting tournament.
Speaker 4: You would simply log onto a website, give your best
Speaker 4: judgment about matter as you may be following anyway, and
Speaker 4: update that judgment if and when you feel it should be.
Speaker 4: When time passes and forecasts are judged, you could compare
Speaker 4: your results with those of others.
Speaker 1: More than twenty thousand people signed up, some professionals and
Speaker 1: some amateurs. Tetlock and his colleagues ran experiments on this
Speaker 1: army of volunteers, giving them different kinds of training or
Speaker 1: assembling them into teams to see if that helped. I
Speaker 1: didn't join in. I told myself I was too busy.
Speaker 1: I suppose I was chickening out too. But the fundamental
Speaker 1: reason that I didn't participate was because Tetlock's work had
Speaker 1: already persuaded me that the forecasting task was impossible, but
Speaker 1: it wasn't. This vast new tournament identified a select group
Speaker 1: of people whose forecasts, while by no means perfect, were
Speaker 1: vastly better than the dark throwing chimp standard. Tetlock, with
Speaker 1: an uncharacteristic touch of hyperbole, called them super forecasters. So
Speaker 1: what makes a super forecaster? It was more a matter
Speaker 1: of personality. The super forecasters are what psychologists call actively
Speaker 1: open minded thinkers, people who didn't cling too tightly to
Speaker 1: a single approach, who were comfortable abandoning an old view
Speaker 1: in the light of fresh evidence or new arguments, and
Speaker 1: who embraced disagreements with others as an opportunity to learn
Speaker 1: the secret of super forecasting. It's a willingness to change
Speaker 1: your mind. Philip Tetlock's work on super forecasting has rightly
Speaker 1: attracted a huge amount of attention, But I think there's
Speaker 1: a message in that work that's often overlooked. A willingness
Speaker 1: to change your mind doesn't just help you make better forecasts,
Speaker 1: it helps you cope with failed predictions too. Let's return
Speaker 1: to John Maynard Keynes and Irving Fisher. Both of them, remember,
Speaker 1: had persuaded themselves that their expertise in economics should lead
Speaker 1: to investment success. Both of them were wrong. The stock
Speaker 1: market crash of nineteen twenty nine caught each of them
Speaker 1: by surprise. Both lost a lot of money. Yet here's
Speaker 1: a curious fact. Despite his failure, Canes dyed a millionaire
Speaker 1: and perhaps the most celebrated economist in the world. Fisher
Speaker 1: made basically the same mistake, yet it ruined both his
Speaker 1: finances and his reputation. Why the difference in their fortunes.
Speaker 1: In a way, the answer is ridiculously simple. Caines changed
Speaker 1: his mind and changed his investment strategy. Fisher changed neither,
Speaker 1: But that only raises a deeper question. Why did Caines
Speaker 1: change while Fisher didn't. Caines had lost one fortune in
Speaker 1: nineteen twenty and survived the experience by nineteen twenty nine.
Speaker 1: Before the crash, he was again pondering his shortcomings. His
Speaker 1: investment strategy, based on the assumption that he could predict
Speaker 1: the ups and downs of the business cycle, wasn't working out.
Speaker 1: He started thinking about how to change his approach. Caines
Speaker 1: lost more than eighty percent of his net worth in
Speaker 1: nineteen twenty nine, but even afterwards he was still rich.
Speaker 1: In short, he had plenty of evidence that had made
Speaker 1: a mistake. He had experience of making mistakes in the
Speaker 1: past and bouncing back, and he was still comfortably off.
Speaker 1: Why not change. By the early nineteen thirties, Caines had
Speaker 1: abandoned business cycle forecasting entirely. The greatest economist in the
Speaker 1: world had decided he just couldn't do it well enough
Speaker 1: to make money.
Speaker 7: As time goes on, I get more and more convinced
Speaker 7: that the right method in investment is to put fairly
Speaker 7: large sums into enterprises which one thinks one knows something
Speaker 7: about and in the management of which one thoroughly believes.
Speaker 1: Forget what the economy is doing. Just find great companies
Speaker 1: and invest for the long term. And if that approach
Speaker 1: sounds familiar, it's most famously associated with Warren Buffett, the
Speaker 1: world's richest investor, that a man who loves to quote
Speaker 1: John Maynard Kynes. Kaines is rightly viewed today as a
Speaker 1: successful investor at King's College. He recovered from the poor
Speaker 1: performance of the early years. He secured high returns with
Speaker 1: modest risks, outperforming the stock market as a whole many
Speaker 1: times over. It's an impressive reward for being able to
Speaker 1: change your mind. Irving Fisher was in a very different situation.
