Saturday, July 23, 2016

A Collision-Course With Crisis: Making The Wrong Choices For The Wrong Reasons


Submitted by Adam Taggart via,

Life is full of examples where folks make bad choices for noble reasons. Not every decision is a winner: sometimes you make the right call, sometimes you don't.

  • In 1962, Decca Records passed on signing a young new band because it thought that guitar-based groups were falling out of favor. That band was The Beatles.
  • Napolean Bonaparte calculated he could conquer Russia by assembling one of the largest invading forces the world has ever seen. He marched towards Moscow in the summer of 1812 with over 650,000 troops. Less than six months later, he retreated in failure, his forces decimated down to a mere 27,000 effective soldiers.
  • 1985 217 separate investors turned down an entrepreneur trying to raise the relatively modest sum of $1.6 million to fund his vision of transforming a daily routine shared by millions around the world. That company? Starbucks.  

In these cases, those making the decision made what they felt was the best choice given the information available to them at the time. That's completely understandable and defensible. Fate is fickle, and no one is 100% right 100% of the time.

But what's much harder to condone -- and this is the focus of this article -- is when people embrace the wrong decision even when they have ample evidence and comprehension that doing so runs counter to their welfare.

Really? you might be skeptically thinking. Do people really ever do this?

Yes, sadly. Absolutely they do.

Because decision-making isn't just based on data. It's also influenced by beliefs. And when our beliefs don't align with the data, we humans can be woefully stubborn against changing our behavior, even in spite of mounting evidence that our beliefs are incorrect and possibly even detrimental to us.

The fascinating field of behavioral economics is dedicated to studying why people are capable of making bad decisions despite have access to good data (if you've got the time, listen to our past interviews with behavioral economist Dan Ariely here. They're riveting.)

So, yes, we humans are easily capable of being our own worst enemies.

For a prime example, let's turn to one of the greatest basketball players of all time.

The Curious Case Of Wilt Chamberlain's Free Throws

On a long drive I took recently, I listened to a podcast produced by Malcolm Gladwell, author of The Tipping Point as well as a number of other intellectually enjoyable human interest books.

Gladwell's podcast tackled this same topic of Why do smart people make dumb decisions?, and it featured Wilt Chamberlain's free throw career to make its point.

Wilt Chamberlain is widely cited as the best forward to ever play the game of basketball. At 7' 1" and 275 pounds, with a ferocious attitude and athletic grace, he was a dominating force on the court during the 1960-70s. He won seven scoring titles, including the game he is best known for in which he single-handedly scored 100 points -- a record that still stands today.

That record 100-point game is even more interesting than most people realize, Gladwell points out. It's significant not just for the total number of points that Chamberlain scored, but also for the number of free throws that he made during the game: 28. 

Chamberlain was on fire with his free throws that night. He made 88% of them (28 of 32). That's a very high percentage versus the league average, and amazingly high given Chamberlain's career average of roughly 50%.

In fact, Chamberlain was widely regarded as a horrible free throw shooter. His overall stats certainly say he was, but this short video clip below does an even better job of hitting home how poorly he typically shot from the line:

So how did Chamberlain's free throw conversion get so much better?

To answer that, we need to look at another basketball great...

Rick Barry & The 'Granny Shot'

A contemporary of Wilt Chamberlain was Rick Barry, who played much of his career for the Golden State Warriors. Barry was a phenomenal free-throw shooter -- at the time he played he was the best in history.

His career percentage? 90%

That's over a 15-year pro career. Amazing. (His best year was in 1979 when he completed a freakishly high 94.7% of his shots from the line).

Why was Barry so successful at free throws? Why was he so much better than Wilt?

He shot his free throws underhanded.

Yep, that's right. This 12-time NBA all-star made 'granny shots'.

Barry approached the free throw as a physics problem, and had a willingness to "do whatever it takes" to improve his accuracy and precision:

"Physicists have done all kinds of testing and said it's the most efficient way to shoot because there are fewer moving parts. It's so much more natural to shoot this way," he says. "Who walks around with their hands over their head?"


As Barry has often explained, the primary benefits of Granny style are that it increases the likelihood of a straight toss, and it produces a much softer landing on the rim. [Shooting underhand] is also able to generate more backspin, which gives him more breaks on errant throws. 

Here's a clip of Barry in action:

He didn't always shoot this way. Barry started as an overhand shooter like everybody else. But when he realized that his completion percentage improved by adopting the underhand toss, he switched over and the rest is NBA history.

Which brings us back to Chamberlain.

As a notoriously bad foul-line shooter, Chamberlain was advised to adopt the granny shot. He did, and his free throw percentage soon rose to a career high 61% in 1961-62, the same season as his famous 100-point game. So, the change worked. His stats improved, his team won more games, and his amazing consistency helped him set a single-game scoring record that remains untouchable to this day.

But then something unexpected happened: Chamberlain stopped shooting underhanded.

Making The Wrong Choices For The Wrong Reasons

When Wilt gave up the granny shot, his free throw percentage proceeded to decline, plummeting to a career low of just 38% by the 1967-68 season.

So, the big question here is: Why? Why would Chamberlain willingly abandon a superior form of shooting, especially when he had already experienced direct personal gain from its benefits?

The answer goes back to beliefs: he felt "like a sissy" shooting that way.

Sure, in the early days of the NBA, underhanded foul shots were common. But by the time of Chamberlain's career, pretty much only female basketball players shot that way anymore.

Given the machismo of professional sports, it's understandable that a star like Wilt cared what the other guys thought of him. But was it important enough to abandon a solution that improved his quality of play so much? After all, isn't the most respected teammate the one who can be counted on to put the most points on the board?

Gladwell notes that it has been estimated that Chamberlain could have scored over 1,000 additional points in his career had he shot underhand from the foul line throughout.

In addition to that, he likely would have scored even more points by playing more minutes. Because he was such a poor free thrower, Wilt was often benched in the final minutes of play during close games -- as a poor foul shooter is a big liability under those conditions. The opposing team can foul him with confidence that he'll miss his shots and they'll then get possession of the ball.

Gladwell marvels that somebody so driven to win would deliberately abandon such an easy and advantageous solution as Chamberlain did the granny shot. Even after he had personally experienced its superiority. But he did, thus proving how belief can trump reason.

Later, in his autobiography Wilt: Larger Than Life, Chamberlain admits that switching back to an overhanded free throw was a clear mistake:

"I felt silly, like a sissy, shooting underhanded. I know I was wrong. I know some of the best foul shooters in history shot that way. Even now, the best one in the NBA, Rick Barry, shoots underhanded. I just couldn't do it."

What's amazing is that even though both Rick Barry and Wilt Chamberlain very visibly demonstrated the advantages of the underhanded free throw, half a century later almost nobody -- not in the NBA and not in college ball -- has adopted it. Think of all the additional points that could have been scored over that time, all the additional minutes played, all the additional team wins. It's not like players haven't had a powerful incentive to consider changing their behavior -- these are the very stats their contracts are based on. In great likelihood, many $millions ($billions?) of additional player compensation have been forfeited over the past 50 years simply because the athletes didn't want to look a tiny bit 'girly' at the line.

Later on in his podcast, Gladwell concludes that Chamberlain -- like virtually everbody else in professional basketball -- had a high threshold for overcoming conventional opinion. He wasn't comfortable being a maverick when it came to bucking social mores. Rick Barry, on the other hand, clearly had a lower threshold -- famously not caring what others thought of him (Barry was widely disliked across the league for his disregard of other's feelings).

He ends the podcast with this observation:

I know we've really only been talking about basketball, which is just a game in the end. But the lesson here is much bigger than that. It takes courage to be good, social courage, to be honest with yourself, to do things the right way.

A Lack Of Courage To Be Good & Honest

Which brings us back to the point of this article. Chamberlain's willful blindness to the ramifications of his clearly inferior choice is not unique. In fact, when we look at many of the decisions being made by world leaders in recent years, we see a depressing abundance of intentional bad choices.

Most emblematic of this, in my opinion, are the ZIRP/NIRP interest rate policies the world's central banks are implementing. As discussed many times here at, the endgame of these policies is easy to predict. History is replete with examples of similar attempts of governments attempting to print their way to prosperity. It's simply not possible. As Chris says, if it were, the Romans would have figured it out and today we'd all be speaking Latin.

The head central bankers are not morons (although a number of them may indeed be ivory tower academics too out-of-touch with the real world). Many of them realize that they have painted themselves into a corner by easing too much for too long, by flooding the world with too much cheap debt-based money. Many understand, perhaps today more than ever, Ludwig von Mises' rule that: 

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."

But, like Chamberlain, they do not have the courage to re-evaluate their beliefs and chart an alternative course.

To 'voluntarily abandon further credit expansion' means letting natural market forces bring down stock, bond and real estate prices from their current bubble highs -- thereby vaporizing a lot of paper wealth. It means widespread layoffs as inefficient companies that have been kept alive by nearly free access to nearly unlimited credit have to start actually generating profits if they can. It means living below our means today, so that we can sustainably live within them tomorrow.

