Ignoring the ‘Expert Consensus’ Can Be Very Profitable

Saw this viral Scott Adams tweet

To focus on the second point, being effective person is not about heeding or ignoring the advice of experts, but knowing what information/advice to discard or use.

A useful heuristic, particularly for the social sciences, is that the ‘expert consensus’ tends to be wrong. Individual experts can be right, but as a whole if they are all parroting a certain line or narrative, odds are they will all be wrong. This happens over and over with such stunning regularity.

For example, the narrative in early 2021 and late 2020 was that the Covid vaccine would be ‘95% effective’ at stopping the spread of Covid, which until June or so seemed to be correct, and then Delta came along and pretty much upended that notion. In the US, cases and deaths are close to record highs in spite of mass vaccination and the assurance by the media, politicians, ‘Twitter experts’, and ‘health officials’ about vaccine effectiveness. Even if vaccines lower the mortality rate, this does not change the reality that their effectiveness at stopping the spread of Covid has been called into doubt, which was one of the major selling points of the vaccines.

The consensus by the ‘Bitcoin experts’ as recently as last week was that Bitcoin would make new highs, as it had already broken out above $50,000. But then it inexplicably fell to $44,000, erasing those dreams. Everyone who bought in anticipation of new highs lost money. Yet again, Bitcoin and crypto is proving to be vastly inferior as an investment compared to stocks. If your ‘hedge against inflation’ is down 15% in a day or 50% in a month, all you have really done is hedge against having money. Or to put it another way, if your inflation hedge is down 15% in a week, you would need 15% deflation in terms of the CPI to offset it (which even during the 2008 crisis deflation was only 4% or so).

The consensus in March-June was that Covid would doom and the US economy and stock market, or at least lead to a prolonged bear market and recession; less than a year later, the stock market, especially tech stocks, would go on to make new highs. GDP would also recover most of its losses too. The Covid recession was the shortest ever.

The consensus in Jan-Feb was that Covid had an IFR of 1% for young and middle-aged people, which by April, coinciding with the stock market bottom, was revised lower by a factor of 10, thanks to two studies regarding a higher than expected incidence of asymptomatic carriers in prisons and among California citizens. The ‘next Spanish Flu’ turned out to be just somewhat deadlier than influenza, not 50-100x as deadly as originally feared.

If everyone is saying something will be a certain way, odds are it will go the opposite. Reality always unfolds in such a way as to make the maximum number of people seem foolish, not to confirm the consensus.

This doesn’t mean that the alternative media is much better. It tends to be as wrong as the mainstream media, but wrong in other ways. It’s too apocalyptical, too pessimistic, and it’s always predicting the end of the world, collapse, or some major cataclysmic event, or recommending poor investments such as gold or Bitcoin.

Instead of the alternative vs mainstream false dichotomy, seek sources that tend to be right more often than not. That criteria alone should eliminate many choices. Writers like Freddie Deboer, Lyn Alden and other sources.

Going against the consensus can be very profitable, as the success of the 3x ETF strategy (which I devised) demonstrates, or buying the dips during the March-April Covid crash, which I did. Or abstaining from the Bitcoin hype and instead buying ‘boring’ but profitable investments instead. The idea of buying FAANG stocks and or 3x tech ETFs (with heavy FAANG exposure) seems obvious in hindsight, yet very people people are even talking about it. Which I think it’s better that way.

1 comment

  1. I literally read an article on Business Insider saying Ethereum would go from $3,000 to $20,000 by the end of this year so I bought 4 tokens. I’m already down about $3,000, and I feel like a retard.

    I’m still holding onto them in the delusional hope they skyrocket, but but by the end of this year, regardless of the outcome, I’m pulling out and never going back in.

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