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The economics of advice
At times I believe the following propositions, in appropriately qualified fashion:
1. You don't know what a person really thinks until you hear his or her advice. Along these lines, if you really want to know what a person thinks, ask for advice and he or she will open up.
2. In philanthropy there is a saying: "Ask for money and you will get advice. Ask for advice and you will get money."
3. There are many exacting scholars who should be locked in a room, asked for advice of various kinds, and forced to speak into a tape recorder with no edits allowed. The advice-giving mode mobilizes insights which otherwise remain dormant, perhaps for fear of falsification or ridicule or of actually influencing people. All of the transcripts should be put on The Advice Website, with an open comments section, to limit the actual influence of the advice. Some famous people would be revealed as foolish in critical regards. The contents would be most interesting as non-advice and the site would carry a government warning that the advice is not to be taken seriously.
4. Often we do not trust people until we hear their advice. We suspect in any case that they wish to control us, and until we know what they have in mind, we remain wary. Sometimes it is necessary to give advice -- even pointless advice -- to establish trust.
These remarks are not intended to apply to medical or clinical advice.
Here is Bryan Caplan, offering direct advice to his colleagues (an excellent post). Brett Arends questions whether you should take advice from people who write for a living.
Posted by Tyler Cowen on January 5, 2010 at 08:04 AM in Education, Philosophy | Permalink
Comments
That is interesting as hell
Posted by: C at Jan 5, 2010 8:17:50 AM
"Ask for money and you will get advice. Ask for advice and you will get money."
I recommend this short video from Peter Diamandis.
youtube.com/watch?v=ZNxlLl4wpp8
It is hilarious. Watch it.
Posted by: Chris Masse at Jan 5, 2010 8:42:33 AM
This seems to assume that advice is objective. Is this because people don't give advice unless asked because unsolicited advice is assumed to be unobjective and thus discarded? It seems like formalizing the method might taint it.
It's interesting that the guy whose job it is to give me advice (advisor) never seems objective to me. Of course it is objective in a way, "help me or, well go die." I don't want to die.
Posted by: Andrew at Jan 5, 2010 9:01:39 AM
the thing i loathe, absolutely loathe, is "Here's how I did it". To my untrained ear, that is a solitary data point surrounded by chatter and devoid of internal controls and of dubious veracity.
"Here's what not to do" tends to be much much better, as there are hundreds more respondents and you can come to better grips.
In practice, people tend to be very bad at telling you how to find wealth, love or fame but phenomenally good at telling you how to be poor, broken-hearted or a schlub. Weigh any advice through that prism
Posted by: farmer at Jan 5, 2010 9:44:59 AM
In regard to asking for advice to find out what someone really thinks... that might work if they trust you.
In the absence of trust, you should ask the person what advice they think someone else would give, "So, what do you think most people would say is the right thing to do next?"
Posted by: Chuck at Jan 5, 2010 9:58:56 AM
Factual information is useful as advice. Judgement - not so much.
Posted by: CIP at Jan 5, 2010 10:08:41 AM
"...fear of actually influencing people."
I am exposed to this fear quite a bit and it perplexes me. Those who would take advice and act upon it directly are probably going to have issues but for those who understand that such advice is biased, and results from different life experiences, gain more information and thus are better able to make any decision that said advice is geared toward.
Instead of being helpful those who would withhold such advice out of fear are being selfish; they are not sharing their experiences and views with others. The main counter-factor is that this requires sharing the biases and life experiences the adviser holds. The adviser, being aware of this fact, should make an effort to help put the advice into context and not simply say "do this". For a casual meeting this may be impractical but when dealing with friends and long-term associates it is an investment in time well worth the effort. Particularly with respect to "advice", one person cannot really attempt to control another (unless rewards/punishments are involved). The person "being controlled" may choose to follow said advice without question or comment but that is simply relinquishing their free will - the decision still rests with them.
As for fact versus judgment: if you limit yourself in this way you are going to ignore lots of potentially useful information. Also, many facts are simply generally accepted judgments. In the end, more information is rarely bad - no matter the type or source. The important thing is to filter said information and to understand the context of its source. If you cannot do this then by all means ignore and avoid advice givers and just do whatever you feel since you are equally as likely to get a beneficial result either way. An a potential advice giver, however, share your experiences and views and strive to provide context so that the receiver can more readily apply your insights onto their actual situation. Also, try to avoid providing a reward/punishment (from yourself) based upon the choices that are made.