Instead, they simply double down on the policies that got us into this mess in the first place, claiming that their efforts to date just haven't been big enough yet to succeed. And they do this with the full support of our politicians, who want to avoid any unpopular austerity measures because they care much more about getting re-elected than the hard work of actually addressing our nation's structural problems. So interest rates go even lower, asset bubbles grow even higher, the wealth gap extends even wider, and the risks of a "total catastrophe of the currency system" become even more extreme.

The coming economic/financial/monetary reckoning can't be avoided at this point; only managed. But we can't position ourselves to manage it gracefully if we don't have to courage to even recognize its existence. And our current leaders do not have that courage.

Which is why we need to ready ourselves, as individuals. Charles Hugh Smith recently penned an excellent report Investing For Crisis which is an essential read for any investor who shares the concern that we will continue to see more wrong choices being made for the wrong reasons -- until the entire systems fails. If you haven't read it yet, you really should.

Click here to read Charles' Investing For Crisis report (free executive summary, enrollment required for full access)


"Policymakers Have Been Calling A 'Depression' A 'Recovery' For Nearly A Decade"


Submitted by Jeffrey Snider via Alhambra Investment Partners,

Some people have impeccable timing. Even if by accident, there are occasions when what they say or write comes out in almost perfect sequence. At the end of August 2014, UC Berkeley economist J. Bradford DeLong wrote an article for Project Syndicate that argued in favor of proper categorization. The lack of recovery was so drastic that the economist community and indeed the world at large needed to come to terms with what was actually taking place; and that was not anything like what was being described especially at that time.

To have such a Keynesian of prominence make such an indictment like that may seem somewhat surprising, as it has been they who have most objected to classifying this economy as anything but robust. Some of it is surely political, or at least loyalty to the good standing monetarist/Keynesians (neo-Keynesian, saltwater-ists, or whatever they call themselves these days) at the Federal Reserve, where no economist shall direct any disparaging comments toward the palace. But to DeLong, the issue had never been about recession at all:

Cumulative output losses relative to the 1995-2007 trends now stand at 78% of annual GDP for the US, and at 60% for the eurozone. That is an extraordinarily large amount of foregone prosperity – and a far worse outcome than was expected. In 2007, nobody foresaw the decline in growth rates and potential output that statistical and policymaking agencies are now baking into their estimates.


By 2011, it was clear – at least to me – that the Great Recession was no longer an accurate moniker. It was time to begin calling this episode “the Lesser Depression.”

As I wrote above, the timing was perfect at the front edge of the “rising dollar.” The economy of greater eurodollar shortage and inflexibility has served, in this context, to demonstrate the claim. Rather than sail off into the Hollywood sunset as Bernanke and then Yellen assured us, the economy instead went the other way, and not just here. Further, subsequent data revisions have shown that it was folly all along to believe that 2014 was anything other than the anomaly; and a fictional one beside.

The idea of calling it the “Lesser Depression” makes good sense because the similarities with the Great Recession are in some ways unbelievably close. What made the Great Depression was not just its collapse but how it lingered interminably for more than a decade. What makes this the Lesser Depression is that same time problem, only following a much smaller contraction at its start. When comparing them, the real difference is the scale of collapse at the front, leaving what followed each as remarkably, undeniably similar.

This is where Ben Bernanke’s forced reputation intrudes; he will claim, has claimed, that it was his efforts that made all the difference. Indeed, that is one reason, as DeLong wrote in August 2014,

it was dubbed the “Great Recession.” And, with the business cycle’s shift onto an upward trajectory in late 2009, the world breathed a collective a sigh of relief. We would not, it was believed, have to move on to the next label, which would inevitably contain the dreaded D-word.

All the world’s central banks did exactly that. Congratulating themselves on a job well-done, they moved on to the cyclical recovery and the universal accolades that would surely follow. By 2011, however, as DeLong also notes, it had become clear something was very wrong. Policymakers have spent the last five years trying to deny to themselves as much as anyone in the public that wasn’t true. Deep down, however, they must have known or at least allowed themselves in their whatever brief moments of clarity outside their dense bubble to worry that they really could have it all wrong.

That was the whole point of QE3, Draghi’s promise, QQE, etc. They would go so far, so big, and so long that they would leave nothing to chance, all doubts erased by sheer size and determination. If the economy didn’t want to follow the script then they would call down the monetary thunder and make it. That was the narrative setting for 2014, and the small improvement from 2013 was their mountain of a molehill “proving” it.

While I personally believe the actions of central bankers from 2011 to 2014 was unforgivable (there really is no excuse, they should have known better; it was their job and self-appointed sacred duty to know better) you can make a case that it was all understandable and perhaps legitimate. After 2014, however, that ship sailed. What has happened in 2015 and 2016 has been to wholly repudiate cyclicality down to the simplest terms. Janet Yellen really cannot claim to be expecting recovery when it was on such shaky ground to begin with and then that ground falling out from underneath her in the trembling earthquake of the “rising dollar” she tries to pretend the FOMC can’t see or hear (“global turmoil”).

As noted yesterday, the bond market is making this act of willful blindness that much more impossible especially in light of the comparison to the 1930s; yet central bankers carry on because they can. They can play themselves into fools in public and in private, but it doesn’t matter because they are still politically insulated. They have called a depression a recovery for years on end, but there are no repercussions for having done so; indeed, their dutiful media still reports everything they say as fact and everything they do as “stimulus.”

At her regular press conferences nobody in the press bothers to ask Chairman Yellen the simplest yet most poignant question of all; why is she still looking for a recovery through constant “accommodation” seven years after the recession officially ended? The answer is equally simple and straight forward – Brad DeLong was right; it was never a recession.

The monetary tools of QE and ZIRP are meant as temporary measures. The turn to QE2, as then the third and the fourth, was supposedly a reflection of the severity of the recession, but that also was a false assumption. Monetary policy is meant to cushion the blow as the economy is pushed to heal, in what none other than Brad DeLong (with Larry Summers) wrote in 1988 was an intentional, determined attempt to, “fill in troughs without shaving off the peaks.” The idea is to use monetary (and fiscal) policy to buy time so that no matter how bad it never gets too bad – like 1929.

Rather than buy time, however, monetary policy has instead squandered it by thinking that “shaving off the peaks” was something that had been avoided not just as a circumstance but even as a possibility. If this all is a “Lesser Depression”, mimicking the lack of recovery in the 1930’s so well, then that, too, must be made accountable. How could the global economy fall into depression when such an outcome was held out for decades as totally impossible? For that to have happened could have only meant the rules of the game changed on them without their notice. That is an entirely new class of negligence, gross misconduct that is costing the world lost economy beyond all comprehension.

Never QE Fed BS CP plus FF repo plus Fed BS Baseline

ABOOK June 2016 OECD Trillions

A comprehensive survey of our predicament isn’t universally bad, however. There are small fissures of hope taking the form of political revolt and populism, as I wrote earlier today. There was Brexit and now:

The light at the end of this tunnel is in the growing body of evidence that we are not yet Japan. The lost decades of the Japanese economy are both parts monetary criminality (“stimulus” after “stimulus” after “stimulus” with nothing ever being stimulated) but also political status quo to further entrench bad economics. Just this week, the Republican National Committee unveiled its commitment to restoring some type of Glass-Steagall. I have no idea how committed they really are, or exactly through what mechanism it might work, and I don’t really care. More important to me is the symbolism of even saying that they will do it and that banking (really money) is no longer a sacred political cow; recognizing just how far that is from TBTF.

In some ways it astounding it has taken this long; in other ways, in terms of glacial political shifts, it is amazing in only two presidential cycles just how far it has come. The last Republican President was committed to Too Big To Fail. That idea was birthed under cyclicality, where the Great Recession would be kept to a recession if Ben Bernanke and Hank Paulson got what they wanted and the awful ramifications of depression avoided by bailouts, monetarism, and the status quo. But we got the ramifications of depression anyway, showing yet again it was all a lie.

As much progress as this dramatic change may be, we aren’t nearly there yet. Central bankers are not anywhere close to having been brought to heel, and they have proved time and again they will not themselves stop. That actually creates something of a vacuum, a window actually for the most unpleasant opportunity:

The real danger of 2016 and immediately beyond, then, is this race; those that are catching up to the real problem and trying to find a real solution not of inflation or deflation but of stable money will need time to find and then implement it (this is where the lost opportunity of 2008 is so tragic). Against them are those who would impede intellectual growth (as what did happen in 2008). But as confidence in the old order falls and the strong populist desire to look elsewhere begins to take its place, into that messy void is still the potentially disruptive force of bad economics. Where do all these curves meet? In other words, what is the point at which shrinking faith, desperate central banks, and growing economic despair all conspire to push us into the darker reaches?

