Open The Freezer

By Robert Seawright

For its reporting of Hurricane Katrina and its dreadful aftermath, the Times-Picayune of New Orleans won Pulitzer Prizes for Public Service and for Breaking News Reporting. Among its Katrina stories was the following striking narrative.

"Arkansas National Guardsman Mikel Brooks stepped through the food service entrance of the Ernest N. Morial Convention Center Monday, flipped on the light at the end of his machine gun, and started pointing out bodies.

"'Don't step in that blood - it's contaminated,' he said. ‘That one with his arm sticking up in the air, he's an old man.'

"Then he shined the light on the smaller human figure under the white sheet next to the elderly man.

"'That's a kid,' he said. ‘There's another one in the freezer, a 7-year-old with her throat cut.'

"He moved on, walking quickly through the darkness, pulling his camouflage shirt to his face to screen out the overwhelming odor.

"'There's an old woman,' he said, pointing to a wheelchair covered by a sheet. ‘I escorted her in myself. And that old man got bludgeoned to death,' he said of the body lying on the floor next to the wheelchair.

"Brooks and several other Guardsmen said they had seen between 30 and 40 more bodies in the Convention Center's freezer. ‘It's not on, but at least you can shut the door,' said fellow Guardsman Phillip Thompson.

"The scene of rotting bodies inside the Convention Center reflected those in thousands of businesses, schools, homes and shelters across the metropolitan area."

That story, like so many such stories, turned out to be false, but its falsity was not discovered before it had already been picked up and repeated by media outlets all over the world. Sadly, the error could have easily been avoided. All the reporter had to do was open the freezer. He was right there.

We like to think that we build our belief systems based upon actual knowledge. But instead, we tend to start with our pre-conceived notions and construct what we claim to know upon that edifice. We also tend to examine and evaluate evidence in light of these notions rather than the other way around. We are ideological through-and-through.

Easy knowledge is the idea that it is easy to produce inductive chains that lead to overstated conclusions when they are predicated upon unsupported assumptions. Since we so rarely evaluate our underlying assumptions - supported or otherwise - the risk is enormous. In our fast-paced, media-saturated world where now trumps right, easy knowledge is both rampant and alluring.

It doesn't take a genius to recognize that this general problem is a constant in the investing world. Each of us who works in that world has a set of ideological commitments and undergirding beliefs which are more or less (often less) supported. We tend to work from there - not challenging or even questioning these underlying beliefs.

It's easier, of course, to see these sorts of problems in others (as Nobel laureate Daniel Kahneman so helpfully and carefully points out). For example, the media does a reasonable job of keeping the government honest, at least in the aggregate, but does a notoriously poor job of critiquing itself. That's why having someone or a group that holds you regularly and specifically accountable is so important.

If we want to be any good at investing, we need to check our work and our underlying assumptions. All the time. We must watch for when the magician puts the rabbit into the hat. Repeatedly. We need to do the math. Over and over. We need to insist upon opening the freezer.


Bob Seawright is Chief Investment & Information officer for Madison Avenue Securities, a boutique broker-dealer and investment advisory firm headquatered in San Diego, California. He blogs at Above The Market.

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