Having been an observer and sometimes participant in quite a lot of debates over various issues, a single thing that catches any observer’s eye is the extremely polarized nature of each and every single debate. What I have realized throughout my life is that when there is such a polarized debate, the truth is often the main victim, which is why I always avoid engaging in such debates.
One of the main areas of contention that has caught my attention is the rapid pace of change that is a catalyst for heating up the debate for both sides. In other words, the pace of change often disturbs our perception of phenomena, causing divergent viewpoints, because one side of the debate often clings on the old perceptions and the other tries to analyze the new phenomena wearing a new lens. The strange thing about the former group is that they often stick to the established theories as if they are timeless truths.
However, it is always important to keep in mind that social sciences (including law, economics, and finance) are not rocket science/natural sciences. In all social sciences, given the sheer abundance of the variables influencing outcomes, it is virtually impossible to derive any conclusions from given facts. Even worse, more often than not, the facts are elusive and in a state of flux, which scapes the eyes of the most perceptive of scholars, making it very difficult to agree upon a specific set of facts, let alone deriving any lesson or conclusion from them.
In the debates about the value of various assets, it is hard not to notice that they are those who adhere to the existing methods of valuations, and those who try to come up with new methods; the latter arguing that new assets (if they can even be categorized as ‘assets’) require new methods of valuation and the old methods are not up to such a task. While the existing methods, are the fruits of years of toiling of great minds, and have so far provided a valuable contribution to the finance and economics literature, they are not infallible and faultless, and they may indeed fall short of correctly valuing certain objects/assets to which people are willing to assign some value.
We may know a bit about corporate finance, methods of valuations etc., but we should not take them as given and create a sacred totem out of them. A little bit of the review of the history of such valuation methods is enough to give us some idea of why they are not meant to be bullet-proof and unfailing methods that could always work.
The whole point is that the social sciences are not exact sciences. After a lifelong deep dive in the study of history, the great historians Will & Ariel Durant conclude that “[h]istory is mostly guessing; the rest is prejudice.” I am afraid their insight is equally applicable to all social sciences. So, it would not be an exaggeration if we say: social sciences are mostly guessing, the rest is prejudice.
So, what to do with such levels of uncertainty in social sciences? I always prefer the methods that start building on the legacy systems/methods, rather than starting by discarding them. Edmund Burke once said, “[a] disposition to preserve, and an ability to improve, taken together, would be my standard of a statesman.” This quote, which I think has very deep insight, always resonates with me. Although preserving what we already have is in itself a strenuous task, the ability to improve what we have is excruciatingly more arduous, as it always requires a much deeper understanding of what we already have.
So, I am always more appreciative of the efforts of those who try to improve, rather than those who try to preserve, even when the former turn out to be wrong or fail with disastrous consequences.
But the ones that I dislike most are the ones who already have some understanding of the existing legacy systems, without a real understanding of their limitations, and have a condescending and belittling approach toward the ones who try to improve things.
Let’s be humble and respect those who are builders and essayists, who in good faith try to find new ways of analyzing the world and discovering solutions to its most pressing problems.