That is the real difference in 2016 – desperate central banks. They were (mostly) content to sit back in 2015 under expectations they formed from 2014. It was a big mistake in so many ways, not the least of which was growing suspicion from markets, even the stock markets (bank stocks as prime examples). They have rallied somewhat this year, with the ECB and now Bank of Japan leading – but all still in hope, not actual results. If this is a depression, and that is where all the evidence points, from GDP to labor to consumers, then this burst of desperation will have the same effect; nothing. Then what?

The narrative basis of my column was the German hyperinflationary episode of 1922 and 1923. I am not claiming that is the next step awaiting central bank bungling inside of the current depression, merely pointing out the commonalities of the situations that can lead to bigger, more intense problems of all kinds of bad possibilities.

In other words, German monetary officials, particularly Reichsbank head Rudolf von Havenstein and Minister of Finance Karl Helfferich, denied that Germany had an inflation problem at all – right up until the end. Minister Helfferich declared that Germany had better gold coverage after the war than before it, despite that more than quadrupling of currency volume. One economics professor, Julius Wolf, wrote in 1922 that, “in proportion to the need, less money circulates in Germany now than before the war.” As much as the easy-to-see Versailles excuse played a part, there can be no doubt that beyond 1921 the German people themselves began to recognize that authorities had no idea what they were doing; worse, they came to see that even though policymakers were inept and incompetent, officials themselves would never admit as much and thus nothing would prevent Germany from its fate. That awakening meant an increase in danger that French occupation could never have unleashed on its own. [emphasis added]

Confidence is truly a big part of economics (small “e”); that is why orthodox Economists (capital “E”) spend so much time with asset prices, infatuating themselves with bubbles while also convincing themselves they aren’t that. It isn’t something that can be conjured out of nothing, manipulated like a regression variable (raise stocks X, confidence increases Y, economy grows Z). But it can work in the other direction, such as when policymakers claim the “wealth effect” and then watch the economy instead sink. The real danger in terms of money and economy might be when the world wakes up to what I wrote above; policymakers have been calling a depression a recovery for nearly a decade. The implications of that might be where this possible event horizon sits; that central banks have exhausted themselves and we still got depression anyway.

I’d like to think that logic and reality will prevail; that distaste for being told how great the world is has become sufficiently revolting and obviously false to stir the world’s populace to end the imbalances. But that, again, will take time, perhaps a good deal of time; until then, whenever it hopefully is, central banks continue to operate with impunity even though the risks of their intemperance rise exponentially as time further accumulates and their claims fall further from reality. It’s not a good set of circumstances, especially since all QE did everywhere it was tried was show that confidence in it was sorely, disastrously misplaced.


In First "Emergency" Decree, Erdogan Seizes Thousands Of Hospitals, Schools, Charities


With the failed/staged Turkish coup quickly fading from memory and media attention, just as Erdogan likes it, and opposition from "western democracies" to a historic purge virtually non-existant aside from the occasional media soundbite, overnight Erdgoan implemented his first decree since imposing a state of emergency in the country last week, and tightened his grip on Turkey by ordering the closure of thousands of private schools, charities and other institutions in his first decree since imposing a state of emergency after the failed military coup.

In his first "emergency powers" decree, published by the Anadolu state news agency, Erdogan authorised the closure of 1,043 private schools, 1,229 charities and foundations, 19 trade unions, 15 universities and 35 hospitals over suspected links to the Gulen movement. The government also announced it would seize the properties of all these schools, universities and private institutions.

As documented, Erdogan has accused U.S.-based Muslim preacher Fethullah Gulen, who has many followers in Turkey and abroad, of masterminding the failed coup, in which at least 246 people were killed. Gulen denies the charge and has condemned the coup.

In the decree Erdogan also extended to a maximum of 30 days from four days the period in which some suspects can be detained. It said this was "to facilitate a full investigation into the coup attempt."

State broadcaster NTV reported that Turkey's Supreme Military Council (YAS) will meet under Erdogan's supervision on July 28, a few days earlier than originally planned, a sign that the president wants to act fast to ensure the armed forces are fully under the government's control. Reinforcing that message, the YAS meeting - which usually takes place every August - will be held this time in the presidential palace, not as is customary at the headquarters of the military General Staff.

Further pointing that the coup had been staged, on Friday evening Erdogan held his first meeting since the coup with the head of the national intelligence agency, Hakan Fidan, after complaining of significant intelligence shortcomings ahead of the coup attempt. Despite media speculation, however, he did not sack Fidan. Naturally, this would be the first person that should be fired. Alternatively, in case Hakan was the person orchestrating a staged coup attempt, he should be promoted and decorated as the final outcome could not have been better for Erdogan.

On Friday, Turkey's ambassador to the US announced that Turkey had formally requested the extradition of Gullen, although there are conflicting reports over exactly what happened. Turkey expects to complete within a week to 10 days a dossier requesting Gulen's extradition from the United States, Foreign Minister Mevlut Cavusoglu told private broadcaster NTV in an interview.  Confirming that the entire process will be at best farcical, Washington has said Ankara needs to provide clear evidence of Gulen's involvement before it can agree to extradite him. Lawyers say the process could take many years.

The farce wouldn't be complete without continued Turkish support to "democracy" - speaking at a meeting of G20 finance ministers and central bankers in China on Saturday, Reuters reported that Turkish Deputy Prime Minister Mehmet Simsek said Turkey would strongly adhere to democratic principles and the rule of law.

Meanwhile, the comedy for public consumption hit new highs yesterday, when the European Union urged Turkey "to respect under any circumstances the rule of law, human rights and fundamental freedoms", foreign affairs chief Federica Mogherini and enlargement commissioner Johannes Hahn said in a joint statement. They slammed as "unacceptable" the sacking or suspension of tens of thousands of people in the education system, judiciary and the media and said they were monitoring the state of emergency "with concern".

So as Europe complains about "unacceptable" practices, here is a summary of what is taking place at this moment in Turkey:

  • The massive crackdown continues: the number of sacked/suspended rises to 76,644 and counting. More than 11,000 detained.
  • Turkey shuts down 15 universities, 934 schools, 104 foundations, 109 dormitories, 35 hospitals, 1,125 associations, 19 unions today.
  • The properties of all these schools, universities and private institutions has been seized.
  • Erdogan's decree has imposed such draconian measures for fired public employees that sacked police can't even get a job as a private guard.

We can only imagine what the independent media's reaction would be if the same putsch had taken place elsewhere, like for example in Russia.


Confront NBC: Social Media & Government Information Operations- The Modern Day Psy-Op

Newsbud Gives NBC a Deadline of Monday, July 25, 2016, to issue a public explanation & retraction

On July 15, 2016, as an attempted coup was unfolding in Turkey, a rumor began circulating that Turkey’s President Recep Tayyip Erdogan had fled the country and was seeking asylum in Germany.  According to various articles and news sites, the report originated from NBC.  Frequently cited was a tweet by Kyle Griffin stating “Senior US military source tells NBC News that Erdogan, refused landing rights in Istanbul, is reported to be seeking asylum in Germany.”  This tweet appears to be the earliest mention on Twitter that this asylum claim came from NBC.

According to his LinkedIn profile, Kyle Griffin is a Segment Producer for The Last Word at MSNBC.  Griffin’s tweet was retweeted nearly 3,000 times, and was used as a source in many reports put out on July 15, 2016 as the attempted coup was taking place.

On July 19, 2016, Newsbud released a video and call to action to confront NBC and MSNBC regarding this claim that President Erdogan was seeking asylum in Germany. Griffin was repeatedly asked on Twitter, in numerous tweets, about his source of information for his claim in his July 15, 2016 tweet.  He blocked those who asked rather than tweeting a response or explanation.  The original July 15, 2016 tweet appears to have now been removed.

It is certainly possible that this was a mistake, or even a careless joke. Mistakes happen and inaccurate reports are often made as major events unfold and reporters scramble to be the first to release new details.  However, as purported reporters of fact and truth, it is extremely important that the media corrects its mistakes with apologies and retractions.  If the source of this report was not NBC News, then NBC News should explain why it has been credited to them repeatedly, and they have not denounced the claims.

Ultimately, this report of President Erdogan fleeing Turkey and seeking asylum in Germany did not change the outcome as the attempted coup was defeated.  So why does this one rumor matter so much?  Why does it matter enough that Newsbud has now officially demanded that NBC explain and retract the story and has officially requested a comment on the story by the Turkish Consulate?  It goes beyond the possible effect such a report might have had on the outcome of the attempted coup. This is about accountability.

It seems that the large media corporations that control the flow of information in the US have become used to having no accountability for spreading rumors.  And in today’s digital world, where so many are getting their news from online sites, especially social media sites like Twitter, it has become even easier to spread disinformation without any accountability.

Combining the use of spreading reports on social media with the growing use of unnamed sources is potentially even more troubling as it creates a certain degree of plausible deniability if the trail doesn’t lead back to an actual report from a specific media outlet but rather to tweets and unsupported statements like “according to NBC.”  It becomes very easy to imagine a scenario where a particular piece of information, whether true or false, can be leaked to create an intended narrative in the media, swaying public opinion, and driving US policy.