Speaker 1: Irving Fisher's business page had graced newspapers across the country.
Speaker 1: When things turned sour, Fisher was a scapegoat in front
Speaker 1: of the entire United States. The New York Times reported
Speaker 1: that the bubble had been blamed on.
Speaker 6: US Treasury Secretary Mellon, former President Coolidge, and Professor Irving
Speaker 6: Fisher of Yale.
Speaker 1: And Professor Irving Fisher of Yale was in deep financial trouble.
Speaker 1: The fact that his investments were made using leverage meant
Speaker 1: that both gains and losses were magnified. What had seemed
Speaker 1: like brilliance before the crash was catastrophic afterwards. Fisher was
Speaker 1: staring in the face of bankrupt see the loss of
Speaker 1: his house, his businesses, everything. For example, one of Fisher's
Speaker 1: major investments was in the stationery company Remington Rand. It
Speaker 1: was fifty eight dollars a share before the crash, dropping
Speaker 1: to twenty eight dollars within a few months. At that point,
Speaker 1: Fisher borrowed more money to invest, but the share price
Speaker 1: kept falling all the way to one dollar. You could
Speaker 1: imagine his desperation, But surely, being in such a tight
Speaker 1: spot would have made Fisher more likely to adapt his strategy.
Speaker 1: Not necessarily.
Speaker 6: I've received another message. Everyone get your overcoats and stand by. Okay, okay, guys, okay,
Speaker 6: everyone sit quietly in the living room. We shall act
Speaker 6: as if this were just an ordinary gathering of friends.
Speaker 1: Remember Dorothy Martin and her Ua Foe cult. They've persuaded
Speaker 1: themselves that the world is about to be flooded and
Speaker 1: that they will be saved at midnight by aliens delivering
Speaker 1: them safely to planet Clarion. And remember too, that the
Speaker 1: psychologist Leon Festinger has infiltrated the cult. His researchers were
Speaker 1: there that night to observe what happened. Festinger had a
Speaker 1: striking prediction that when the aliens didn't appear, many cultists
Speaker 1: wouldn't be discouraged by the clear failure of missus Martin's
Speaker 1: prophecy or feel angry and betrayed. Instead, they would redouble
Speaker 1: their efforts to believe.
Speaker 6: Another reporter, no doubt. Just hang up. Our preparations cannot
Speaker 6: be interrupted. We'll call them later if we have anything
Speaker 6: for them.
Speaker 2: As the clock has midnight.
Speaker 1: That's wrong with that.
Speaker 4: Take a couple of minutes.
Speaker 7: That clock is love. Look at the other clock. I
Speaker 7: said it myself this afternoon, and it's not midnight yet.
Speaker 6: One minute to midnight, and not a.
Speaker 2: Plan has gonistry.
Speaker 1: At midnight, the aliens did not appear. Nobody said a word.
Speaker 1: One of the more casual cult members, who had expressed
Speaker 1: skepticism before, picked up his coat and hat and walked out,
Speaker 1: no comment.
Speaker 7: We have nothing to tell you.
Speaker 1: People tried to make sense of what was happening, or
Speaker 1: rather not happening. The theories grew ever wilder. People were confused, exhausted.
Speaker 1: Leon Festinger's observers tried to ask why the saucer hadn't come.
Speaker 1: The group didn't want to talk about it, and then
Speaker 1: at four o'clock in the morning, Dorothy Martin put her
Speaker 1: face in her hands and began to weep. One of
Speaker 1: Festinger's researchers stepped outside for some air and discussed the
Speaker 1: situation with a leading cult member.
Speaker 3: I've had a long way to go. I've given up
Speaker 3: just about everything. I've cut every tie, I burned every bridge.
Speaker 3: I've turned my back on the world. I can't afford
Speaker 3: to doubt. I have to believe.
Speaker 1: They went back inside. But at four forty five am,
Speaker 1: Dorothy Martin, with hand shaking, picked up a pencil and
Speaker 1: began to write. It was, she said, a new message.
Speaker 1: Because of the faith shown by that small group of people,
Speaker 1: the earth had been spared destruction. A higher power would
Speaker 1: save not only the small cult but the entire human race.
Speaker 1: At this the cultists acquired new fervor, going out to
Speaker 1: greet the dawn and tell people the good news. They
Speaker 1: suddenly became evangelists, issuing stufatements to the press rather than
Speaker 1: batting them away.