Of course, I am unable to give lots of context for the above advice, but given the mass-distribution of said advice I assume the reader will perform the necessary critical analysis before simply ignoring me.
Posted by: David J at Jan 5, 2010 10:50:02 AM
I think #4 applies well to "life advice", but I don't think it applies at all to financial advice.
When it comes to investing, people don't like low cost, high quality advice, and seeking low cost advice, (say walking into a Vanguard office and saying "allocate my 401(k) for me in a 15 minute conversation") seems pedestrian. Instead, people seek some sort of relationship outside the financial advisory, which has incredible cost, (meeting your friend's good friend who is a broker, and saying "Let's have lunch Tuesday. Can you play golf this Sunday?")
To justify the explicit and implicit expenses of building this relationship, advisors must then overcharge for execution, implementation, whatever thereby compensating themselves for their time.
The client has bought a very expensive friend. The advisor has sold...well, I'm not sure what.
Posted by: Marc Roston at Jan 5, 2010 11:32:58 AM
Asking for advice is interesting, but how do you deal with uncertainty on this issue.
I provide portfolio managers with economic advice. I know they are aware of the uncertainty and that they are also getting advice from other economist. So I can give them my opinion without having to worry about the risk. But if a friend or relative asks the same question that my client does I am very reluctant to give them advice about the market because of this. I will give them different comments than I give my professional client.
Part of this difference is the risk of being wrong, something most academic economist pay little attention to. My professional client knows there is a significant risk that I will be wrong and that it is their job to seek alternative advice and weigh the risk of the various alternatives. But the average person is not in a position to weigh the risk in this manner.
I know I'm not expressing this well. But the typical academic economist that you are thinking about in the initial statement
probably is not thinking very clearly about it either.
Posted by: spencer at Jan 5, 2010 11:46:15 AM
I was going to add this to the advice for Yana but I'll add it here:
Listen to all advice, take none of it.
Posted by: Andrew at Jan 5, 2010 12:11:37 PM
Bryan Caplan should write the book "The Rational Libertarian's Guide to Winning In a World of Irrational Voters."
Posted by: Andrew at Jan 5, 2010 12:18:48 PM
"These remarks are not intended to apply to medical or clinical advice."
But they should.
Posted by: Norman at Jan 5, 2010 3:09:11 PM
With investment advice if I am going to act upon said advice I'd either expect to be over-informed and make the final decision or work strictly on trust and let the adviser make the actual decision. My thinking was more around inter-personal and "life choices" advice as opposed to "professional" advice which I would prefer to get from a professional as opposed to a "friend" - or if gotten from a friend would analyze VERY critically - especially if they just say "Buy Microsoft" instead of "Here are Microsoft's fundamentals and outlook and this is why you should buy them".
Posted by: David J at Jan 5, 2010 5:08:33 PM
Caplan should have finished "The Case Against Education" rather than switching to "The Selfish Reason to Have More Kids". The desire for children is genetically ingrained in us, an understanding of the signalling model of education is not.
Posted by: TGGP at Jan 5, 2010 9:49:55 PM
It's really interesting blog. For the first time I visited the blog where I found that response is larger than post. It's really cool.
Posted by: BPM at Jan 6, 2010 1:03:36 AM
When I'm giving advice, I'll sometimes say "What advice would you give your sister, if it was her in this situation instead of you?" Sometimes that displaces their viewpoint enough that they can see.
Posted by: Laserlight at Jan 8, 2010 9:15:17 AM
The advice-giving mode mobilizes insights which otherwise remain dormant, perhaps for fear of falsification or ridicule or of actually influencing people. All of the transcripts should be put on The Advice Website, with an open comments section, to limit the actual influence of the advice
Posted by: Debt Rescue at Feb 2, 2010 12:57:24 AM
You are right, we don't trust people until we know what are in their mind...
Posted by: memory foam mattress topper at Apr 21, 2010 9:44:14 PM
Kind of funny, but I guess it's really true. To win, anyone would do anything no matter how ridiculous it sounds.
Posted by: above ground pool covers at Jul 29, 2010 2:06:16 PM
Or, you could find an internship, or co-op in you want to pursue your MBA. With your kind of background, I'm sure you are in a good path.
Posted by: Whole Life Insurance at Aug 26, 2010 10:14:27 AM
