

Discover more from The Deload
Consensus loves an expert. Followers of the herd always look to others to do their thinking for them. Who better to trust than someone with the credentials that make him or her an expert? As such, experts play a large role in shaping popular opinion, and readers of this Substack should know by now that popular opinion cannot yield extraordinary results.
It is never contrarian to heed the advice of an expert, although that doesn’t mean contrarians shouldn’t listen to experts. The aim of a contrarian is to be right, and experts often offer useful advice to that end. But a contrarian especially wants to be right when popular opinion is wrong, and this demands challenging expert advice. Looking for areas where supposed experts are wrong is a useful game for contrarians looking to create extraordinary results.
Experts can be wrong for reasons of ignorance, ideology, or both. Ignorance is often innocent. Most fields have ever growing knowledge, and even the most dedicated experts may struggle to stay current. Further, experts are often asked to interpret new and novel situations that offer no easy historical comparison or otherwise obvious answer. Those situations are easy even for experts to get wrong. Looking for expert ignorance is hard for a contrarian to unless the contrarian is also an expert in the field but looking for the influence of ideology offers us a more universal tool to challenge expertise.
The Expert Ideologue
Expertise naturally flirts with ideology. For someone to become deeply knowledgeable about something, it stands to reason they have a predisposition to believe it is important. This is true for everything from epidemiology to Bitcoin. Can you name any epidemiologists or Bitcoin experts that don’t think their field of study is tremendously important? Why would anyone spend a life studying something they didn’t think was important?
While passion for a subject creates the necessary spark to build expertise, it can also create Charlie Munger’s classic man-with-a-hammer bias. When you only have a hammer, you treat everything like a nail. Experts, by nature, form deep expertise in a narrow subject, and that can prevent them from seeing the bigger puzzle. Those experts that succumb to man-with-a-hammer bias are still mostly innocent. It is when expert fields become religious ideology that the experts fail us most severely.
The point of religion is faith and worship, not reason. When religions form around specific fields, we end up with dogmatic views protected by closed-minded zealots rather than objective experts. The experts become the Gods or prophets of the religion, and are empowered as such, while any well-studied person with views outside of religious consensus is deemed a heretic. Reasonable arguments against the religion are waved away without dialectic response and often countered with anger or attack. When supposed experts attack rather than eloquently defend, contrarians should take notice. Religion makes experts idiots.
Religious expertise results in a circular reality that is hard to break. Consensus looks to experts to form opinions. Experts promote religious dogma and deny any challenges to the religion in question. Since consensus looks to the experts to form opinion, it accepts that challengers to the religion are evil. The cycle repeats, reinforcing the field of expertise as a religion rather than a tool for seeking truth.
Even if an expert field doesn’t become a religion itself, it’s still subject to influence from external religious ideology in the same manner. Politics most clearly defines our modern religious associations, and experts are not immune from those influences. Once the effect of external ideology takes hold of some expert community, experts defend the external ideology through the lens of their field rather than religiously defend their field of expertise as above.
The outcome is the same: The contrarian is offered an opportunity for intelligent dissent.
Application
We’ve identified two ways ideology can affect experts: internally when an expert field becomes a religion and externally when an expert field becomes a tool to defend another religion.
There are several fields within academia we could easily identify as internal religions, just as there are examples in medicine and vaccination policy in the COVID era that we could use to exemplify the impact of external ideology; however, I’ll focus my observations on the field of finance where I have the most personal expertise.
The Religion of Bitcoin
Bitcoin is a modern religion in the tech and finance communities. Either you believe or you don’t. There doesn’t appear to be a middle ground. If you challenge the religion, you are told to “enjoy staying poor.” I don’t say this because I disbelieve — I’ve written before that I own Bitcoin and still do; I have no plans to sell — but it’s clear that the religion of Bitcoin rules the conversation. Bitcoin is consensus, and it won’t pay for the contrarian to go against that consensus right now, but that doesn’t mean we shouldn’t ask reasonable questions about it.