The allowance for the use of unnamed sources is necessary as many who have important information take great risks to share it with journalists.  However, justification for the practice has become very loose.  In this August 14, 2014 article, Jack Shafer describes the over-use of such justifications:

“An Aug 13 Times piece noted that U.S. administration officials ‘spoke on condition of anonymity because they were not authorized to speak publicly.’  This justification has become so popular in modern journalism that when you drop it into Nexis, the database burps and informs you that the query will return more than 3,000 stories containing the passage or something very close to it.

If a lower anonymity bar than ‘was not authorized to speak publicly’ exists, I cannot imagine it. Very few people are authorized to speak publicly in government, corporations, and institutions. Does that mean that anybody who has accepted a muzzle can expect anonymity from the press?”

He goes on to write about sources who “spoke on the condition of anonymity because of the sensitivity of the topic,” and others who spoke “on the usual condition of anonymity.”  As if once granted, anonymity will always be automatically supplied.

Add to that the changes to the Smith-Mundt Act, with an amendment to the National Defense Authorization Act, that passed in 2013 which allows for the broadcasting of information and stories previously restricted to broadcasting outside the US.  According to this RT report from July 15, 2016, “until earlier this month, a longstanding federal law made it illegal for the US Department of State to share domestically the internally-authored news stories sent to American-operated outlets broadcasting around the globe. All of that changed effective July 2, when the Broadcasting Board of Governors (BBG) was given permission to let US households tune-in to hear the type of programming that has previously only been allowed in outside nations.”

Michael Hastings wrote in this May 18, 2012 Buzzfeed article, before the amendment was voted on, that “the new law would give sweeping powers to the government to push television, radio, newspaper, and social media onto the U.S. public. ‘It removes the protection for Americans,’ says a Pentagon official who is concerned about the law. ‘It removes oversight from the people who want to put out this information. There are no checks and balances. No one knows if the information is accurate, partially accurate, or entirely false.’”

In his article, Hastings links to this USA Today story from May 19, 2012 that describes how two reporters that were investigating “Pentagon propaganda contractors” were targeted themselves through the establishment of fake social media accounts.  The article states, “fake Twitter and Facebook accounts have been created in their names, along with a Wikipedia entry and dozens of message board postings and blog comments. Websites were registered in their names.”  These fake accounts were used to discredit the journalists.

That happened after the reporters published this report in USA Today in February of 2012 which begins with: “as the Pentagon has sought to sell wars in Iraq and Afghanistan to often-hostile populations there, it has spent hundreds of millions of dollars on poorly tracked marketing and propaganda campaigns that military leaders like to call ‘information operations,’ the modern equivalent of psychological warfare.”

Undoubtedly, these “information operations” are occurring more and more frequently in the US media today.  Spreading a rumor via social media that the president of another country has sought asylum outside his country during a coup attempt looks an awful lot like just such an operation.  It is becoming increasingly clear that if there is to be accountability for what is being reported in the mainstream media, it is going to require that the people demand it.

*Newsbud has given NBC a deadline of 3:00 p.m. Eastern, on Monday, July 25, 2016 to provide an explanation and issue an official retraction. If not fulfilled, on Thursday, July 28, 2016, at 9:00 a.m., a Newsbud team will gather with other concerned supporters in New York City, in front of NBC News HQ (NBC News, 30 Rockefeller Plaza, New York, N.Y. 10112) to confront and demand correction and retraction from NBC executives in person.  We hope to see many thousands of you there!

**Follow us here at Newsbud Twitter

***Subscribe here at BFP-Newsbud YouTube Channel

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Katie Aguilera, Newsbud-BFP Columnist, is an independent researcher, author, and activist who resides in Bend, Oregon. She studied Outdoor Recreation Leadership and spent many years working in the field of wilderness therapy and as a river guide. She writes at the blog Seeking Redress.


The Market For Lemons, The Market For Bullshit, And The Great Cascading Credence Crash Of 2016


Submitted by Daniel Cloud

The Market for Lemons, the Market for Bullshit, and the Great Cascading Credence Crash of 2016

“The cost of dishonesty, therefore, is not only the amount by which the purchaser is cheated; the cost must also include the loss incurred from driving legitimate business out of existence.”

       George Akerlof, The Market for Lemons


People have begun to worry that we’re experiencing a crisis of confidence in our traditionally most prestigious institutions - in our political parties, and central banks, and great newspapers, and universities, and even in accredited experts.

Views that would have been regarded as extreme in the past also seem much more common now. The entire political spectrum, all around the world, seems to be in the middle of collapsing into a collection of smaller, more radical groups. Some of them advocate violence.

The problem doesn’t seem to be unique to this particular historical moment. There are other times in recent history – the 1930’s, perhaps, or the 1960’s – when the public seemed equally unhappy with existing institutional points of view. Like the present, they were periods of relatively rapid change in organizational and communications technology.

The underlying problem is, I think, a very strange one. But it’s a risk faced by any society that both undergoes rapid technological change, and contains organized interest groups. (Formal or informal.) Something really bad is happening to all our bullshit. In fact, I’ve begun to worry that there’s actually a sort of crash or cascading failure going on in the bullshit market. If there is, I think it’s driven, as previous bullshit crashes were, by changing technology.

This may seem like an odd thing to worry about. But it’s actually a very natural worry, if you have any interest at all in recent American philosophy and/or the economics of informational externalities.

Bullshit Defined

Harry Frankfurt’s On Bullshit i has, for a long time, been the single best-selling title in Princeton University’s Press’s philosophy list. The book sells well partly because people think the title is somehow cute, or funny, but Frankfurt himself doesn’t really seem to think that bullshit is a laughing matter at all. (Take a look at his 2007 YouTube video2, if you want to see if he’s serious about the subject.)

He argues that lying and bullshit are distinct forms of dishonesty. The liar is trying to present something false as true. But the bullshitter doesn’t actually care whether what he’s saying is true or false, relevant or irrelevant. He represents himself as concerned with the truth, but in fact his only concern is presenting a certain appearance or creating some particular impression in his audience. Frankfurt thinks that this is a much more subtle and powerful strategy, and therefore a much more dangerous one.

The bullshitter is competing with those around him to seem a certain way, or he’s competing with them to avoid seeming a certain way. Or perhaps he wants to make someone else seem some way, or make some proposal seem some way, seem noble or contemptible, dangerous or safe. Or he wants to fit in, or stand out, or be admired, or pitied, or feared, or promoted. The truths he speaks in the course of his effort to achieve these things may be completely irrelevant to the point he’s supposedly trying to make. But unlike the liar, the bullshit artist doesn’t actually have to say anything false to mislead. He might, but he also might not, he might just talk about a lot of irrelevant true stuff. (Machiavelli tells us that a Prince should almost never lie…)

This is a way of deceiving that’s much safer for the deceiver than outright lying. A lie can be destroyed by a single incongruous truth. It’s much harder for a single fact to pierce the veil of bullshit, because it’s more difficult for a single fact to dispositively establish that some set of considerations is irrelevant, or that their importance is being exaggerated. Humans are instinctively angry at the liar, but the bullshit artist slides right past our evolved defenses. Frankfurt thinks this is a much more powerful and subtle strategy than lying, and therefore a more dangerous one.

In fact, it seems to me that one of the ways we can tell that someone is basically a bullshit artist is that it never really happens to the person that they argued for something, and then, to their surprise and dismay, found out that they were wrong about the facts and had to permanently change their views. That just isn’t a thing, in their world. The bullshitter’s very rare and grudging public mea culpa is always only tactical. When your argument isn’t actually based on the trueness of certain facts in the first place, no pattern of facts can possibly dislodge you from it in any lasting way. As Frankfurt says, the bullshit artist has a kind of freedom and a kind of safety that the liar can only dream of.

Is Bullshit Necessary, or Inevitable?

Presumably the idea of a crash in the bullshit market wouldn’t actually worry Frankfurt himself very much. In his most recent statements on the topic (in his recent Vimeo video iii) he seems convinced that bullshit is unnecessary, that a world without bullshit would be a better one. But he hasn’t always seemed so sure; in the earlier YouTube video, he was still wondering whether bullshit might perhaps be of some use to society.

(The contrast between the two videos I’ve mentioned is interesting, in itself, as a sign of where we’re all headed, of how things are developing at the moment. The 2007 YouTube video has clunky production values and a crystal-clear message. But the much more recent one on Vimeo… Well, let’s just say that the producers seem to have been worried that in 2016, a man sitting in a chair telling the truth simply isn’t enough.)

