The surprise EU Referendum result to Brexit in June and more recently Donald Trump winning the US presidential race has exposed a serious lack of faith in so called ‘experts’.
This shift has prompted Oxford Dictionaries to make ‘post-truth’ – an adjective ‘relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief’– its international word of the year.
But what are the dangers of turning away from experienced commentators and institutions and should we be forced to listen?
The post-expert era
It was a seminal moment for us all back in June, when on the Brexit campaign trail, then-Justice Secretary Michael Gove declared that he wouldn’t be supporting his argument with the endorsement of economists because: “People in this country have had enough of experts”.
It’s not just Brits either. In the US Jeffrey Lord, one of President Elect Trump’s prominent media supporters, argued that fact-checking was an “out-of-touch, elitist, media-type thing,” adding: “I don't think people out here in America care.”
Mistrust of experts isn’t confined to the political sphere either. Edelman PR does a huge global survey on trust every year, and this year asked whether people have faith in financial services companies.
In the UK, the general population scored their level of trust at 41 out of 100.
Why has this happened?
It’s no wonder, therefore, that when the experts tell us to do something specific with our money, we are apt to ignore them, and choose to invest our money in the way we think is best: it doesn’t matter how many experts tell us to invest in a pension and shares for the long term, most people think they'll be better off in property and cash.
When people act against the advice of experts, the knee jerk reaction is to blame ignorance and misunderstanding – such as when Sir John Major claimed people had been “bamboozled” by Brexit arguments. However, what’s at work here isn’t so simple, it’s the result of a number of far more complex forces.
Society is fundamentally changing, because rather than knowledge being in the hands of a privileged few, it has been democratised.
When the Edelman survey asked people how they sourced their news, 71% said they did an online search – making it by far the most popular answer.
We feel if we want to know something, we can get it straight from the horse’s mouth –rather than being spoon-fed by experts.
Who are we turning to?
If we seek outside opinion, it’s not the experts we turn to.
When the Edelman survey asked people to rate whose opinion they trusted the most, they rated ‘people like me’ as a 63 out of 100 – while Government officials rated just 35.
It’s one reason why when Aviva asked people who they turned to for financial advice, respondents mentioned friends, family and the internet above all else.
Generally, when we talk to friends and family, they tell a very different story to one from the experts.
As a 20-something I had very fixed views on good and bad investments. I’d seen friends double their money by investing in property in London. I’d also seen older friends lose a fortune in the dot-com crash, and a relative caught up in the Equitable Life scandal.
At that stage I was fairly convinced as a result that shares were too dangerous, pensions were a terrible idea, and property and cash were the best investment. I even convinced myself that a five-year fixed rate saving account was my best bet for ‘long-term savings.’
If anyone at the time had highlighted that my views weren’t the standard advice meted out by financial experts, I would have responded in exactly the same way as anyone else: I would have told you that the experts have a vested interest. A pensions company who told you to put your money in property would be like the turkey voting for Christmas.
When experts get it wrong
I didn’t enter into in-depth financial discussions at the time, but if I had, I would have been able to point to the myriad of times when financial experts had been wrong. You don’t have to look far to find a humiliated guru.
Some Brexit experts, for example, have been forced to change their mind. This September Credit Suisse and Morgan Stanley both backtracked on their prediction that a vote for Brexit would lead quickly to recession.
“Previously, we had expected an immediate reaction to the vote to leave,” said analysts at Morgan Stanley in a note to clients. “But in practice, the reaction has been muted, or rapidly reversed.”
The Bank of England is not immune to predictive disasters either. In 2013, for example, it said it wouldn’t raise interest rates until unemployment fell to 7% - which it expected around late 2016. It actually hit this rate by January 2014, forcing the bank to move the goalposts and focus on something else.
It’s never difficult to find experts who have been wrong, so it’s tempting to think they are too unreliable, so they are no use to us.
However, before we send them packing and rely on ourselves instead, it’s worth bearing in mind that we’re not infallible either. In fact, the way we reach every financial decision we ever make is flawed – because we suffer from inherent bias.
Take my view that property was a sure thing, and shares were guaranteed to fail. I’d never really examined the long-term performance of any of these assets.
I had fallen prey to what’s known as the availability heuristic - which means we give too much emphasis to small probabilities - because they are close to home.
I also suffered from Base rate neglect (where we overlook facts and figures about general rules in order to focus on appealing stories).
Why it’s hard to change
My view that shares and pensions should be avoided at all costs was also based on a fear of loss. Again I was suffering from faulty decision-making.
Humans are designed to value loss far more strongly than we feel gains, so in focusing on the relative who suffered at the hands of Equitable Life, I ignored the huge number of my other relatives, who were benefiting from sensible pension planning and sound long-term investments.
Once we have come to a conclusion, confirmation bias makes it very difficult to change our minds. It’s not just our Facebook feed that gets filtered according to our likes and dislikes: we prioritise information that agrees with us, and filter the information that supports our existing beliefs. If the experts disagree with us - we therefore decide that the experts are wrong.
This confirmation bias is what makes a mockery of our assertion that the experts are wrong because they have a vested interest – because our vested interest is every bit as powerful and we want to be right just as much as they do. We need to ignore the vested interest fallacy to appreciate that just because someone wants to be right they are not necessarily wrong.
Why we need to change
Of course, we might still decide that the experts are wrong - because there are plenty of examples of when they have been.
The fundamental problem is that economics is not an exact science. It depends on so many variables that the experts can only make their best guesses.
In a post-expert world, we are apt to use this as proof that a best-guess from someone with decades of experience and research into a subject is no better than the random guess of someone with a newspaper and a mate with a buy-to-let.
So what’s the solution?
Persuading people to abandon entrenched positions is notoriously difficult. I was lucky: I switched from writing about celebrities to writing about money and got a crash course in investing.
I was surrounded by a new paradigm, and was forced to reconsider my previous views. And when I’d stopped kicking myself, I started investing in a pension.
Not everyone can go through this kind of immersive change experience.
Financial education, awareness campaigns, advisers and employers can all do their best to give people more information effectively enough to get them to prioritise it and reconsider.
Over the long term, if information is continually drip fed from a young age, it may be possible to give people the facts they need to overcome bias from the start, but it's no easy task.
The Government has decided, therefore, that the answer is to get people to accidentally do the right thing without noticing - alongside whatever else their biases may persuade them to do.
This is why we have auto-enrolment into workplace pension schemes, and why the experts are pushing for higher contributions from both employers and employees to be made mandatory.
Because while people will still believe the experts are wrong, that property and cash are their best hope, and that pensions and shares are being pushed by vested interests, at least they won't have to suffer the consequences if it turns out the experts were right all along.