Among the many memorable sights and sounds (and smells) of Occupy Wall Street was the young man who was very eager to speak to me about derivatives trading, which, he promised me, was positioned to sucker-punch the world economy even more brutally than the mortgage bubble had. He seemed to have a great deal of information at his command: The derivatives market was so many trillions of dollars and was inadequately regulated in such-and-such a way, etc. Listening to him speak for a bit, I told him I had only one question that I’d like him to answer:
“What’s a derivative?”
Sputter, stutter, stammer, hem and haw. He had no idea. It was something Wall Street types did, and it was . . . bad.
Manually dislocating one’s opinions from one’s lower intestine is not a vice unique to soapbox speakers on public squares. A year or so ago, there was a big Russia story in the news, and late in the afternoon I received a panicky mass e-mail from a cable-news producer inviting every Russia “expert” in his contacts list to high-tail it to the studio for a live segment that was starting in 90 minutes or so but which was at that moment short on Russia expertise.
I am about as much of an expert on Russia as I am on the civil-engineering challenges of contemporary Cairo, and for a gleefully malicious moment I was tempted to go on the show and do something funny. I thought better of it. But there are people who care a great deal more about being on television than I do, and who will respond to any invitation, regardless of their level of relevant knowledge. And I’ve made that mistake, too: Occasionally on those long panel shows, you’ll get asked about something you weren’t expecting to speak about, and the perceived need to say something is an invitation to error that I have, in the moment and to my shame, answered.
“Ignorance” is a word with deeply pejorative connotations that it does not deserve. Ignorance is the natural state of human affairs, and all of us, from addlepated reality-television enthusiasts to theoretical physicists, are almost entirely ignorant of almost everything. The sum of human knowledge is far too vast for any of us to truly master more than a few bits of it. But we feel inadequate when we are confronted with a question that is beyond our range, and the anxiety is so intense that we frequently ignore Abraham Lincoln’s advice that it’s “better to remain silent and be thought a fool than to speak out and remove all doubt.”
That was very much on my mind when I read Slate’s dopey account of the gyrations in the Chinese stock market and its consequences. The headline should have been a warning: “A crystal-clear explanation of why global stocks plummeted,” as though these things were ever simple. The article delivered on the promise of the headline, with such gems as “this all started two weeks ago . . . ” No, Sunshine, no it didn’t.
When the markets tanked on Monday, one of my Wall Street friends wrote me a quick note early in the day, as he sometimes does when, being solicitous of my well-being, he fears that I might write something stupid. (He never puts it that way.) He had some interesting insights, arguing that the popularly despised practice of high-frequency trading was probably keeping the dip from being much worse than it was, because most high-frequency-trading programs respond more strongly to momentum than to price in the expectation that dramatic shifts in any direction will revert, at least partially, to the trend. That’s a long, wonky piece for a different day, but I am very much persuaded by his argument about why high-frequency trading is held in low regard rather than welcomed as an innovative step toward more efficient markets.
His argument is that in the minds of journalists and the general public, “I don’t understand this” ends up being abbreviated as “wicked.” Thus derivatives, hedge-fund strategies, high-frequency trading, etc., are regarded with suspicion at least, if not outright hostility, while the public longs sentimentally for a model of finance that is barely distinguishable from stuffing cash into mattresses, as though banks were vast storehouses of shoeboxes with their customers’ names written on the lids in Magic Marker.
Read it all.