Is bullshit, defined as Frankfurt’s defined it, something that we can ever really expect to be completely free of? Personally I doubt it. For one thing, some of it strikes me as genuinely useful. The policeman directing traffic in his spiffy uniform is doing his very best to present a somewhat false appearance of gleaming perfection, because a ragged naked man presenting the same truths about where it would be convenient for cars to go would be ignored. He may even wear a hat designed to make him look taller and more imposing than he actually is. He isn’t trying to look tall because he’s vain. Yes, the whole thing is an act, but in this case it’s a necessary act. Because of the nature of the social role that’s been delegated to him, because we all want him to send a certain clear, authoritative and unambiguous signal iv, we excuse and approve of these conventional, socially necessary, legitimate forms of bullshit.

No doubt the line between these things and the more egregious or harmful forms of bullshit is a very complex and deceptive one, with one form often disguised as the other. (Perhaps this particular policeman actually is a little vain. Maybe his hat is custom-made, and is a little taller than a regular policeman’s hat. Or maybe he takes bribes to let some cars through the intersection more quickly.)

Anyway, empirically, there don’t seem to be any large complex human societies without any bullshit. To completely get rid of it, you’d have to read everyone’s mind at all times, which seems undesirable. So I can’t quite agree with Frankfurt’s more recent opinion that we’d all be better off without any bullshit at all. It seems to me that human society would collapse into a collection of small warring tribes. (Just as traffic at the intersection might grind to a halt without the spiffy policeman.) As far as I can tell, that’s how we lived before we invented bullshit. No chimpanzee is a bullshit artist – or any other kind of artist.

Like it or not, we have it now, and I find it impossible to imagine a practical plan for completely eliminating it. If we really can’t get rid of it, then I can’t agree that the relevant question is what life would be like without it. That seems utopian. Bullshit exists; it’s doing something in our society. It has effects on us. The real question, I think, is whether there can be better or worse effects. Is some bullshit more damaging than the rest? Are fairly standard forms of timeworn bullshit perhaps a bit like the suite of benign microbes that live in our guts? Is existing, harmless bullshit protecting us from novel, possibly dangerous bullshit? (As the analogies of the 1930’s and the Reformation might suggest…) Can anything really go wrong with the market for bullshit? Are there any public dangers associated with this large-scale, apparently rather consequential social phenomenon, do we need to manage it somehow?

Bullshit and Informational Externalities

As for the economics of informational externalities… Frankfurt’s philosophical clarification of the meaning of the ordinary English word “bullshit” strikes me as capable of driving an economic model because he suggests that we’re most likely to come up with bullshit when it’s difficult for us to speak the truth. For example, when we’re expected to have a strong opinion about a matter on which we have no expertise. From an economic point of view, this is a theory about how people cope with the potential costs of information gathering.

We all constantly encounter subjects we know very little about. Most conversations about politics are like this. Discussions between people who know rather little about the particular problems they’re discussing, problems they personally won’t be expected to directly do anything about. It could hardly be otherwise in a democracy, since everyone’s asked to vote on whole political programs containing prescriptions for dealing with various different societal problems.

The reward for carefully ascertaining and then impartially telling the unadorned and directly relevant truth in many of these ordinary, inconsequential conversations is small. There might be public benefits. But public knowledge of the truth is a public good. We, personally, will only receive one seven billionth of those benefits, while the entire cost of carefully gathering the information and presenting to people who may not be all that interested in it will fall on us. The temptations to slack off and pursue other social goals which these situations present may be resisted by a few, but those are rare and sometimes unpopular individuals.

Perhaps we all have a threshold. When we know less than x about some subject, we all struggle against a temptation to employ bullshit in discussing it, to just agree with the people around us to be agreeable, or use the incident as an excuse to point out how stupid the hated out-group is, or try to come up with a funny or enraging fairy-tale about what the truth must be, or to complain plaintively about how nobody really cares, or something like that. Making up bullshit is easier than finding the truth about every abstruse subject, so wherever ease or mere courtesy are the most practically relevant considerations, we can expect almost everyone to face a temptation to repeat or invent bullshit. In a sort of conversational version of Gresham’s law, bullshit should drive out honesty wherever there are no consequences for the individual.

But the true bullshit artist produces bullshit egregiously, even in contexts where it’s not conventional or acceptable. He represents himself as sincerely concerned with the truth in situations where he really should be, but he’s not. He isn’t just occasionally tempted to make careless and insincere pronouncements on unimportant-seeming subjects he knows nothing about. He’s turned doing that into his thing, into a complex art form. He persistently insists that his bullshit is reality, and that the actual truth is just a bunch of bullshit.

He may even get angry when this assertion is questioned. Often the anger is sincere; he thinks it’s unfair for you to question his facts, because his argument was never based on facts, the facts were just added to support an existing point of view. They’re basically decorations, so by attacking them you’re not really invalidating his conversation goal, as far as he’s concerned. You’re just getting in the way. Like an idiot, like some fool who thinks the conversational contest is about what the facts are. Not, as he believes it to be, about whose bullshit will prevail in the eyes of the audience. Presumably he has no idea that the questioner is doing anything that’s different from what he himself is doing…

It seems to me that in some sense this person is a polar opposite or mirror image of Hayek’s “man on the spot” v or Kenneth Arrow’s benevolent specialist vi, In both these cases, the expert creates positive informational externalities for society by knowing all about some obscure thing, and sharing the information in various ways. Either through the price system, for Hayek, or by broadcasting the information, by publishing it in a journal, for Arrow. I also like to tell a story vii  that involves a kind of person, the entrepreneur, who generates positive informational externalities for society by personally taking the risk of performing an experiment that may fail, of starting a firm and possibly going bankrupt.

But the bullshit artist doesn’t perform any experiments, and he doesn’t know all about some obscure thing. Or if he does, he doesn’t actually just stick to telling the plain unadorned truth about that thing, or about how those experiments came out.  He’s surrendered completely to the natural human urge to have a strong opinion on every subject, even ones he’s not in a very good position to discover the truth about. He hasn’t bothered to take the risks he’d need to take, or go to the trouble he’d need to go to, do the hard work he’d need to do, to engage in the self-criticism and he’d have to engage in, to find out the truth about them. Because he doesn’t really care that much about what’s true.

Since bullshit is free from the constraints of honesty, it can be perfectly designed to attract attention and elicit belief. (Whereas the actual full truth is usually abstruse and implausible.) From the point of view of cultural evolution, it’s a parasitic mimic, like a cuckoo. Like a cuckoo chick, it has to be more dazzling than the real thing in order to displace it.

Nevertheless, the bullshit artist may generate either positive or negative informational externalities, because even he will speak the truth if it suits his ulterior purpose.

The Market for Lemons

But before I say anything more about all that, I need to quickly describe George Akerlof’s model of the used car market viii That will put me in a much better position to explain why I’m now starting to worry about cascading failure in the “bullshit market”.

Akerlof was interested in the potential of informational asymmetries, in general, to produce market failure. (So it’s easy to see why his model might be relevant to the market for bullshit, which by its very nature exists entirely within the precarious and shifting world of asymmetries in information.) The basic idea behind his model is quite simple. Suppose that, when buying a new car, people have an imperfect ability to determine whether the car is a lemon. (For the sake of the example, either quality control is very bad, or else little information on safety, reliability, etc. is available in advance of purchases, or the people simply have imperfect judgment. The model is from a time when it was more plausible that not much information about car quality might be available.) But once they’ve owned a car for a little while, they begin to have a pretty clear idea of its quality.

People who have a car that they now know is worth more than the prevailing market price for a used car will keep their car off the market. But people who have a car that they now know is worth less than the prevailing market price for a used car would be happy to sell theirs for the prevailing market price. So the used car buyer will have to choose his car from a pool of used cars the very best of which are worth a shade less than the prevailing market price, and the worst of which are worth much less than the prevailing market price.

In the case of completely asymmetric information – if the seller always knows just exactly how bad the lemon is, but the buyer can’t ever tell the difference between it and any other car – the average buyer will end up with a car drawn from the middle of this distribution. But that means the average person will get a car that’s worth a lot less than he paid for it. Once this becomes generally known, it’s hard to see why the buyers wouldn’t refuse to buy used cars for any price higher than this average value.

If the price is adjusted down to this new level, however, everyone with a car that’s worth more than the new price will withdraw their car from the market. So the average quality of the cars available at that price will be even lower. Once this becomes generally known, it’s hard to see why the buyers wouldn’t refuse to buy cars for any price higher than the new, lower, average value.

Once the price has been adjusted down to the new new level, however, everyone with a car that’s worth more than the new new price will withdraw their car from the market…

By a cascading series of steps like that, the used car market can fail, as a result of the informational asymmetry between buyer and seller. Although at each step there were some sellers willing to sell cars for only a little more than they were worth, and some buyers genuinely willing to pay slightly over fair value to avoid the expense of buying a new car, in the end the equilibrium is zero transactions. 

