The Brandolini Principle

Amar Pandit , CFA , CFP

Did you know that there is a course titled “Calling Bullshit”, at the University of Washington?

This is not a joke; I am serious!

As you might already know, there is so much bullshit produced on a daily basis, in every area of our lives (including money, investing and financial services). In fact, we are literally drowning in it. We thus need to develop the ability to spot bullshit coming to us from all quarters. Bullshit detection then is an essential skill for our survival and overall well-being. Never has it been more important in the investing world than in the current age of fake news, fin-fluencers and the financial porn networks. There is so much to be written on bullshit that I decided to devote an entire section to it. The goal is simple – We need to eradicate bullshit and bullshitters from our lives. Are you with me so far? I believe you are…Well, let’s just dive into the post.

Professors and Authors, Carl Bergstrom and Jevin West, in their book “Calling Bullshit” wrote, “Perhaps the most important principle in bullshit studies is Brandolini’s principle. Coined by Italian software engineer Alberto Brandolini in 2014, it states: ‘The amount of energy needed to refute bullshit is an order of magnitude bigger than (that needed) to produce it.

Producing bullshit is a lot less work than cleaning it up. Producing is also a lot simpler and cheaper to do. A few years before Brandolini formulated his principle, Italian blogger Uriel Fanelli had already noted that, ‘an idiot can create more bullshit than you could ever hope to refute.’

Within the field of medicine, Brandolini’s Principle is exemplified by the falsehood that MMR (measles-mumps-rubella) vaccines cause autism. After more than twenty years of research, there is no evidence that vaccines cause autism; indeed, there is overwhelming evidence that they do not. Yet misinformation about vaccines persists, due in large part to a shockingly poor 1998 study published in The Lancet by British physician Andrew Wakefield and colleagues. Wakefield’s paper galvanized the contemporary antivax movement, created a remarkably enduring fear of vaccines, and contributed to the resurgence of measles around the world.

Millions of dollars and countless research hours have been devoted to checking and rechecking this study. It has been utterly and thoroughly discredited. As the evidence against the MMR-autism hypothesis piled up, most of Wakefield’s co-authors started to lose faith in their study. In 2004, ten of them formally retracted the interpretations section of the 1998 paper. In 2010, the paper was fully retracted by The Lancet. The same year, Wakefield was found guilty of serious professional misconduct by Britain’s General Medical Council. In 201, British Medical Journal editor in chief Fiona Godlee formally declared the original study to be a fraud and argued that there must have been an intent to deceive; mere incompetence could not explain the numerous issues surrounding the paper.

So here we have a hypothesis that has been as thoroughly discredited as anything in the scientific literature. It causes serious harm to public health. And yet it will not go away. Why has it been so hard to debunk the rumours of a connection between vaccines and autism? This is Brandolini’s Principle at work.

This same principle is at work in the financial services industry. It’s because many are eager to get rich quickly. Even the rich are eager to become richer quickly. Some examples of bullshit that are prevalent –

• Some people/institutions know how to time the stock markets. They know the right time to invest and more importantly the right time to exit. These institutions and their Chief Bullshitters know where the stock market is headed in the short term. We just have to find the right firm.
• There are investments where you can earn very high returns without the risk of the stock market.
• He is a stock market whiz who knows the right stocks to buy. That’s why he concentrates his portfolio in a few sectors and stocks. He moves quickly out of sectors and stocks. Invest in his PMS.
• You are a High-Net-Worth Investor (a stupid classification) and you deserve something special. That’s why we have created these PMSs (Portfolio Management Schemes), AIFs (Alternate Investment Fund). You must invest in these from a diversification perspective.
• My wealth is given to 3 different people who manage it in their own way. Some people proudly say this because they have been made to believe the bullshit that this is how money is supposed to be managed. If you too believe this, ask yourself this question, what would I call someone who allows 3 different surgeons to operate on his brain, instead of getting the best one to operate on?
• We are data driven junkies who manage money differently. We have developed algorithms that measure the velocity of how fast a stock price is either rising or falling. If the prices are rising, our algorithms buy if they are going down, we sell.
• I use stop-losses, so I know my downside. It’s another thing that none of these stop losses worked in 2008.
• Your mutual funds are relative return strategies. You need our proprietary absolute return strategies to work for you. (If you didn’t understand this, that’s ok. It’s really not important).

I can go on and on with more examples, but I believe you get the point.

Bullshit is not only easy to create, but it’s also easy to spread. And the speed at which bullshit spreads now is simply mind-boggling. And this makes the job of a real financial professional even tougher. These truth tellers who clean up the bullshit are generally at a serious disadvantage because as the late US President Franklin D Roosevelt’s secretary of state, Cordell Hull said, “A lie will gallop halfway round the world before the truth has time to pull its breeches on.”