Via Marginal Revolution, comes this interview with Warren Buffett, where he makes the case for the current stimulus package. I highlight this excerpt not to argue for the bill, but to highlight one of Buffett’s many excellent mental habits, which we should all attempt to imitate:
SG: But there is debate about whether there should be fiscal stimulus, whether tax cuts work or not. There is all of this academic debate among economists. What do you think? Is that the right way to go with stimulus and tax cuts?
WB: The answer is nobody knows. The economists don’t know. All you know is you throw everything at it and whether it’s more effective if you’re fighting a fire to be concentrating the water flow on this part or that part. You’re going to use every weapon you have in fighting it. And people, they do not know exactly what the effects are. Economists like to talk about it, but in the end they’ve been very, very wrong and most of them in recent years on this. We don’t know the perfect answers on it. What we do know is to stand by and do nothing is a terrible mistake or to follow Hoover-like policies would be a mistake and we don’t know how effective in the short run we don’t know how effective this will be and how quickly things will right themselves. We do know over time the American machine works wonderfully and it will work wonderfully again.
The important thing to note about Buffett’s short answer is that it’s mostly about what he doesn’t know. It’s not until he admits that the answer is uncertain that he begins making a case for his own set of beliefs. Incidentally, Buffett’s response neatly demonstrates one of my favorite pieces of decision-making wisdom, which comes from Colin Powell. Although Powell made a number of mistakes in the run-up to the Iraq war, his advice to his intelligence officials was psychologically astute: “Tell me what you know,” he said. “Then tell me what you don’t know, and only then can you tell me what you think. Always keep those three separated.”
Of course, the human brain is spectacularly bad at differentiating between what it knows and what it thinks, which often causes us to think we know much more than we actually do. This is why it’s so important to constantly interrogate one’s own beliefs, so that we see the facts (or lack thereof) underneath.
Ok, that’s enough vague advice for one day.