If some institution or institutions existed to help the buyer determine the actual value of the used car more precisely, or if the people themselves developed a method of detecting lemons, they could meet and transact. So getting rid of the informational asymmetry would remove the market failure. But Akerlof worried that the rating agency would be unreliable, that whoever provided the public information about car quality would be tempted to issue bullshit instead, to use the resulting power to muddy the water in some self-serving way…

The Market For Bullshit

Okay, so now we’re back to bullshit, though now we’re coming at it from a slightly different angle. But what exactly is the analogy I’m pushing here actually supposed to be? What actually makes the market for bullshit a “market” in the first place? Is that supposed to be some kind of metaphor?

I don’t think it is just a metaphor. At the same time, the phrase is slightly misleading, in precisely the same way as the phrase “the market for lemons”. Of course, the market for bullshit is parasitic on the market for sincere attempts to tell the truth. Why? Because bullshit derives most of its value from the fact that not everyone can always tell the difference between these two things. Strictly speaking, the market for bullshit is no more separable from the market for putative public truths in general than Akerlof’s “market for lemons”, for used cars not really worth the price they’re being offered for, is from the market for used cars in general. It’s one segment of the market for putative truths, in the same way the market for lemons is one segment of the market for used cars. The segment, in both cases, includes all and only those items that are worth less than they’re presented as being worth. (Or at least, in the case of bullshit, where the seller hasn’t exercised nearly enough diligence to really know that they’re worth as much as he’s presenting them as being worth.)

Every issuance of egregious bullshit that’s at all consequential is, in fact, an exchange, involving at least two parties. There are people who produce egregious bullshit, often for a living, and there are people who buy it, and hold onto it until and unless they see through it. The producers are paid by the consumers, not with a permanent transfer of the scarce commodity, credence, but with a conditional loan that can be recalled at will. The unique and distinctive transaction in this market is the temporary exchange of egregious bullshit for credence.  Sooner or later, this credence may be repossessed by the credulous person, when the bullshit becomes discredited in his eyes. (When and if the bullshit artist’s ulterior motives become too readily apparent, or crucial facts turn out to be too obviously false, or the emotional impact simply fades.)

So really it’s a commodity market, because while some truths remain true forever, bullshit gets used up over time, like gasoline, or sugar, meaning new bullshit must constantly be produced.

The objective of each established vendor of bullshit is to get the customer to constantly roll over his credence to a new story from the same source, instead of repossessing it and looking for another vendor. But if the perceived credibility of the pool of existing vendors, in aggregate, declines, for some reason, new vendors with equally low quality bullshit who were shut out of the market before will become able to enter and compete.

Every time a prestigious institution or a prestigious public official lowers a standard somehow to compete in the market for putative pieces of public information, whether in an internal or an external struggle, every time we see egregious bullshit from an unexpected source, some players outside the Establishment lose their tinfoil hats. Every time a prestigious news source uses an invidious headline or elides a crucial fact, other, less trusted sources of information suddenly seem more credible. Disenchanted television viewers move from the news networks to the Daily Show, opining that there’s no difference except the entertainment value. But once they have, they’re just as likely to wander on over to the Onion, even though they might never have thought of that as an alternative to CNN or the Washington Post before the move.

That means this market has an odd and dangerous feature, one that makes it similar to the market for lemons. As exchange value – price, in the case of used cars, and credence, in the case of bullshit - goes down, average quality should also get worse.

(Not that the Onion itself isn’t good. It’s just that in a world where the Onion is as reliable as hard news sources, consensus reality does not exist.)

The admission of new, marginal sources to the pool of semi-credible public information is one obvious reason for this decline in quality. But there’s another problem, one that can, I think, drive human societies into surprisingly dark places. To be really interesting, the new bullshit must be fresh, which means it must somehow differ from existing, less exotic bullshit. But the low-hanging fruit has already been taken. The most salient and crucial truths will already be employed, in some existing item or tradition of bullshit, and can’t be repeated in any interesting and engaging way. Each additional marginal piece of bullshit must be either less directly relevant, or more contaminated with falsehood, or both, to succeed in being unique. To compete for the attention and credence of a fixed number of humans, it should also be gaudier than its predecessors. It should be more extreme, more bizarre or more shocking or more pleasing or moving or nobler or more wrathful or terrifying or self-mutilating or funnier, in order to still be noticeable in the more crowded field. Existing sources of public information, however credible, may also have to participate in this race to the bottom, if they’re going to retain viewers or readers. So the average quality of their output is likely to decline along with everyone else’s. That makes the information asymmetry a lot worse, because now even trusted sources may be forced to peddle egregious and exotic bullshit. Akerlof’s model of the market for lemons suggests that it should be possible, in theory, for this intensification of the informational asymmetry to cause cascading failure all by itself.

Unfortunately, this market also has another strange feature, one that makes it even more fragile. Removing tinfoil hats affects volume as well as quality. In the face of increased competition, existing issuers also have to try even harder to catch the public’s increasingly fragmented attention, and are likely to increase the volume of putative information they put out. So as “price” (average number of people convinced and mean duration of the conviction produced by the typical piece of bullshit) goes down, the aggregate quantity of bullshit being produced should actually increase in response. The price elasticity of the bullshit supply curve is negative.

But that means that the quantity increases if the quality declines. And we already knew that the quality declines if the quantity increases. So if the quality declines, the quantity increases. And if the quantity increases, then the quality declines. But if the quality declines, the quantity should increase again. And if the quantity increases again, the quality should decline again… Which is cascading failure, in the same kind of jerky series of successive steps down that Akerlof described for the used car market.

If the public can’t tell the difference between good and bad sources of information, if they suddenly or gradually lose that ability somehow, the market for public information becomes vulnerable to this sort of failure. Because the average source may then in fact become much worse, much less honest, than they’re used to supposing. Is forced to do that, in order to compete, by the public’s very confusion. And things can continue to cascade down from there. So the equilibrium outcome can be zero transactions. Zero credence being lent. Nobody really believing anything anyone says in public.

Even though there are some sources of information that are still almost as valuable as they claim to be, and some consumers of information who would still benefit from lending credence to them, the informational asymmetry would, in a world like that, make it impossible for these people to find each other, so nobody would end up lending much credence to anything said in public. In that world, the public would take rumors, and lies, and conspiracy theories just as seriously as official pronouncements from formerly credible sources.

The First Consequence of the Technological Shock: Too Much Information

Now that we have this supposed analogy on the table, what’s the exogenous technological shock supposed to be? Why might the combined market for bullshit and sincere attempts to tell the truth in public be crashing, again, right at this moment? What is it about all our tweeting, and Facebooking, and Googling, and emailing, and chatting, and constantly talking on the phone, and instant messaging, and posting of ominous videos on Vimeo, and tinderizing, and dressing up as plush toys, and organizing two-day conferences about Derrida’s influence on the Ninja Turtles action figures, and writing things for Zero Hedge, that could possibly cause a similar problem?

Obviously, an enormous amount of new, very low-quality information has become publicly available to everyone. (Along with a very large but still smaller amount of new, very high-quality information, the problem being that we haven’t yet really collectively learned how to tell the difference in the new environment.) It seems to me that the consequence is that the persuasive value of the average piece of bullshit is collapsing. This is happening because the supply is increasing greatly, while fewer people attach less lasting credence to each piece. This affects our faith in existing institutions partly because they’re what’s available for people to lose faith in, because you can only lose the illusions you already had.

As the increasing public supply of bullshit becomes more and more discredited, it drags the credibility of all sources of public information down – especially since some of the new bullshit is coming from the same institutions the more credible information already comes from.

Information can be endlessly, costlessly replicated, so simply making some information more salient and more available counts as an increase in the supply of that particular information. As every part of every legacy institution becomes better and better at making itself transparent, the overall picture of the institution as a whole that we can get from outside becomes much more detailed. But this explosion of available details confuses the brand, because we no longer only see the greatest achievements and most serious messages. We still see those, but now we see everything else as well, and the average thing we see is less impressive.

Each member of the Fed’s board always had their own opinions, but now technology has put them in a position to constantly tell us all about them, and us in a position to dig down into all the inevitable disagreements and uncertainties. Seeing the complexities that were always there more clearly makes the message much harder to interpret, and decreases its authority. In something like the same way seeing what’s actually been under the uniform of the traffic cop all along might diminish his authority in our eyes.

The Fed, in particular, is and really has to be in the business of fooling everyone, at least if they’re going to go on being Keynesians rather than straight neo-classical rational choice theorists, because Keynesian monetary stimulus relies on the creation of illusions for its effectiveness. Every producer is supposed to be under the illusion that it’s only the price of their own product that’s going up, in response to the stimulus, while the prices of their inputs are going to remain unchanged. That’s what makes them increase production – the illusion that doing so has become more profitable. If nobody was fooled, if everyone realized that all prices would eventually go up in response to the monetary stimulus, they would simply adjust their own prices, immediately, without increasing production at all. 

So the Keynesian central banker is supposed to be a kind of magician, who manipulates the public into doing what he sees as the right thing by creating illusions, using a printing press. But a magician can’t really show you everything he’s doing to fool you, as he’s doing the trick, and still expect you to be fooled by it. That would be a good way of teaching you to do the trick yourself. But as a way of doing a magic trick that’s supposed to actually deceive the audience and make them take some ill-considered action, it makes exactly no sense at all.

