Wednesday, October 22, 2008

Even a Stopped Clock is Nouriel Roubini

I’m a little bugged by all the attention and credit Nouriel Roubini has been getting for predicting the crash. I normally like contrarians, but I’m also generally an optimist, and pessimistic Bears bug me. I was always annoyed by the credit the Morgan Stanley economist, Stephen Roach, got for predicting the end of the dot-com boom in 2001.

The problem is that the fact of business cycles means that every expansion will end in recession. And people like Roach and Roubini started predicting the crash many years before the crash actually happened.

If I start predicting that there will be another crash, I will be right eventually. It doesn’t mean it’s useful.

There’s an expression, even a stopped clock is right twice a day. Just because a clock that happened to have stopped at 7:56 is accurate when it is 7:56 doesn’t mean it is useful.

I have the same problem with people who complain that there was someone at the FBI who predicted 9/11 before it happened. In an organization with 30,000 people, you probably have 30,000 predictions being made every single day. Anything that could possibly happen is probably predicted by one of them. It doesn’t mean there was anything useful about that prediction, any more than a stopped clock.

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