Setting aside the fundamental questions about use case (medium of exchange vs store of value), energy consumption, etc., my biggest question about the religion of Bitcoin/decentralization is: Will it really solve the “problems” the experts say it will? The idea that decentralization will result in some more egalitarian distribution of economic power seems questionable for the simple fact that power consolidates by nature. Power must consolidate, otherwise it isn’t power. A decentralized system doesn’t prevent the consolidation of power, it just prevents the continued use of the current methods of consolidation. The power of the central bank and sovereign governments may be reduced, but how will that power evolve as a result? And will we like how it evolves?
It’s a question I’m not even sure the experts can answer, even if they set aside the zealotry. The most reasonable answer is that we don’t know how society will evolve around the widespread use of a digital currency outside the control of government influence. But it’s reasonable to question whether it will happen as innocently and elegantly as the religion might expect. I believe in the merits of a digital currency, but nothing is a perfect solution in a dynamic system where humans are involved. Humans are creative and adapt around solutions to use them in ways that may not be intended or expected.
Politics in Finance
It’s consensus amongst finance experts to at least wonder if we’re in a bubble, if not fully believe it. The discussion around market valuations, retail participation, SPACs, inflation and the potential for interest rate changes has heightened over the past few months. I’ve found the discussion around inflation particularly interesting, with some smart market experts drawing parallels between our current economic situation to that of Weimar Germany in the 1920s before it suffered from brutal hyperinflation that made German Marks almost worthless. The basic argument is that the level of fiscal stimulus the government has used throughout the pandemic, and continues to use, could trigger serious inflation, and the central bank seems to be complacent about it.
Before touching on the ideological influences on the inflation discussion, there’s a tie to the previous Bitcoin discussion. Proponents of Bitcoin are among those with strong views on the inflation question. They believe that Bitcoin would act as a solid store of value, and ultimately a medium of exchange, that would allow holders to circumvent the carnage of a rapidly devaluing fiat currency. While this may be partially true, my contrarian view is that if we are about to have Weimar levels of hyperinflation, you should invest in guns and ammunition before Bitcoin. There aren’t enough people that hold Bitcoin in sufficient quantities for it to act as a true alternative to the US dollar in the event of hyperinflation. If we were to experience Weimar inflation, it won’t result in some new utopia where Bitcoin rules. It would result in societal chaos where the returns to violence may literally be survival for most people. You might be able to buy food with Bitcoin, but who’s going to stop someone from taking it from you in a disorderly society?
Without wading into the more intricate nuances of the Weimar comparisons, there is an obvious potential influence of external ideology on the entire conversation. Experts can’t help but view the potential impact of government policy through the lens of ideology. It’s natural to view policies of their party positively and policies of the other party negatively. As contrarians, we should wonder how much of the growing concern about inflation is driven by ideological opposition to the current administration rather than objectivity. Inflation is notoriously hard to predict, but it seems some of the finance world, which I would argue generally leans more conservative, seems to think inflation is now more predictable.
To make my position clear: I also have concerns about inflation and the level of stimulus. Maybe those concerns are driven by ideological differences about government spending policy, or maybe they’re rational. Maybe the economy shrugs off inflation for another five years, maybe a decade. If we position ourselves against that reality, we’ll end up wrong and have to deal with subpar investment results. Or maybe inflation spikes this year, the Fed will be forced to raise rates, and the market crashes. Maybe the Fed loses control and we end up the next Weimar. In any case, I’d rather be right about the outcome than adhere to any ideological inclinations about government policy, and the only way to do that is challenge expert consensus along with my own biases.
When the Experts Aren't
Check out Cliff Asness (AQR) early 2000 paper about bubbles if you haven't. If power naturally consolidates (which I agree), it's byproduct is entropy, which eventually redistributes the consolidated power. ad infinitum - Keep writing Doug. appreciate you taking on such a heavy topic