The odd thing is that the prestigious institution often still seems to suppose that the front of the house still represents it to the public, that we basically all get our information about it from the occasional very formal and uninformative news conference for the old media by the head chef. But now all the diners can also see everything going on in the kitchen, which naturally gives them a completely different perspective on what sort of place the restaurant is. The chef’s formal description has turned into an empty ritual, a place food critics go to show off their own particular brands of bullshit in front of an audience.

The contrast with the new, more complex and transparent background makes any traditional form of bullshit that might be conventional in communicating with the old media at press conferences seem more antiquated and unreasonable. So traditional ways of preserving public credibility can now actually have the effect of diminishing it, under the new technological circumstances. Refusing to comment in public on matters you’ve already shared your opinion about in less formal settings, that sort of thing. The problem is that the contrast between official pronouncements and actual beliefs is now just too obvious, too visible, too sharp. Even though the actors were never actually trying all that hard to conceal the contrast in the past. They just relied, unconsciously, on the whole picture being a little more murky, to outsiders, than it presently is. Clarified, it seems to convey a certain amount of contempt for the audience’s ability to reason, to connect the dots in the dot plots… (It’s as if we cleaned up the Mona Lisa a little, and it turned out she’d been giving us the finger all along.)

From the outside, we now see a confusing multiverse of different Harvards, with no consistent story coming from anywhere about which ones matter most, or which one is the real Harvard. The university itself may not have changed very much, it was always a big complicated place, but the partial panopticon it lives in has become much more elaborate. We outsiders all can see much more about more different parts of it, if we choose to. That makes it potentially much more confusing to the outside world, which now can’t tell whether they should think of it as primarily consisting of the parts they like, or the ones they find unappealing.

Complex human complex societies are always built around limiting the information people have to know about each other to a manageable level. In a group of more than a few thousand people, what there actually is to be known exceeds our individual capacity for assimilating and dealing with the knowledge. We aren’t gods, or angels. We’re just people. Now that necessary blurring has been interfered with, by the new technology, and we can’t help staring at what was always underneath the blur. At what an angel would see, at what, in some cases, only an angel could fully accept.

So just the new technologies, all by themselves, are capable of making the credibility, plausibility, and comprehensibility of the average piece of public information from existing institutions decline, as far as the observer is concerned, even if those institutions don’t change at all. Even organizations which aren’t even occasionally in the business of producing any kind of bullshit (if there are any) can’t avoid having their credibility affected by this technologically driven tendency towards a confusing kind of transparency.

A Second Consequence of the Technological Shock: Coming Up With New, More Extreme Forms of Bullshit

But it’s also true that most large institutions contain many groups of people doing various different things. Inevitably, for a variety of reasons, some of those groups are more focused on publicly stating the exact truth as they understand it than others. Some people have searched diligently for genuinely important truths for a long time, with great skill. Occasionally they succeed in finding one. The advent of new organizational technology – computers and the things they’ve led to – helps these people. But there are only so many who can and will do the lonely, difficult, sometimes boring work, and actually finding significant new truths is very hard.

Coming up with new forms of bullshit, and organizing new communities of bullshit artists around them, seems to be much easier. Entrepreneurial people associated with existing political parties, newspapers, interest groups, universities, or other prestigious institutions have considerable organizational advantages in the struggle to keep up with the depreciating value of bullshit, and may be responsible for a large fraction of the increased supply. New organized interest groups must grow up around existing institutions like vines, whenever organization and communication get easier and cheaper. Naturally each has its own preferred line of bullshit.

In fact, the existence of organized interest groups, sources of economic and political rents, and other subsidies for particular signals means that the tendency for the credibility of public speech to decline under some technological circumstances can be accelerated in surprising ways by the social results of competition for access to the subsidies. Their existence can lead to a competition for unfakeable displays of commitment to the cause ix. Over time, this can result in behavior that seems quite strange to outsiders, as each would-be beneficiary tries to outdo the most recent effort of some rival. The result of this ratchet is a world where people often seem to decide what to think and do by asking themselves what would be most implausible belief and the most counterproductive behavior. As both organization and communication have become easier and cheaper with the new technologies, our ability to mount impressive and highly visible displays of this kind has improved as well.

Perhaps the most extreme example of all this, at the moment, is the group of zealots in Raqqa. They’ve been very successful in attracting both followers and contributions in this very way, by undertaking insanely counterproductive, disgusting, and shocking displays of takfiri commitment. But the phenomenon is a far more widespread one, because this is, in fact, a basic human impulse, something our ancestors have been doing for a very long time in a huge variety of different ways, some splendid and some horrifying. The specific content of the subsidized signal – whether it’s flower arrangement, some particular form of social justice, or suicide bombing – matters enormously, but the competition to display some very refined and demanding or very arbitrary or very twisted conception of virtue or capability is always the same.

This tendency to produce exaggerated forms of bullshit, as an evolved part of human nature, is, I suspect, at least partly a tool for achieving what Max Weberx called “closure”, a way for an in-group to acquire permanent ownership of a source of economic rents. People already immersed in the local brand of bullshit already know exactly what to say to please their audience. Often that includes some extremely odd things, some things the community has allowed itself to become concerned with, over time, by some progressive process of cultural evolution that seemed perfectly reasonable to them at each little step. By these gradual processes, the group can arrive at a set of preferences that would strike any outsider as strange and exotic in somewhat the same way some very unusual breeds of dog or cat or goldfish do. These exotic and arbitrary preferences act as a semi-permeable barrier to entry. You only get in to the subsidized group if you drink the cool-aid, if you become really good at exhibiting the exotic preferences in acceptable ways. Which limits access to the source of rent to friends and willing henchmen.

This sort of competition for access to a subsidy can force competing bullshit artists to come up with more and more extreme, impressive, and (to the uninitiated) unpalatable versions of the particular forms of bullshit that are customary in their moral community. As the competition for prestige becomes more intense, what counts as an impressive signal of commitment to the subsidized set of beliefs can become much more extreme, leading in the end to forms of priest-craft that may seem very strange to any uninitiated person. Technological change, new ways of organizing and communicating, can greatly enhance the effectiveness of this sort of competitive display, as it has for the zealots in Raqqa. So as the exogenous technological shock hits, the exotic in-group behavior may become even more extreme.

At the same time, a general increase in transparency has the effect of making all these weird little social worlds much more visible from the outside, contributing to the public sense that the other people whose social behavior they’re observing clearly for the first time have all gone completely nuts. In a world that’s apparently gone crazy, even crazy analyses may seem credible.

All of these same processes can take place inside of existing institutions as well, as new organized interest groups with their own new forms of bullshit spring up under the newly favorable technological circumstances like mushrooms after a rain. Sometimes this can apparently be quite paralyzing. Various political parties in different places around the world have already visibly begun to experience interesting new forms of internal fragmentation and competition. Certainly there are fascinating things happening inside both large American political parties.

A Third Consequence of the Technological Shock: More Rapid Turnover of Egregious Bullshit

For both of these reasons, the passive one and the active one, the initial effect of the new technology should be a decline in the average perceived credibility of existing institutions’ output of putative pieces of public information, along with an increase in its perceived quantity. A Democrat is now more likely to publicly say or write that the DNC, and a Republican that the RNC, is terrible. And we’re also more likely to hear about it. Having heard these things, we’re now less likely to accept anything either party says. If even they say they’re terrible…

(Presumably the initial impact of any large technological change is always partly just disorganization, because at the beginning the society is bound to be set up all wrong, given the possibilities inherent in the new technology. The pattern is as old as Ugarit. Invent the first alphabetic writing system and the use of gold as money… and watch your whole civilization collapse, as it tries to cope with the social results. Once you notice it, this pattern appears in history again and again. Improvement may only come much later, if at all, as a result of some sort of eventual Darwinian winnowing process.)

At the same time, as Daniel Dennett has pointed out recently with respect to public falsehood in general x, xi, we’ve recently become collectively much better both at detecting all kinds of dishonesty, and at informing each other that we all know everyone else has also detected it.

In the Politics, Aristotle points out that in the end, the public tends to have sound judgment about what’s really a great work of art, even though individually many of its members may lack perfect taste. Each person still may be able to spot some particular flaw, so all together they constitute a reliable filter. The sound evaluations reinforce each other, while each idiosyncratic error of judgment is likely to be different. So over very long periods of time, the public standard of taste is more reliable and refined than that of any one individual.

The same thing applies to public bullshit. Over time, at least outside of subsidized in-groups, all but the very finest examples of bullshit are eventually detected and persuasively rejected by someone in the crowd. Sooner or later, someone successfully points out that the Emperor isn’t wearing any clothes. The motive or gimmick becomes obvious to everyone, and the dishonesty becomes transparent.