Speaker 5: Dorothy, is this the first time you've called the newspaper yourself?
Speaker 6: Oh? Yes, this is the first time I've ever called them.
Speaker 6: I've never had anything to tell them before, but now
Speaker 6: I feel it's urgent.
Speaker 3: We should call the Associated Press and the Oneida Press.
Speaker 3: This thing is pretty important. It's a very big thing,
Speaker 3: bigger than just one newspaper.
Speaker 2: I don't think the creator would want this to be
Speaker 2: an exclusive story, you know, definitely not.
Speaker 6: Oh no, right, correct, It's got to be for everybody.
Speaker 7: It's for everybody who wret.
Speaker 1: Yes, Festinger had been right. His view that the cultists
Speaker 1: would redouble their efforts to believe in the face of
Speaker 1: failure was based on a theory he called cognitive dissonance.
Speaker 1: Cognitive dissonance predicts that people will start to squirm when
Speaker 1: they hold contradictory thoughts, such as it's worth quitting my
Speaker 1: job in order to be collected by aliens, and the
Speaker 1: aliens did not show up. People often deny the obvious
Speaker 1: in order to reduce the discomfort, and the more suffering
Speaker 1: people have put themselves through on behalf of a belief,
Speaker 1: the more likely they are to cling onto it. Otherwise,
Speaker 1: all that suffering would seem ridiculous, would it not. Festinger's
Speaker 1: theory applies perfectly to poor Irving Fisher in the nineteen thirties.
Speaker 1: He believed himself to be a man of logic and reason,
Speaker 1: and yet he was deeply in debt, the most famous
Speaker 1: financial basket case in the country. In fact, if people
Speaker 1: today know just one thing about Irving Fisher, it's this.
Speaker 1: Two weeks before the Wall Street crash began, he was
Speaker 1: quoted by The New York Times.
Speaker 5: Starks have reached what looks like a permanently high plateau.
Speaker 1: How do you away from that? Fisher went deeper and
Speaker 1: deeper in debt to the taxman and to his brokers
Speaker 1: towards the end of his life. He was a marginalized figure,
Speaker 1: a widower, an easy target for scam artists and their
Speaker 1: get rich quick schemes because he was always on the
Speaker 1: lookout for a way to revive his fortune. He never did.
Speaker 1: Although Caines had much in common with Fisher, he was
Speaker 1: a different kind of character. Recall Kine's comment to his father, this.
Speaker 7: High stakes gambling amuses me.
Speaker 1: The Monte Carlo gambler knew all along that while investing
Speaker 1: was a fascinating game, it was a game, nonetheless, and
Speaker 1: one shouldn't take an unlucky throw of the dice too
Speaker 1: much to heart. When his investments flopped, he tried something else.
Speaker 1: Fisher and Canes died within a few months of each other,
Speaker 1: not long after the end of the Second World War.
Speaker 1: Fisher had become irrelevant. Caines was the most influential economist
Speaker 1: on the planet, fresh from shaping the World Bank, the IMF,
Speaker 1: and the entire global financial system. Looking back, Cain's reflected.
Speaker 7: My only regret is that I have not drunk more
Speaker 7: champagne in my life.
Speaker 1: But he's remembered far more for words that he probably
Speaker 1: never said. Nevertheless, he lived by them. When my information
Speaker 1: changes I alter my conclusions. What do you do, sir?
Speaker 1: If only he'd taught that lesson to Irving Fisher. You've
Speaker 1: been listening to Cautionary Tales If you'd like to find
Speaker 1: out more about the ideas in this episode, including links
Speaker 1: to our sources, The show notes are on my website,
Speaker 1: Tim Harford dot com. Cautionary Tales is written and presented
Speaker 1: by me Tim Harford. Our producers are Ryan Dilly and
Speaker 1: Marilyn Rust. The sound designer and mixer was Pascal Wise,
Speaker 1: who also composed the amazing music. Starring in this season
Speaker 1: are Alan Cumming, Archie Panjabi, Toby Stephens and Russell Tovey,
Speaker 1: alongside Enzochilente, Ed Gochen, Melody Gutteridge, Massaamnroe and rufus Wright.
Speaker 1: And introducing Malcolm Gladwell. Thanks to the team at Pushkin Industries,
Speaker 1: Julia Barton, Heather Faine, Mea LaBelle, Carl Migliori, Jacob Weisberg
Speaker 1: and of course the mighty Malcolm Gladwell. And thanks to
Speaker 1: my colleagues at the Financial Times