Tell your children to forget becoming doctors or lawyers
Chris Johns: Data scientists are going to put most of us out of work
Most of us can’t handle the data. Much of what we think we know is, in fact, wrong. Many of the things we take for granted have little basis in fact, or history
Psychologists and other behavioural scientists know, or think they know, that many of our most cherished beliefs are informed by all sorts of weird factors, not least a distorted view of the past.
Evolutionary biology sometimes suggests that we might simply be born with fixed opinions. Strongly held beliefs can be shaped by trauma. Acute stress, particularly experienced during our earliest years, stays with us forever and helps determine an individual’s worldview.
The past is an important driver of how we view today. But memory can be an unreliable companion. Much of what we think we know is, in fact, wrong. Many of the things we take for granted have little basis in fact, or history.
Demand for data scientists is exploding. In financial centres, in particular, data scientists can pretty much name their own price. We are in the foothills of the artificial intelligence revolution and everybody needs a database along with people who know how to torture it.
Don’t be too worried if you don’t know what a data scientist is: very few of us do. But those of us who have encouraged our children to become doctors, accountants or lawyers have all been barking up the wrong tree. Our beliefs about the unassailable nature of the usual professional qualifications are wrong: the data scientists are going to put most of us out of work. Best selling futurologist Yuval Noah Harari says that workers are no longer exploited but merely irrelevant.
The past isn’t all that it is cracked up to be
A favourite party trick of the data wonk is to ask mere mortals a few simple questions. How many immigrants are there? What’s the rate of inflation? Is the crime rate going up or down? The answers are always completely wrong and, curiously, biased towards the view that life is getting worse. All of the available data strongly suggests, globally, that things are getting unambiguously better.
The past isn’t all that it is cracked up to be. Particularly the world’s entire history up to 250 years ago. During that rather prolonged period there wasn’t any sustained economic growth at all. Not surprising, given mankind’s relatively brief appearance during that time.
But, until the late 18th century, there wasn’t any economic growth. None. I’ve never met anyone, other than data scientists, who believes that one; most of us take economic growth for granted.
Today’s central bankers acquired their financial beliefs during a time when inflation was the biggest bogeyman. The stagflation of the 1970s was the childhood trauma experienced by today’s monetary gurus. Ever so slowly, they are coming to realise that world’s biggest problem today is populism, something driven in part by unanticipated consequences of globalisation and technological change. But that early trauma still influences belief and behaviour. In Europe, the case for running economies at a much faster pace is a compelling one. But those memories of inflation still dominate orthodox thinking.
It is commonplace to bemoan the disappearance of permanent, pensionable employment: the jobs for life, the comfortable pensions at the end, that were abundantly available to previous generations. All a bit of a myth – as the data nerds are aware. Employment has always been insecure: if anyone did stay in a job for decades it was both rare, lucky (perhaps) and a phenomenon of the 1950s and 60s. Similarly, pensions have been, historically, non-existent and more public than private sector.
In the US, many pension plans are in trouble, particularly where the fund is betting on high returns from stocks
Bismarck invented pensions for the Prussian army in the late 19th century and made sure that few of his officers would live to collect. The disappearing “gold plated” pensions written about in the “pension crisis” commentaries were, by and large, a post second World War phenomenon. They are disappearing for all sorts of reasons, not least of which is that they weren’t that common to begin with.
In the US, many pension plans are in trouble, particularly where the fund is betting on high returns from stocks. Long run data tells us that the best that can realistically be hoped for, over time, from equities is around 5 per cent a year. That’s including dividends. For lots of good reasons we should probably halve that number for expected returns going forward. This doesn’t play well in some parts of the US (in particular) savings industry.
People believe that an investment in a house is a superior bet compared to putting money into equities
Pick up almost any weekend newspaper and somewhere there will, usually in the personal finance section, be an interview about money with a public figure or celebrity. And there is often a question or two about saving habits. The answers are consistent with more formal surveys of individual investor beliefs: property will always beat the stock market.
It’s always the same answer: people believe that an investment in a house is a superior bet compared to putting money into equities. Except that it isn’t. The data doesn’t support this belief. It might be true going forward (I doubt it) but history is against it.
Based on history and observation about today’s housing market, try suggesting this outlook for property: house prices won’t see another sustained rise from here for at least the next quarter of a century (that’s a party trick designed to make new friends, not necessarily a serious forecast).
Perhaps it should be obvious why data scientists are so in demand and so expensive: most of us can’t handle the data.