The Internet has dramatically amplified this oracular collective capability, because more eyeballs are now seeing each potential piece of bullshit with greater clarity, sooner. The people behind the eyeballs now find it much easier to communicate their skepticism to each other. So we reject dishonesty much more quickly and with better accuracy. Common “knowledge” of both truths and untruths, making it known to all that everyone knows that everyone supposedly knows something, has, as Dennett points out, become both much easier to produce, and much easier to destroy.

Bullshit Inflation and Market Failure

With a vastly increased supply, lower average quality, and much less public willingness to hold on to each piece, the value of the average putative item of public information seems to be crashing now in more or less the same way the value of a unit of currency crashes during a hyperinflation. In that case, the problem is also that the supply of something – money – explodes just as public willingness to hold onto it for very long is collapsing. The credibility of each individual piece of bullshit, the number of people it will persuade for how many hours in total, is, I suspect, now in steep decline. What’s pretty easy to see is that bullshit just simply doesn’t stick for very long any more, that a semi-bullshit explanation that’s believed by the public may now only settle them down or rile them up for a few days or a few weeks, not for months or years as it once might have.

What’s a little harder to observe, unless you habitually wander into a lot of places people in your own little social world don’t go much, is the fact that that this more rapid churning is happening in parallel in more and more different and divergent arenas. So during the much shorter half-life of each piece of bullshit it probably convinces many fewer people at any one time. As its value collapses and its quality declines, more and more must be issued to accomplish the same persuasive tasks.

In the end, no amount of bullshit may be enough. It may become impossible for anyone to persuade very much of the public of anything, even the truth. Akerlof’s model of the used car market suggests that in an extreme scenario, the market for public information, for putative attempts to tell the truth in public, as a whole might eventually fail under the new pressure.

The problem with this kind of crash in the bullshit market would be that it would have the unfortunate effect of making genuinely reliable sources of public information no more credible than any entrepreneur with a completely novel and untested form of bullshit. A simple, clear, and emotionally appealing plan, concocted without reference to its actual possibility or efficacy. When nobody is the least little bit credible, anybody at all is just as credible as anyone else. That can be a surprisingly bad outcome for the whole society - if “anybody at all” happens to include Adolf Hitler.

Keeping civilization going is hard, not easy. This is the fundamental fact we seem most inclined to forget. Human history shows that there are more potential recipes for societal disaster, more ways of not having the things we have now, than paths to societal success. Agonizing failure is genuinely possible. History is full of failed experiments. So a frantic bullshit free-for-all of the kind Germany had in 1920’s and the 1930’s seems like a rather frightening outcome. But a possible one. Or look what happened when the printing press was invented. Suddenly everyone was an authority on scripture. It was fun… at first. But the path from Erasmus to the Battle of White Mountain is surprisingly straight.

At the same time, there was a lot of bullshit around in the 1920’s, and the 1950’s – all the horrible bullshit associated with segregation and numerous other unjust deprivations of basic human rights – that we’re all much better off without. In the very long term, getting rid of bullshit is usually a very good thing. There are probably some similar pieces of horrible bullshit in our world, things our descendants will wish we could have rejected sooner. The problem is basically just that the transition from there to here involved all kinds of untoward and surprising events. Good news in the long term can sometimes be surprisingly bad news in the short or medium term.

We assume that seeing far more of each other’s lives than we’ve ever seen before will leave our social and political system pretty much undisturbed. Because on some level we think we’re still living in the television age. But actually the particular design of the partial panopticon we all live in, which only allows certain acts of certain people to be seen by certain other people some of the time, is central to society’s functioning on a day-to-day basis. We aren’t used to having this much extreme bullshit directed towards us this persistently. We aren’t used to actually seeing a man’s head sawed off with a serrated knife. As part of a sort of gruesome political advertisement for an expensive form of madness, directed at least partly at those few scattered people who might be driven over the edge by it, and commit similar acts.

We aren’t used to knowing this much about what the people who run the New York Times and the Wall Street Journal are actually talking about, with each other, behind the scenes. We aren’t used to having the magician describe every trick in detail for us, as he’s actually doing it.

Eventually we’ll learn ways to shut most of the information out again, to stop watching Charlie Rose and Jihadi recruitment videos, but in the meantime the sheer quantity and volume and the increasingly uncertain quality are extremely disorganizing. Sooner or later, public revulsion may set in, and the market may fail completely.

The specific sort of fragility I’m imagining in the market for public information is a vulnerability to cascading failure, which makes the full magnitude of a possible event very difficult to predict in advance. Presumably bullshit crises are like earthquakes. There must be many, many tiny little cascading failures in local bullshit markets all the time, a few medium sized ones every once in a while, and very very rarely, some really huge ones that affect everyone.

Hopefully this one will be one of the smaller ones, or will be relatively benign, even if it is big. But the Reformation, or the eventual effects of the introduction of radio, movies, telephones, and the mass party early in the twentieth century, can give us some idea of how bad the short-term effects of a really serious bullshit crash can potentially be.

Some appreciation of the potential risks associated with this kind of rapid change in communications and organizational technology, on the part of our political leaders, might perhaps make them less eager to continue to try to put out fires with gasoline, as they’re presently doing.

What Is To Be Done?

Is there anything we can do about all this? In the end, I’m afraid, as in past cases, it’s really mostly going to be up to us. As citizens, we have to learn how to recognize lemons. We have to learn to tell the difference between sincere though possibly mistaken public speech, or the policeman’s hat, customary and acceptable forms of public pretense, and genuinely egregious bullshit. As these things appear in new forms in the new technological environment. And to learn how to tune a lot of the bullshit out. If we can. Eventually the public learns how to navigate under the new technological circumstances. Spinoza writes the Theological-Political Treatise, and order is restored in the market for public information.

(Unless they don ‘t, and it isn’t. Germany society in the 1920’s and ‘30’s doesn’t really seem to have ever endogenously solved its bullshit problem. And they were incredibly sophisticated people. So it’s possible to fail, even if you’re very smart. Nevertheless, we can hope.)

Just as Akerlof’s used car market can really only function well if buyers eventually learn to detect lemons, to function in the new world, we all have to become less willing to have our attention grabbed and our emotions inflamed by some bullshit artist with a novel song and dance. Human societies are structured as they are precisely because we don’t and can’t have perfect information about everything and everyone. Moral exhortations to live as if we did are utopian, in a way that should be easier to see now that the people in Raqqa have also become all riled up about what they perceive as the manifold injustices of our global society. Thinking globally implies a will to impose your conception of the good on the whole of humanity. But we don’t need seven billion distinct and incompatible utopian conceptions of the global good being unilaterally imposed on the whole world all at the same time. What we actually want is seven billion people all doing their best to see through that kind of reckless bullshit, on the basis of what they know about their own smaller worlds. Doing their best to not be beguiled or distracted by bullshit artists with simple, morally satisfying solutions for all the world’s most photogenic problems.

I’m afraid the bad new is that we the people are more or less on our own, in this particular struggle. The New York Times and the Wall Street Journal can’t really help us, or advise us, now, because it’s precisely whether to go on trusting them that we have to decide. There are things they could do to retain or regain our trust, but we shouldn’t hold our breath, because they apparently have yet to perceive any need for reform.

No, it’s sort of going to have to be up to us to learn to filter out this latest wave of bullshit, and figure out which sources to trust in the new technological environment, just as we’ve eventually done in all the previous crises. The stakes are high. This may be your single most important job, as a citizen. Figuring out which publicly available bullshit is egregious, and of that what part is potentially harmful, and what harmless, or even socially necessary. What makes the whole thing much more complicated is the fact that there’s probably a lot of the existing egregious bullshit that we need to try to keep, for the sake of continuity if nothing else.  And because it takes up space that we don’t want filled with something worse… Even though it may all seem worthless, in the middle of a crash.

[i]  Frankfurt, H. On Bullshit. Princeton University Press, Princeton, 2005.
[ii] “On bullshit, part I.”
[iii] “Bullshit!”
[iv] McAdams, R. The Expressive Power of Law: Theories and Limits. Harvard University Press, Cambridge, MA (2015)
[v] Hayek, F. “The use of knowledge in society.” American Economic Review, XXXV, no. 4 (Sep. 1945) pp. 516-30.
[vi] Arrow, K. “Methodological individualism and social knowledge.” American Economic Review: Papers and Proceedings 84 (1994) 1-8.
[vii] Cloud, D. The Lily. Lassiez Faire Press, Baltimore, MD (2011)
[viii] Akerlof, G. “The market for ‘lemons’: quality uncertainty and the market mechanism.” Quarterly Journal of Economics, vol. 84, no. 3 (Aug. 1970) pp. 488 – 500.
[ix] Berman, E. “Sect, subsidy, and sacrifice: an economist’s view of ultra-orthodox Jews.” NBER Working Paper No. 6715 (Aug. 1998). Currently available at
[x] Weber, M. The Theory of Social and Economic Organization. The Free Press, New York (1947)
[xi] Dennett, D., and Roy, D. “How digital transparency became a force of nature.” Scientific American, March 2015.